Bay Area Housing Affordability: New California Reforms for 2025

Governor Newsom signs the 2025 housing affordability and infrastructure reforms in Sacramento. California faces a real housing challenge; any relief is welcome. Recently, on July 1, 2025, Governor Gavin Newsom signed a historic budget bill packed with housing and infrastructure reforms. These new laws — hailed as “the most significant reform in decades”, aim to cut red tape and make it faster and cheaper to build homes. As a Bay Area real estate expert at Harv Realty Services, I’m excited to explain what these changes mean for our community and affordability.

The California housing crunch is well documented. By late 2024 only about 16% of households statewide could afford the median-priced home. In the Bay Area, the numbers are even more eye-popping: for example, the minimum income needed to buy a home in San Mateo County exceeds $514,000, and in San Francisco about $396,000. No wonder so many locals feel priced out! Housing costs have outpaced income for years (monthly payments rose roughly 80% since 2020). In fact, California home prices are more than double the national mid-tier price, and mortgage rates have jumped from ~3% to ~7% in recent years. These factors have made the Bay Area’s housing market extremely tight.

The good news: the 2025 reforms are a bold step toward easing this crunch. Here are the key changes to watch:

• Streamlined Environmental Reviews (CEQA Updates): New rules exempt many qualifying housing projects from lengthy state environmental review (the CEQA process). Infill housing and infrastructure projects — and even routine local rezoning under approved housing plans — face fewer delays. In short, builders can break ground sooner without compromising environmental protections.

• Faster Permits & Approvals: The state is expanding its Permit Streamlining Act and limiting certain coastal appeals. This will speed up the planning and permitting process, especially for infill developments and wildfire- and climate-friendly projects. For example, new approvals under the Housing Crisis Act are now permanent, and some local permit appeals are curtailed.

• Building Cost Stability: To avoid sudden cost jumps, California will freeze new residential building standards through 2031(except for emergency, fire safety or conservation updates). This means builders won’t face unexpected new regulations that could drive up costs, helping keep construction more affordable.

• Affordable Housing Funds: The budget establishes innovative financing tools. A new revolving fund will reinvest revenue from existing affordable housing into fresh developments. There’s also a statewide CEQA mitigation bank: developers can pay into affordable projects to offset environmental fees. These tools inject more capital for building lower-income housing.

Taken together, these reforms break down long-standing barriers that slowed homebuilding in California. State leaders call the package a “game changer” for affordability Senator Scott Wiener put it this way: “With these historic laws, we finally have the tools we need to move the needle on affordability in California”. Local city and county officials have echoed that sentiment, saying cities now have the flexibility and resources to deliver the housing and infrastructure Californians deserve.

Advocates praise the reforms as a breakthrough for affordable housing. What does all this mean for you? In the Bay Area, more streamlined approvals should gradually boost housing supply – from new starter homes to multi-family communities. More supply and stable construction costs can help moderate price growth over time. For buyers and renters, it means watch this space: new developments may come online faster in the next few years, offering more options.

Of course, these are not instant fixes. Approvals must still go through, and construction takes time. Meanwhile, our region’s fundamentals remain: strong jobs, desirable locations, and historically low vacancy mean demand is still high. That’s why having an experienced agent on your side is key.

Tips for Bay Area Buyers and Renters: Stay informed about upcoming projects in your neighborhood. Your realtor can track new developments and alert you to affordable housing lotteries or first-time buyer programs. With mortgage rates fluctuating and inventory slowly growing, having a trusted local expert to guide you is more valuable than ever.

My team and I keep a close eye on the latest laws and market trends. We’re here to help you navigate this changing market and find your best path to homeownership or renting. As the reforms take effect, I’m optimistic we’ll see meaningful progress: more building means more chances for Bay Area families to afford a home.