By RSG Principals Jim Simon and Tara Matthews
As we approach the halfway mark on 2025, Governor Newsom has released the May Revision to his proposed 2025–26 State Budget. The update reflects California’s shifting fiscal realities, continued revenue uncertainty, increased construction costs, and a limited number of new program proposals.
We wanted to share a few highlights that stood out to the RSG team—especially those affecting housing, infrastructure, and local government decision-making:
No Major New Housing Development Funding, But RHNA Accountability Takes Center Stage
The Governor’s revised budget does not introduce significant new funding for affordable housing development. Instead, the focus remains on increasing transparency and accountability around how state funds have been used, particularly in meeting Regional Housing Needs Allocation (RHNA) targets. As housing production continues to lag behind goals, the Administration is emphasizing reforms to speed up local approval timelines and reduce project delays.
Permit Reform in the Spotlight
A forthcoming statewide report is expected to assess the impact of permitting processes not only on housing, but commercial and mixed-use development. This focus is echoed in legislation such as AB 253 (Ward and Quirk-Silva), which would establish a plan check “shot clock” requiring local agencies to complete initial residential project reviews within 60 days. AB 609 (Wicks) and SB 607 (Wiener) both seek to streamline housing approvals by expanding CEQA exemptions for infill projects. AB 609 would exempt most urban infill housing from review, while SB 607 proposes technical changes to further ease approvals for infill, mixed-use, and affordable housing aligned with local zoning.Together, these bills reflect a broader legislative push to accelerate housing production by easing regulatory barriers.
Economic Development Tools Under Discussion
While the May Revision proposes reductions to some discretionary state spending, there is renewed legislative interest in expanding tools for economic development. For example, SB 769 (Caballero) proposes the need for a new financing mechanism to support community revitalization and job creation in underserved areas. This bill would enhance the ability of cities and counties to partner with state agencies on infrastructure and workforce investments.
Construction Costs and Global Trade Impacts
Ongoing inflation and global trade factors, including tariffs, continue to increase the cost of delivering both public and private development projects. While these issues are not the focus of any single budget item, they are contributing to rising capital costs and complicating feasibility for affordable housing and infrastructure projects.
With the Legislature required to pass a balanced budget by June 15, we expect the coming weeks to include further negotiation and policy shifts as lawmakers work to reconcile budget limitations with ambitious housing and climate goals. RSG will continue to track relevant legislation and policy changes, and we remain committed to helping public agencies adapt to an evolving landscape with smart, practical strategies rooted in decades of experience.
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. Our services include support in real estate, economic development, fiscal health, and housing initiatives.
RSG actively engages in professional organizations focused on advancing community development in California. These include the California Association for Local Economic Development, California Association of Local Agency Formation Commissions, and regional housing networks that inform our policy and programmatic work.
To learn more about RSG and how we help public agencies navigate change, visit www.rsgsolutions.com or tune into our “RSG Insider” podcast, available on YouTube and most podcast platforms.
