In a significant move to address California’s housing affordability crisis, Governor Gavin Newsom has signed a new law aimed at reducing the cost of affordable housing construction. The legislation, AB 179 is part of a broader effort to streamline the housing development process and make affordable housing more accessible to residents.
The new law targets the financing of affordable housing projects, one of the biggest obstacles to construction. It aims to streamline how these projects receive state funding while encouraging cities to reduce development impact fees which can add tens of thousands of dollars to a project. Supporters argue that these changes could lower development costs by roughly $60,000 to $70,000 per unit.
Streamlining Bureaucracy and Reducing Costs
Governor Newsom highlighted the importance of cutting red tape and reorganizing the financing process for affordable housing. The new law introduces a one-stop application system for financing, aiming to drive accountability at both the local and state levels. This reform is part of a broader effort to reduce regulatory hurdles and speed up the development process.
State Sen. Jesse Arreguín D-Oakland, emphasized that the legislation also seeks to address development impact fees, which can significantly increase the cost of housing projects. These fees, levied by local governments, are used to support municipal services such as schools, public parks, and sewage systems for residents in new affordable housing units. However, critics argue that these fees can make it difficult to build affordable units.
The Impact of Impact Fees
A report by the Terner Center for Housing Innovation at UC Berkeley found that affordable developments in California paid an average of roughly $300 million in impact fees annually. Governor Newsom described these fees as “outrageous,” stating that they make it “quite literally impossible to build an affordable unit.” The new law aims to alleviate this burden by reducing these fees and making it easier for developers to build affordable housing.
The legislation passed with overwhelming bipartisan support, drawing just 18 no votes across both chambers. Supporters hope that these changes will help get more affordable housing projects built faster, although they acknowledge that financing is only one part of California’s broader housing affordability challenge.
Federal Housing Reforms and California’s Approach
The announcement comes as new bipartisan housing reforms take effect at the federal level. Governor Newsom praised these changes, noting similarities to policies that California has already pursued. He emphasized that both approaches focus on reducing regulatory hurdles and giving local governments more flexibility.
“It’s really about getting rid of those regulatory thickets. It’s really about creating flexibility. And, and doing what you can to support localism,” Newsom said. He believes that the changes at both the federal and state levels will feed nicely into what counties and cities will be doing all across the nation and substantively, all across the state of California.
Despite these efforts, California consistently ranks among the most expensive states to build and buy a home. Governor Newsom argued that the state’s issues with bureaucratic hurdles in the home-building process are “old talking points.” He cited statistics showing a 59% increase in housing construction and a 57% decrease in the time to get permits suggesting that the state is making progress in addressing its housing crisis.
