A more diversified housing landscape may soon be coming to California as state leaders take aggressive steps to tackle the state’s enduring affordability crisis. Governor Gavin Newsom signed a comprehensive package of housing legislation designed to accelerate construction, eliminate unnecessary regulatory barriers, and expand housing choices across the state. The wide-ranging reforms aim to fundamentally alter how residential communities are built, paving the way for everything from high-rise transit towers and missing-middle townhomes to more affordable backyard cottages.
The legislative package arrives at a critical juncture for California. According to a 2024 analysis by the Zoning Atlas, more than 95% of all residential land in the state is currently zoned exclusively for single-family housing. This restrictive zoning legacy, combined with surging demand, has made California home to some of the most expensive housing markets in the United States. Furthermore, the state continues to grapple with the nation’s largest unhoused population, even as recent regional efforts have recorded marginal declines, including a 2.8% drop in homelessness statewide in 2025.
State leaders argue that incremental changes are no longer enough to address the scale of the housing shortage. By streamlining approval pathways and limiting the ability of local jurisdictions to block multi-unit developments, the newly enacted laws seek to catalyze a new wave of construction tailored to diverse income levels and family sizes.
"Every Californian deserves a fair shot at a stable home — families shouldn’t have to wait years for housing to be approved and built in their communities," Governor Newsom said in a news release issued upon signing the bills into law.
Finding the Missing Middle
As urban planners and policymakers nationwide look for strategies to bridge the gap between single-family neighborhoods and high-density downtown apartments, California is leaning heavily into middle-scale housing types. To facilitate this shift, the state enacted the Missing Middle Townhome Act, designated as AB 1751. This legislation establishes a streamlined, by-right approval pathway for townhome development projects of up to 150 units.
According to an analysis by the law firm Holland and Knight, AB 1751 authorizes local governments to establish a fast-track, 60-day ministerial approval timeline for qualifying projects. Importantly, the legislation also exempts these missing-middle townhome developments from lengthy and often litigious reviews under the California Environmental Quality Act, a frequent bottleneck for residential builders.
Complementing these efforts, Senate Bill 1116 further bolsters the state’s existing Starter Home Revitalization Act, building upon prior legislation enacted in 2023 and 2024. Advocacy groups like California YIMBY have championed the measure, noting that it clears a clear path for a rapid 60-day approval process for starter homes, including both townhomes and condominiums. Additionally, SB 1116 explicitly blocks local agencies from utilizing subjective zoning standards to restrict these vital ownership housing types in designated areas, ensuring that municipalities cannot quietly undermine state-level directives.
Housing advocates point out that missing-middle housing is essential for younger buyers, growing families, and moderate-income households who find themselves priced out of traditional single-family homes but uninterested in high-rise condominium living. By easing the regulatory burden on townhomes and small-scale multi-unit configurations, the state hopes to unlock private-sector investment in communities that have historically resisted denser development.
Bigger Smaller Housing
While mid-scale townhomes represent a crucial frontier for affordability, California is also doubling down on smaller, infill housing solutions that have already proven popular across many neighborhoods. Accessory dwelling units, commonly known as ADUs or granny flats, have experienced a dramatic construction boom in various parts of the state in recent years, transforming suburban backyards into independent living spaces.
The new legislative package signed by Governor Newsom seeks to fuel this momentum even further by targeting one of the persistent financial hurdles associated with larger ADUs: local impact fees. Under previous rules, many municipal jurisdictions required property owners building ADUs exceeding 750 square feet to pay the full, standardized impact fee per square foot, driving up overall project costs significantly.
The newly enacted legislation replaces this blanket approach with a proportional marginal fee structure. Under the updated framework, local governments are limited to charging fees only for the square footage that exceeds the 750-square-foot threshold, rather than levying charges across the entire structure. This adjustment applies to the first two ADUs constructed on a given residential property.
Industry groups and housing advocates have praised the change as a practical remedy that will encourage the construction of roomier, more livable secondary units. Eliminating the punitive fee structure for larger footprints reduces overall development costs and represents a substantive policy shift that will help create more family-sized accessory dwelling units, according to California YIMBY CEO Brian Hanlon. By making it financially viable to build larger backyard cottages, the state hopes to accommodate multi-generational households and provide flexible rental options without fundamentally altering the physical footprint of established neighborhoods.
A Highway to High-Rises
At the densest end of the spectrum, California is shifting its focus toward transit-oriented urban cores to revitalize struggling downtown areas and curb automobile dependency. Assembly Bill 2074 targets some of the state’s largest and most transit-rich municipalities, requiring them to establish dedicated regional transit hub districts.
Within these designated zones—defined as areas surrounding at least one transit-oriented development stop—cities must establish residential building height limits of at least 150 feet. Furthermore, the legislation mandates that even taller residential buildings, with maximum height limits of at least 450 feet, must be permitted in at least 25% of all regional transit hub districts within a participating city.
The strategy is designed to concentrate dense residential growth directly adjacent to major public transportation infrastructure, cutting down on commute times, lowering greenhouse gas emissions, and creating vibrant commercial hubs around transit stations. Proponents argue that encouraging vertical growth near existing infrastructure is the most efficient way to accommodate the state’s expanding population while protecting natural open spaces from sprawling suburban development.
"Our downtowns are still struggling and need to be brought back to life," said Assemblymember Matt Haney, the author of the legislation, in a statement released earlier this year. "AB 2074 makes that happen by building dense housing where it’s needed most while creating good-paying jobs."
As these diverse housing measures take effect, municipal governments across California will be tasked with updating their local zoning codes and compliance processes to align with the new state mandates. While the sweeping reforms are expected to face pushback from local control advocates, state leaders remain steadfast in their position that regional and statewide coordination is vital to overcoming the housing shortage and ensuring long-term affordability for all residents.
