Newsom signs balanced budget with $1.7B locked-in for housing

This time last year, California Gov. Gavin Newsom signed a state budget that included sweeping housing reforms that allowed urban residential developers to avoid rigorous environmental reviews.

This year’s budget, which Newsom signed on Monday, does not carry the same historic housing reforms as last year. Instead, it is historic for balancing the budget.

“For the next two years, California will have a zero-dollar deficit,” Newsom said in a video statement.

While balancing the budget, the plan still allocates nearly $1.7 billion toward housing and homelessness programs. The budget signing also comes as hundreds of additional housing reform bills work their way through the legislature, with the Sept. 12 end of the session looming.

Lawmakers are targeting construction costs, permitting delays and wildfire insurance. Two bills aim to revive condo construction by reforming defect liability and raising deposit caps.

Budget details on housing dollars

The budget’s most significant housing intervention nearly doubles the homelessness funding the governor sought. Lawmakers approved $900 million in Homeless Housing, Assistance and Prevention grants.

It also allocates $500 million for state Low-Income Housing Tax Credits for calendar year 2027, $200 million for the Multifamily Housing Program and $100 million in housing stability funding aimed at keeping renters housed.

The budget also sets the stage for a November ballot measure dubbed the Veterans and Affordable Housing Bond Act of 2026. Voters will decide whether to authorize $11.25 billion for affordable housing construction, rental assistance and homeownership programs.

California’s 2026 housing push targets costs, permits and insurance

Last year, the most significant change came from historic reforms to the 1970 California Environmental Quality Act. The overhaul shields apartment and residential projects from lengthy environmental reviews, aiming to boost housing supply and improve affordability.

Developers moved quickly to take advantage of the change, though implementation has not been entirely smooth. Local governments have continued to find ways to delay projects.

California’s legislature is juggling hundreds of housing bills this session, with lawmakers shifting focus from land-use reform to reducing construction costs, cutting permitting delays and shoring up the state’s home insurance market.

One marquee item is already done. Newsom signed Senate Bill 417 in June, placing an $11.25 billion affordable housing bond on the November ballot. The measure includes $10 billion for rental and homeownership programs and $1.25 billion for veterans’ home loans.

On the permitting front, Assembly Bill 1294 would create a standardized statewide housing entitlement application and limit cities’ ability to stall projects by disputing the completeness of applications. Senate Bill 1014 would require cities to disclose infrastructure requirements within 30 days of a housing application and bar them from adding new conditions later.

Several bills target development costs. Assembly Bill 2252 would allow four-story-and-taller buildings to use a single staircase, reducing construction expenses. Senate Bill 1036 would require impact fee credits for projects redeveloping previously developed sites.

On accessory dwelling units, Assembly Bill 956 would allow homeowners to build two detached ADUs per lot and prohibit homeowners associations from blocking compliant units.

Post-wildfire insurance legislation is also moving. Senate Bill 1076 would bar insurers from dropping homeowners who meet fire-safety standards. Assembly Bill 1680 would expand coverage options under the FAIR Plan, the state’s insurer of last resort.

Condo reform bills advance in the legislature

In addition to these measures, two bills targeting California’s near-dormant condominium market cleared the lower chamber and now face Senate scrutiny ahead of the Legislature’s Sept. 12 adjournment deadline.

Assembly Bill 1903, which passed the Assembly 68-0 in May, would give builders the right to repair construction defects before homeowners can sue. Supporters say the change would revive condo construction, which has fallen by roughly 90% over two decades.

A Senate committee postponed its hearing on the bill, a warning sign that Consumer Attorneys of California’s opposition is making headway.

Assembly Bill 1406, which passed the Assembly 41-14 in January, was assigned to a Senate committee. The bill would raise the cap on liquidated damages in new condo sales from 3% to 6% of the purchase price, making it easier for developers to secure construction financing. On Monday, the bill’s author canceled the first Senate hearing on the legislation set for June 30, reflecting opposition influence.

The California Association of Realtors opposes the measure, saying in a notice to members that it “dismantles strong, long-standing consumer protections for buyers, putting their savings, life-changing sums of money, at risk to finance the condominium projects.”