California is making a major change to the way affordable housing gets funded and built. Gov. Gavin Newsom has signed a new law designed to make the process faster, reduce construction costs, and help more affordable housing projects move forward. The law changes how the state handles housing financing and encourages cities to reduce some development fees that can add tens of thousands of dollars to the cost of a project.
The goal is simple: get more affordable homes built and get them built faster. Supporters say the changes could save about $60,000 to $70,000 per affordable housing unit, allowing the state to stretch its housing dollars further.
A New Approach to Affordable Housing
Newsom signed Assembly Bill 179, a housing budget bill, on July 13 in Oakland. The law is part of California’s larger effort to deal with its long-running housing shortage and high housing costs.
One of the biggest changes involves the way affordable housing developers apply for and receive state financing. Under the new system, California wants to create a more streamlined, “one-stop” process instead of making developers move through multiple layers of reviews and applications.
State officials say this could reduce delays and help money reach housing projects sooner. Rather than having funding tied up in a complicated process, the state wants to focus more on projects that are ready to move forward.
That could be especially important for affordable rental housing, which often depends on several different sources of funding before construction can begin. The new system is intended to reduce repeated reviews and make it easier for developers and local governments to understand what they need to do to get a project approved and financed.
Lower Construction Costs Could Mean More Homes
The cost of building housing has become one of California’s biggest problems. Land, labor, materials, financing and government fees can all make new housing expensive.
Development impact fees are another major expense. Cities and counties often charge these fees to help pay for roads, utilities, parks and other public services needed when new development is built. Those fees can add tens of thousands of dollars to a housing project.
The new law attempts to address some of those costs by encouraging changes to development impact fees. Supporters estimate that the combined changes to financing and fees could reduce the cost of building affordable housing by roughly $60,000 to $70,000 per unit.
That does not mean every new home will suddenly become $70,000 cheaper for a buyer or renter. Instead, the savings are expected to lower the overall cost of developing affordable housing. That could allow a fixed amount of state funding to help pay for more homes.
For example, if a housing program has a limited amount of money available, lowering the cost of each project means that money could potentially support additional units.
The State Wants Housing Money to Move Faster
California has invested billions of dollars into housing programs, but getting a project from the planning stage to construction can take a long time. Newsom and other supporters of the law say the state needs to make better use of the money it already has.
The new financing system is designed to direct funding toward projects that are ready to move ahead. Supporters believe this could prevent money from sitting in lengthy approval processes while housing costs continue to rise.
State Sen. Jesse Arreguín, who supports the legislation, said the goal is to make it easier to build and get housing money out the door faster.
The changes also come as California continues to deal with a severe shortage of housing. California remains one of the most expensive states in the country for buying and building homes, making affordable housing a major issue for renters and potential homeowners.
The new law does not solve that problem by itself. Instead, it focuses on one important part of the problem: making affordable housing projects less expensive and complicated to finance.
California Says Housing Construction Is Already Increasing
Newsom has pointed to several housing numbers as evidence that California’s policies are already producing results.
According to the governor’s office, annual residential construction increased by 59% between 2018 and 2024, rising from about 70,000 homes to roughly 111,000 homes per year. The state also says more than 682,000 homes have been built since 2019. The state also reports that the average time between a development application and entitlement fell by 57%, from 160 days to 68 days in 2024.
Those numbers are important because California has spent years trying to reduce the amount of time and paperwork involved in building housing. Newsom argues that the state has already made progress in cutting delays and increasing construction. The new law is meant to continue that effort, particularly for affordable housing.
California officials also say cities and counties have planned for millions of additional homes. According to the governor’s office, local housing plans are prepared to accommodate at least 3.6 million new homes, including about 1.4 million affordable units.
Still, planning for homes does not mean those homes will immediately be built. Developers must still find financing, obtain approvals and deal with construction costs and local requirements.
What the Changes Could Mean for Californians
For renters, homebuyers and families struggling with high housing costs, the biggest question is whether the changes will eventually lead to more affordable homes. The answer will take time. The new law does not instantly create thousands of apartments or houses. Instead, it changes the process used to finance and build affordable housing projects.
If the new system works as supporters expect, developers could spend less time dealing with complicated financing requirements and reduce some of the costs associated with construction. That could allow more projects to move from planning to construction.
The state is also putting additional money into affordable housing programs. The 2026-27 budget includes $500 million for enhanced state low-income housing tax credits and another $200 million for the Multifamily Housing Program. These funds are intended to support the construction and preservation of affordable multifamily housing.
California is also creating a $100 million Disaster Rebuilding Fund to help homeowners who need to rebuild after disasters. The program is designed to reduce financing costs and help affected homeowners repair or reconstruct their homes more quickly.
The state is also extending its homelessness funding program with $900 million for the 2026-27 fiscal year. Together, these measures show that California is trying to attack the housing problem from several directions: build more homes, reduce construction costs, speed up financing, preserve existing affordable housing and provide assistance to people experiencing homelessness.
The changes will not fix California’s housing shortage overnight. However, state officials hope that making affordable housing cheaper and easier to finance will allow more projects to get built. For Californians facing high rents and home prices, the real test will come over the next several years, when it becomes clear how many additional homes the new system actually helps produce.
