Newsom signs law to reduce costs of building affordable housing

California Gov. Gavin Newsom signed a new housing affordability law on Monday, aiming to cut red tape and spur housing construction.

At a press conference in Oakland’s Chinatown, the governor didn’t mince words when it came to confronting the state’s cost-of-living crisis, which is top of mind for residents.

“It’s Econ 101,” Newsom said. “We need to build more damn housing, and we need to lower the cost of construction.”

The reforms signed into law are expected to reduce the per-unit cost of affordable housing by $60,000 to $70,000, the governor said. One primary change is slashing impact fees, which local governments add onto new housing developments to generate tax revenue.

The one-time fees levied on developers are used to support municipal services — including schools, public parks and sewage — for residents in the new affordable housing units.

A report by the Terner Center for Housing Innovation, a UC Berkeley think tank focused on housing challenges, recently found that across the state, affordable developments paid an average of roughly $300 million in impact fees annually. In his announcement on Monday, the governor called the fees “comical.”

“They’re outrageous. It makes it quite literally impossible to build an affordable unit,” Newsom said.

State Sen. Jesse Arreguín, D-Berkeley, and other officials at the conference credited the state’s investments in housing with alleviating some of the heavy burden of the housing crisis on residents and municipalities — and resulting in a 9% drop in unsheltered homelessness statewide over the past year, Arreguín said.

This announcement was also an opportunity for Newsom to trade barbs with President Donald Trump after he refused to sign a major housing bill from Congress, which became law over the weekend.

“The President may not be familiar because he did not take the time to sign a bill,” Newsom said when asked about the federal legislation, but “it looks a lot like what we’ve been doing here in the state of California.”