California Legislature Passes Sweeping Housing Package Targeting Zoning and ADU Rules

The California Legislature adjourned its 2025-2026 session on August 31, sending a sweeping package of housing bills to Governor Gavin Newsom's desk. The legislation targets local zoning control, accessory dwelling unit (ADU) expansion, and downtown high-rise development, marking another significant state intervention into municipal land-use authority.[1]

The package, which Newsom has until September 30 to sign or veto, includes Assembly Bill 956, Assembly Bill 2074, Senate Bill 1117, and Assembly Bill 2433. Under the California Constitution, any bill passed before September 1 that the governor does not return by the deadline automatically becomes a statute without his signature.[1][5]

For a homeowner with a deep lot, AB 956, authored by Assemblymember Sharon Quirk-Silva, represents a major expansion of property rights. The bill allows the construction of up to two detached ADUs on a single-family property, doubling the current cap of one and opening a cleaner path to multi-generational living or rental income.[2][5]

It also explicitly prohibits homeowners associations (HOAs) from blocking ADUs that comply with state standards. This provision closes a zoning gap that had allowed restrictive covenants to override state housing policy in many newer subdivisions, ensuring that owners in HOA-governed communities have the same building rights as those in older neighborhoods.[2][5]

Paired with the capacity increase is Senate Bill 1117, introduced by Senator Sabrina Cervantes, which fundamentally alters how cities calculate impact fees for backyard homes. Under existing law, ADUs of 750 square feet or less are exempt from impact fees, but units exceeding that threshold are taxed on their entire square footage—a penalty that often forces owners to shrink their floor plans.[7]

SB 1117 replaces this "fee cliff" with a marginal structure. For the first two ADUs on a property, local governments will only be permitted to charge impact fees on the square footage that exceeds the 750-square-foot threshold. For an 800-square-foot unit, a homeowner would only pay fees on the 50 square feet above the line, potentially saving tens of thousands of dollars in development costs and making a two-bedroom layout financially viable.[7]

Beyond single-family lots, the legislature took aim at commercial centers with Assembly Bill 2074, the Downtown Revitalization Act. Authored by Assemblymember Matt Haney, the bill requires California's seven largest transit-rich cities—Los Angeles, San Diego, San Jose, San Francisco, Sacramento, Oakland, and Long Beach—to designate regional transit hub districts.[4][6]

Within these designated zones, which must cover at least 0.25 square miles, cities are prohibited from setting maximum height limits lower than 150 feet. Furthermore, at least 25% of the total area of these districts must allow residential buildings of at least 450 feet, giving developers the certainty needed to finance high-rise projects.[4][6]

"The pandemic is over, but many of our largest cities are still struggling to bring vitality back to their downtown neighborhoods," said Brian Hanlon, CEO of California YIMBY, which co-sponsored the legislation. "AB 2074 will expedite the construction of tall residential buildings, alongside existing commercial buildings."[4]

The package also includes Assembly Bill 2433, authored by Assemblymember David Alvarez, which strengthens the state's 1979 Density Bonus Law. The legislation expands incentives for developers who provide deeper levels of affordability and mandates that cities process concessions and waivers through a ministerial, rather than discretionary, approval process.[3][8]

"California's housing crisis has been decades in the making, but Bonus Law is proof that the right policies work," Alvarez said after the bill cleared the legislature. "AB 2433 builds on that success by making it easier to build homes families can actually purchase."[3]

The bills now await action from Newsom, who has historically championed state-level interventions to force local housing production. If enacted, the new laws will take effect on January 1, 2027, changing the math for property owners deciding what to build in their backyards and for developers eyeing downtown parcels.[1][3]