California Governor’s Forum Highlights Top Housing Issues Facing the Next Administration

By David Garcia, Deputy Director of Policy

California’s next governor will inherit significant housing affordability and homelessness challenges, as well as the opportunity to implement housing policy initiatives and legislative changes enacted by their predecessor. 

On May 8, the Terner Center for Housing Innovation, San Francisco Foundation, Housing Action Coalition, and The New York Times convened a nonpartisan housing policy forum featuring California gubernatorial candidates at Oakland’s Henry J. Kaiser Center for the Arts. 

The candidates discussed a wide range of topics, including varied approaches to addressing homelessness, ways to lower the cost to build new homes, and how to hold cities accountable for increasing housing supply. They also discussed innovations in the construction industry, as well as the challenge of funding more affordable housing, given current budgetary constraints. 

While there were clear differences in candidates’ responses, they all agreed that housing would be a primary focus of their respective administrations. This commentary spotlights five key housing policy issue areas that surfaced at the forum and are likely to continue to dominate the gubernatorial campaign in the lead-up to the November election 

Creating more efficient and effective governance

Some candidates noted that California’s administrative and financing functions must be improved to more efficiently administer state funds and enforce state housing laws. To that point, the next administration will inherit the newly formed California Housing and Homelessness Agency (CHHA), which begins operating in July 2026. CHHA reorganizes the state’s fragmented housing policy functions into far fewer agencies, with the goal of improving housing governance and streamlining affordable housing financing. Consolidating state-level housing funding programs and administration could meaningfully reduce time and costs for affordable housing developers, since the inclusion of one additional public funding source can add four months to the development timeline and $20,460 in per-unit development costs. The restructuring also needs to be accompanied by training, comprehensive change management, and updated systems to ensure that the state government can execute efficiently and effectively on this broadened mandate. 

The relationship between the State and both regional and local jurisdictions also continues to be an area of concern. The current administration has strengthened and enforced state housing laws curtailing cities’ ability to block new housing, while at the same time burdening them with an increasingly complex set of rules. Finding ways to increase the effectiveness and build the capacity of local public agencies to regulate and fund housing will need to be a continued area of focus. Newly formed regional agencies like Bay Area Housing Finance Authority (BAHFA) or Los Angeles County Affordable Housing Solutions Agency (LACAHSA) are potentially well positioned to support the State on piloting new and innovative cost-containment efforts or high-impact policy reforms. 

Bringing down development costs

Each of the gubernatorial candidates acknowledged that the cost to develop housing in California is too high. Many proposed and entitled housing projects are not moving forward because they are too expensive to build relative to rents and home prices. Many developments simply do not pencil, given a combination of increasing costs for construction materials, debt financing and equity requirements, insurance coverage, and other important development inputs. Some candidates specifically identified local policies, such as impact fees, high transfer taxes, and inclusionary requirements, as well as lengthy approval processes, as core drivers of cost and unpredictability. For example, some jurisdictions charge upwards of $100,000 in impact fees per new home built. All of these issues combined make California the most expensive state for multifamily construction. For affordable housing, high development costs mean a less efficient use of scarce public dollars, with new subsidized affordable homes costing over $700,000 per unit to build. 

The challenge of high development costs can be addressed from several angles. Advancing innovations in the housing construction industry is one strategy to save on both time and building costs, as noted by multiple candidates. The Terner Center’s work has identified areas where the State can facilitate growth in the factory-built housing sector. Additionally, revisions to the state’s building code—such as the creation of an appeals process, or examination of code innovations such as single-stair reforms—could address hard costs.There is also a need to address labor shortages while ensuring basic labor standards are met. Right-sizing local impact fees and making the local approval processes faster and more certain—two areas where the legislature has made progress in recent years—should continue to be areas of focus.

Financing costs are also a challenge for builders, given today’s high interest rates and tight lending standards. This is not only true for traditional homebuilders but also for smaller builders who are the most likely to take advantage of recently passed state laws that encourage the development of “missing middle” housing. Options—such as a revolving loan fund for mixed-income projects that provides more favorable financial terms in exchange for some level of affordability, or new social housing financing structures—could help with lowering costs and spurring new types of housing. 

Expanding the supply of affordable housing and addressing the needs of people experiencing homelessness

Solving the state’s homelessness crisis was a major topic of discussion for the candidates. California’s homelessness rate remains twice the national average, but progress has been made in recent years. The state has invested substantial resources to address homelessness—contributing to the development of thousands of new interim and permanent housing units and increasing the services available to people facing physical and behavioral health challenges. Hundreds of people across California now successfully leave homelessness every day. 

Changes to federal funding could undermine this progress, with particularly strong impacts on permanent supportive housing programs that, in combination with prevention and emergency interim housing solutions, are an integral part of addressing the full spectrum of housing needs for people experiencing homelessness. The Trump administration is developing new rules for the nation’s largest homelessness grant program, which would reduce funding for permanent housing programs that currently assist about 32,000 Californians. New eligibility requirements and limitations to public benefits like Medicaid also jeopardize vital supportive services for many people experiencing or at risk of homelessness.

The State may be able to mitigate the impacts of some federal cuts and promote stability for homelessness and housing providers by maintaining, if not expanding, its funding commitments. Providing long-term funding would unlock additional interim and permanent housing programs and facilitate long-term strategic planning. Protecting and expanding CalAIM investments in housing-related services—which have been shown to improve housing stability and health outcomes for people experiencing homelessness, as well as reduce healthcare utilization and costs over the long term—is likely to continue to be an ongoing area of focus. 

Candidates also acknowledged that it is more expensive to address the full needs of an individual who becomes homeless than it is to provide assistance to those currently at the highest risk of losing their home. Programs and policies under discussion include emergency rental assistance that can effectively keep people housed, as well as renter protections, such as an extension of the Tenant Protection Act, which protects against exorbitant rental increases and no-cause evictions and is scheduled to expire in 2030.

The need for the State to continue to invest in the preservation and new construction of affordable housing was generally supported by the candidates but with varying commitments to the actual scale of that investment. Unlike interim housing, building and preserving affordable housing results in a lasting public benefit, providing housing opportunities for low-income families over the long-term. The State has a goal of building over one million new affordable homes by 2030, but so far remains well off the pace needed to reach that target, in part due to dwindling funds to support shovel-ready projects. And given high development costs, cities and builders are hard pressed to secure enough funding to complete new affordable housing projects.  

Aligning climate goals with housing priorities

California continues to be a national leader in addressing climate change, but California’s climate and housing policy approaches are often in tension. Much of California’s new housing has been built on greenfields and in car-centric ways, but with stronger alignment, housing and climate strategies can be complementary. For example, reforming exclusionary and car-oriented planning rules provides an opportunity to increase housing supply and reduce carbon pollution simultaneously. The State should continue to pursue strategies that focus both on transit-oriented development and promoting infill more broadly, which can reduce reliance on cars and lead to more energy-efficient building typologies. Research shows that enabling denser communities is a climate strategy that works: for example, housing growth in Seattle’s walkable neighborhoods coincided with Washington’s reduction in rates of driving more than any other state from 1996 to 2021. 

Aligning climate and housing policy is also critical for disaster prevention. California must dramatically accelerate the retrofit of its existing housing stock—not only to meet decarbonization goals, but also to protect residents from escalating climate risks, including wildfires, extreme heat, flooding, and power disruptions. At the same time, the state faces growing instability in both the home insurance and electricity systems on which households depend. Yet the scale of investment required far exceeds currently available funding. Expanding retrofit financing, strengthening implementation capacity, and targeting investments to the communities facing the greatest risks will all continue to be topics of policy debate.

Expanding access to homeownership 

Improving access to homeownership was another theme of the forum. While homeownership has traditionally been the most direct way to build wealth and achieve housing stability in the United States, buying a home has become increasingly out of reach for many in California. The homeownership rate declined from around 50 percent in 2000 to around 44 percent in 2021, with younger Californians aged 35-45 experiencing the steepest decrease. The share of adults who own their home in California is more than 15 percentage points lower than the rest of the country—the widest the gap has ever been. 

The State has a key role to play in remedying this through financial programs—for example, through the expansion of shared equity and/or down payment assistance programs as a way to support first-time homebuyers. But perhaps even more importantly, the State must find ways to increase the supply of “starter” homes for purchase. This will require supporting the growth of smaller-scale housing typologies—such as duplexes, fourplexes, and townhomes—that can often be built at lower cost than large multifamily developments. Achieving this goal will also require addressing regulatory and cost barriers, including homebuilder liability requirements and building code provisions that can make for-sale housing significantly more expensive to deliver. 

Conclusion 

Ultimately, California’s next governor is likely to enter office with a mandate to implement a comprehensive and effective strategy to bring housing stability to the millions of people who call California home. 

While the state legislature has advanced an ambitious housing reform agenda, there is still limited evidence on the real-world impacts of these measures. Additional research will be needed to understand which laws are working and which need further reforms.

However, it is clear that success for the incoming governor will require pursuing a multifaceted approach that balances the improvement of the state’s policy and financing processes and a commitment to explore and implement the bold strategies needed to meet the scale of the state’s housing crisis. By doing so, the next governor has the unique opportunity to cement California’s role as a leader in innovative housing policy that delivers lasting affordability and stability beyond their tenure. 

 

Acknowledgments

Thank you to Terner Center colleagues for informing and guiding this commentary, including Ben Metcalf, Sarah Karlinsky, Carolina Reid, Ryan Finnigan, and Zack Subin.

We are grateful to the Heising-Simons Foundation and San Francisco Foundation for their support of the Terner Center’s work on this topic.

Photo courtesy of the Housing Action Coalition. Photo credit: Scott Chernis Photography.