California lawmakers weigh state-backed loans for downtown housing towers

California lawmakers are weighing yet another tool in the housing toolbox to jumpstart high-rise construction in the state’s largest downtown areas.

Assembly Bill 2074, dubbed the Downtown Revitalization Act, would ease approvals and offer state-backed, low-interest financing near major transit hubs. The bill calls for seeding a loan fund with $500 million.

The bill is moving through the committee gauntlet after passing unanimously in the Housing and Community Development Committee last week.

California lawmakers have passed a slew of bills in recent years to cut red tape and build more housing in a state with long-running affordability problems. Their work has served as one model for other states seeking to solve their own housing affordability challenges.

Gov. Gavin Newsom signed a landmark bill last year to override local zoning authority and allow more density near public transit.

What the bill would do

It would require California’s seven largest and transit-rich cities — Los Angeles, San Diego, San Jose, San Francisco, Sacramento, Oakland and Long Beach — to map regional transit districts. These districts would cover areas in and around their central business areas.

Within the transit districts, the bill sets a baseline building height of 150 feet. At least one-quarter of the land would have to allow towers of 450 feet or more. Projects that meet the bill’s labor and affordability standards would qualify for streamlined approvals. The goal is to cut local permitting delays that can stall dense housing for years.

Authored by Assemblymember Matt Haney, a San Francisco Democrat, the measure is sponsored by California YIMBY and the State Building and Construction Trades Council of California. Haney framed the bill as both a housing and economic development measure. He said it targets urban cores still reeling from the pandemic-era shift to remote work.

“I’ve spoken with city leaders across California and the message is clear: our downtowns are still struggling and need new energy,” Haney said in a statement. “AB 2074 makes that possible by building dense housing where it’s needed most, while creating good-paying jobs in the process.”

A central feature is a Downtown Revitalization Loan Fund to be administered by the California Housing Finance Agency. The revolving fund would provide low-interest loans to qualifying high-rise residential and mixed-use projects that meet state-defined labor and affordability benchmarks. The loans would be repaid at completion to support additional projects.

Closing a funding gap

Proponents say the fund is designed to close persistent capital stack gaps that often make tall buildings in California’s expensive markets financially unfeasible compared with mid-rise construction.

Brian Hanlon, president and CEO of California YIMBY, said the bill is intended to tackle the core structural barriers to building tall in job-rich downtowns.

“For too long, the economics of building high-rise housing in California’s downtowns simply haven’t worked. AB 2074 changes that,” Hanlon said, arguing that it’s “time to build up.”

Supporters say more predictable heights and faster approvals would give developers and lenders more certainty. They say union labor and affordability provisions would ensure projects deliver long-term public benefits.

The bill declares that its standards address a statewide concern and would apply to all eligible cities. That includes charter cities that typically wield broad control over local zoning. California YIMBY describes AB 2074 as part of a wider 2026 housing package. The group says the package aims to revive downtowns and lower construction costs through state intervention in both permitting and finance.

California budget woes

For Haney and the bill’s supporters, seeding the fund is the biggest challenge. California faces recurring budget shortfalls because tax revenues from high-income earners swing sharply. Analysts also blame rising ongoing spending and new cost pressures from federal cuts.

The Legislative Analyst’s Office projected an $18 billion budget deficit for 2026-27 in a report released last November. It warned that California could face large ongoing gaps without structural fixes. But Newsom’s budget, released in January, showed what he described as a manageable deficit of $2.9 billion.

California YIMBY officials note that the $500 million would turn into a revenue-neutral fund as developers pay back the loans with interest.