California’s Bold Step Towards Affordable Housing and Infrastructure Reform

California Governor Gavin Newsom has officially signed into law a groundbreaking set of measures aimed at tackling the state’s persistent housing crisis and enhancing its infrastructure. As part of the 2025-2026 state budget, the newly enacted legislation, including Assembly Bill 130 and Senate Bill 131, forms a vital component of the “Abundance Agenda,” a strategic initiative designed to modernize California’s housing policies and expedite the construction of affordable homes.

These bills mark a significant shift in the state’s approach, breaking down long-standing regulatory barriers that have hindered the development of housing and infrastructure for decades. By modernizing the California Environmental Quality Act (CEQA) and introducing new tools to speed up project approvals, the state is making a concerted effort to address housing shortages, reduce construction costs, and increase accountability.

“This is not just about managing budgets this is about building for California’s future,” Governor Newsom remarked. “We’ve taken bold action to create pathways for more affordable housing, and this legislation is the result of tireless collaboration among housing, labor, and environmental leaders. It’s about creating a future where every Californian can access affordable housing.”

Key Reforms to Speed Up Housing Production

The package focuses on several pivotal reforms aimed at addressing California’s housing needs while balancing environmental protection:

• CEQA Reforms: The legislation includes significant changes to the CEQA process, streamlining the approval of housing and infrastructure projects. This includes an expedited review for infill housing, high-speed rail, utilities, and community-serving facilities, ensuring quicker delivery without compromising environmental protections for sensitive areas.
• Permit Streamlining: California will expand the Permit Streamlining Act and limit housing appeals, particularly with the Coastal Commission. These measures are designed to reduce bottlenecks in housing permitting, especially in coastal areas, and ensure that projects are approved and built faster.
• Freezing New Residential Building Standards: To bring regulatory stability, California will freeze most residential building standards through 2031, with exceptions only for emergencies or conservation-related updates. This measure aims to reduce unnecessary compliance costs that often slow down construction.
• Sustainable Financing Tools: The state is also establishing new financing mechanisms, such as a revolving fund to reinvest equity from stabilized affordable housing into new projects. Additionally, a statewide CEQA Vehicle Miles Traveled (VMT) Mitigation Bank will help developers meet environmental mitigation requirements, supporting the construction of location-efficient affordable housing.
• Stronger Accountability: The legislation also strengthens oversight of local homeless shelters, requiring annual inspections and civil actions for non-compliance. Local governments that fail to meet housing targets may face penalties, including withheld state funding.

Support for Renters and Homelessness Initiatives

The legislation offers additional support to California’s renters, such as increasing the Renters Tax Credit, which will now reach up to $500 for qualifying filers. This move is part of the state’s broader strategy to reduce the burden on renters while providing affordable housing options.

In addressing homelessness, Governor Newsom’s budget allocates substantial funding for programs aimed at alleviating California’s homelessness crisis. The $500 million for the Homeless Housing, Assistance, and Prevention (HHAP) fund, as well as additional resources for encampment resolution and family homelessness, will further strengthen local efforts to combat homelessness.

Homekey+ Initiative: A Comprehensive Housing Solution

The state is also building on the success of Proposition 1, which funded the creation of permanent supportive housing. A recent announcement reveals $103 million in Homekey+ awards, aiming to develop more than 315 permanent supportive housing units for veterans and individuals facing mental health or substance use challenges. The program is designed to address the unique needs of at-risk populations, offering not just housing, but comprehensive supportive services.

Homekey+ has also received significant new funding, with $1.033 billion from Proposition 1 available to develop housing for veterans, and an additional $1.11 billion to support broader housing projects. As of June 24, applications for this program are already exceeding $1.14 billion, showcasing the overwhelming demand for supportive housing across the state.

Progress on Homelessness and Housing Supply

While homelessness remains a major issue, California has managed to curb the increase compared to the national average. From 2014 to 2019, California saw a rise of about 37,000 unsheltered individuals. However, in 2024, the state limited this increase to just 3%, in stark contrast to the 18% national rise in homelessness. Additionally, California achieved the largest reduction in veteran homelessness in the nation, while also making significant progress in addressing youth homelessness.

Matthew O. Franklin, President and CEO of MidPen Housing, praised the new legislation, calling it a crucial step in solving California’s affordability crisis. “We know that increasing the supply of affordable housing is essential, and these reforms will help create a future with more affordable, sustainable housing options for all Californians,” Franklin said.

Looking Ahead: A Vision for the Future

California’s bold new housing reforms represent a transformative shift that could redefine how the state approaches its housing crisis. With a comprehensive strategy that combines regulatory changes, increased funding, and strong accountability measures, the state is poised to build more housing faster and reduce the cost burden on families.

As Governor Newsom emphasized, this isn’t just a financial plan it’s a vision for a more affordable future. “This legislation will be felt for generations,” he said. With strong backing from the legislature and key housing advocates, California is now in a stronger position to tackle its housing challenges head-on, creating more pathways to homeownership and a stable, affordable housing market for all.

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