The new year has given us already a lot to talk about for communities. Today we want to highlight some of the news from Governor Newsom’s final budget proposal in his tenure, as well as share some thoughts on the proposed $10 Billion Affordable Housing Bond Act, both of which are unfolding over the next several months.
Governor’s Optimism on Revenues Bolsters 2026-27 Budget, but Leaves Unsolved Deficit in 2027-28 for Successor
The Proposed 2026-27 Budget Totals $248.3 billion in General Fund expenditures, with a $4.5 billion discretionary reserve and a balanced budget after adjustments for a $3 billion deficit.
It was less than two months ago that the media shared news of a projected $18 billion deficit in the state budget, so one must wonder – what has changed so quickly? Well first, the Governor’s budget indeed offers a rosier revenue picture than the Chief Legislative Analyst, even as both point to personal income tax revenues from the growing artificial intelligence industry as a bright spot. Even since the Governor released the budget, the Federal government has made more threats to reduce funding to California, so time will tell whether the revenue picture is too optimistic.
For the most part, the Governor’s budget proposal anticipates limited spending increases for health and human services, K-12 education, and higher education, with cuts to other programs compared to the current year, including housing and homelessness and labor and workforce development.
Diving deeper into the housing and homelessness budget components, we see that the Governor is continuing to champion streamlining and modernization of the state’s administration of housing programs, but not budgeting for additional ongoing funding. The largest source of ongoing housing comes from the state’s Affordable Housing and Sustainable Communities (AHSC) program, where the Governor hopes to realign the $560 million program to leverage other subsidies and expedite delivery of capital projects, while creating more flexibility in the sustainable communities components.
As a reminder, the budget process is now in the hands of the Legislature who will bring bills to implement the budget process and programs. Bills may be introduced until February 20, followed by a revised budget proposal from the Governor on May 14. Per state law, the Legislature must adopt a balanced budget by June 30, 2026.
Momentum Builds for $10 Billion Housing Bond to go to the Voters in 2026
The Senate (SB 417, Cabaldon) and Assembly (AB 736, Wicks, Haney, and Quirk-Silva) are considering legislation that would put before the voters a $10 Billion bond measure that aims to infuse new capital funding for housing programs for the first time since the $4 Billion Veterans and Affordable Housing Bond Act of 2018.
The two bills are quite similar, with the main difference being SB 417’s focus on wildfire resilience/infill infrastructure versus AB 736’s focus on energy efficiency weatherization for low-income households. Here’s how that line up, along with a comparison of the funding from the 2018 Housing Bond for context:
| Program Category | 2018 Prop 1 (SB 3) | 2026 AB 736 (Wicks) | 2026 SB 417 (Cabaldon) |
| TOTAL BOND AMOUNT | $4.0 billion | $10.0 billion | $10.0 billion |
| Multifamily Housing Program | $1.5 billion | $5.25 billion | $5.25 billion |
| Homelessness/Supportive Housing | (included in MHP) | $1.75 billion | $1.75 billion |
| Portfolio Reinvestment Program | — | $800 million | $800 million |
| Community Anti-Displacement | — | $500 million | $500 million |
| CalHome Program | $300 million | ||
| CalHFA Downpayment Assistance | $150 million | ||
| Combined Homeownership Programs | $1.0 billion | $1.0 billion | |
| Infill Infrastructure Grant | $300 million | — | Some MHP funds |
| Transit-Oriented Development | $150 million | — | — |
| Farmworker Housing Grant | $300 million | — | — |
| Tribal Housing Programs | — | $250 million (new program) | $250 million (existing program) |
| Local Housing Trust Matching | $300 million | — | — |
| Energy Efficiency/Weatherization | — | $200 million | — |
| Wildfire Prevention/Displacement | — | — | $200 million |
| CalVet Home Loan Program | $1.0 billion | — | — |
If you are interested in tracking or advocating for either of these two housing bond proposals, you can click on the links we provided above.
We are in the second year of the two-year legislative cycle, and there are over 1,100 bills active or carried over from the 2025 session. We expect that figure to substantially increase over the next several weeks.
About RSG
RSG is a creatively charged consultant to California public agencies. We collaborate with the people responsible for creating vibrant places to accomplish their goals. The inspired leaders at RSG create stronger communities capable of achieving bolder futures by bringing more than four decades of native knowledge to each engagement. As diverse as the agencies we work with, our services span real estate, economic development, fiscal health, and housing initiatives.
RSG are active members of several professional organizations advocating for community development interests in California, including the San Diego Housing Federation, Nonprofit Housing Association, and California Association for Local Economic Development, where we engage on legislation for our clients as part of our consulting practices.
If you are interested in learning more about RSG and our team, visit our website at www.rsgsolutions.com or check out our new podcast series “RSG Insider” where you will get a chance to meet our team and learn about some of the services we offer. RSG Insider is available on our exclusive YouTube channel and most podcast services.
