March 2025 - Affordable Housing News Update
Hi Everyone, Happy Pi Day! This March, we have some important updates to share regarding affordable housing. Stay tuned for key information and developments
TL;DR
Federal: HUD funding is falling short, risking reduced Section 8 vouchers and cuts to homelessness programs. A rollback of fair housing rules eases compliance for local governments but could make it harder to ensure equity.
California: State policies expand affordable housing opportunities through zoning reform (SB 423), new financing tools, and stronger tenant protections. Developers can expect faster approvals and new funding sources, but also more affordability requirements and rent caps.
Los Angeles: HACLA has paused new Section 8 vouchers due to funding gaps, which may slow leasing. Meanwhile, the city’s new CHIP ordinance allows more housing density in commercial areas. Local rent control updates and Measure ULA funds offer both challenges and new financial support.
U.S. Federal Level
Continuing Resolution Underfunds HUD Programs: Congress is advancing a long-term stopgap funding bill (continuing resolution) that would extend FY2024 spending levels through FY2025, with only limited increases (Federal Government at Risk of Partial Shutdown at Midnight Tonight – Take Action! | National Low Income Housing Coalition). Crucially, HUD’s Housing Choice Voucher program would receive about $700 million less than needed to renew all vouchers, which is projected to cut roughly 32,000 low-income families from the program (Federal Government at Risk of Partial Shutdown at Midnight Tonight – Take Action! | National Low Income Housing Coalition). HUD’s Homeless Assistance Grants would also fall $168 million short, potentially forcing shelters to scale back or close and affecting services for an estimated 20,000 people experiencing or at risk of homelessness (Federal Government at Risk of Partial Shutdown at Midnight Tonight – Take Action! | National Low Income Housing Coalition). The House passed the measure on March 12, and while the Senate initially resisted, leaders signaled support to avoid a government shutdown (Federal Government at Risk of Partial Shutdown at Midnight Tonight – Take Action! | National Low Income Housing Coalition).
Fair Housing Rule Rolled Back: HUD issued an interim final rule revising the Obama-era Affirmatively Furthering Fair Housing (AFFH) regulations (HUD AFFH Rule Revised | February 2025). The 2025 rule repeals the stricter 2015/2021 AFFH requirements and returns to a pre-1994 approach, eliminating detailed fair housing planning and analysis mandates for jurisdictions (HUD AFFH Rule Revised | February 2025). Instead, communities only need to certify that they are taking actions to promote fair housing, without submitting formal assessments or plans (HUD AFFH Rule Revised | February 2025). HUD asserts that basic anti-discrimination laws still apply, but advocates worry the lack of oversight and reporting will weaken enforcement of fair housing goals (HUD AFFH Rule Revised | February 2025).
Brief Analysis: The federal funding patch, if enacted, signals a tighter resource environment for affordable housing. For developers, the shortfall in voucher funding means fewer tenants will have rental assistance, which could jeopardize occupancy and rent collections in projects that rely on Section 8 vouchers. Financing new developments may become harder as lenders and investors factor in reduced subsidy availability and potential project revenue gaps. Similarly, underfunding homeless assistance could strain local shelter systems, increasing pressure on affordable and supportive housing projects to serve those displaced by service cuts. On the regulatory side, HUD’s pullback of the AFFH rule reduces compliance burdens on local governments but may also reduce incentives for communities to support equitable affordable housing development. Developers might find less proactive cooperation from jurisdictions on fair housing initiatives (e.g. inclusive zoning or site selection), potentially limiting opportunities in high-opportunity areas. While the deregulation could streamline some approval processes, it places more onus on developers and advocates to ensure projects further fair housing objectives without a strong federal mandate.
California State Level
Emergency Rent Cap Extended in Disaster Areas: Governor Gavin Newsom issued an executive order (N-23-25) extending anti-price-gouging protections for rent in areas hit by recent Los Angeles/Ventura County wildfires (Governor Newsom Issues Executive Order Extending Protections for Homeowners and Renters Related to LA Fires | Snell & Wilmer - JDSupra). Through July 1, 2025, landlords in affected regions cannot raise rents by more than 10%, and they are barred from evicting tenants to re-rent units at higher prices (Governor Newsom Issues Executive Order Extending Protections for Homeowners and Renters Related to LA Fires | Snell & Wilmer - JDSupra). To encourage new housing supply, the order exempts newly built units (first occupied after Jan 1, 2025) and large single-family homes from the rent-gouging cap (Governor Newsom Issues Executive Order Extending Protections for Homeowners and Renters Related to LA Fires | Snell & Wilmer - JDSupra). It also prioritizes displaced fire victims for placement in state-funded affordable housing, moving them to the top of waiting lists (Governor Newsom Issues Executive Order Extending Protections for Homeowners and Renters Related to LA Fires | Snell & Wilmer - JDSupra).
Streamlined Zoning for Housing (SB 423): A major new law (SB 423) took effect January 1, 2025, extending and expanding California’s streamlined approval process for housing. SB 423 renewed the SB 35 streamlining program through 2036 and now allows certain affordable housing projects by-right in coastal zone areas that were previously off-limits (Governor Signs Legislation Enacting Significant Amendments to SB 35, Increasing Opportunities for Development of Multi-Family Housing (Part I)) (with some conditions to protect environmentally sensitive areas). It also strengthens enforcement: any city or county without a state-approved Housing Element must approve eligible projects ministerially. In exchange for faster permits, developers face deeper affordability requirements – for example, projects using SB 35 in non-compliant cities must set aside at least 10% of units for extremely low-income households (50% AMI or below) to qualify (Governor Signs Legislation Enacting Significant Amendments to SB 35, Increasing Opportunities for Development of Multi-Family Housing (Part I)). This law opens more sites (especially commercial and coastal properties) to multifamily development, as long as a portion of units are affordable.
New Funding and Preservation Tools: California enacted laws to bolster affordable housing financing and protect existing units. SB 440 authorizes regions to form Regional Housing Finance Authorities with voter approval, empowering local governments to raise taxes or issue bonds for affordable housing development and preservation (California Housing Laws That Go into Effect in 2025 - Terner Center). This could lead to new regional funding streams (similar to Bay Area’s and L.A. County’s initiatives) that developers can tap for project financing. Another law, AB 2353, eases cash flow for nonprofit developers by allowing them to defer property tax payments on affordable projects under development (California Housing Laws That Go into Effect in 2025 - Terner Center). Previously, nonprofits had to pay property taxes upfront and then seek reimbursement via the welfare exemption; now they won’t incur taxes or penalties while their affordable housing exemption is pending, reducing carrying costs and risk.
Strengthened Tenant Protections: Several state measures expand tenant rights with implications for affordable housing operations. AB 846 brings California’s rent cap law to certain subsidized units – it directs regulators to limit annual rent increases on Low-Income Housing Tax Credit (LIHTC) properties (California Housing Laws That Go into Effect in 2025 - Terner Center). Although LIHTC rents are already regulated by AMI limits, this ensures rents in those affordable projects cannot jump sharply year to year, offering additional stability for tenants. AB 2347 lengthens the eviction process statewide, giving tenants 10 business days (up from 5) to respond to an eviction lawsuit (California Housing Laws That Go into Effect in 2025 - Terner Center). This change provides tenants more time to seek help or rectify issues, and landlords (including affordable housing operators) will need to adjust their timelines for legal proceedings. Additionally, AB 2926 was enacted to prevent the loss of affordability in older projects – owners of subsidized properties nearing affordability expiration must accept bona fide purchase offers from preservation buyers or extend affordability, rather than drifting to market-rate, if an offer comes during the required notice period (California Housing Laws That Go into Effect in 2025 - Terner Center) (California Housing Laws That Go into Effect in 2025 - Terner Center).
Brief Analysis: California’s recent policy moves continue to prioritize housing production and tenant stability, creating a mixed bag of opportunities and responsibilities for developers. On the upside, laws like SB 423 significantly streamline the development process – reducing entitlement uncertainty and delays for qualifying projects. This improves project feasibility by saving time and carrying costs, and it opens formerly restricted areas (e.g. coastal and commercially zoned land) for new affordable housing. Developers can leverage these by-right approvals and the increased density allowances to build more units, but must be prepared to meet stricter affordability and labor standards in return. New financing mechanisms (such as regional housing authorities under SB 440) and process tweaks (like AB 2353’s tax deferral) are likewise positive for project economics – they hint at more local funding sources and lower pre-development expenses, which can help close funding gaps. At the same time, the state’s expansion of tenant protections means developers and owners need to plan for tighter rent increase limits and procedural requirements. For instance, rent-regulated affordable projects may see slower revenue growth, requiring careful budgeting for operating costs. Longer eviction timelines and mandated preservation sales may slightly increase compliance costs or limit an owner’s exit strategies, but they also maintain tenant security and the affordable housing stock – outcomes aligned with the industry’s mission. Overall, California’s environment is increasingly pro-housing but also highly regulatory: affordable housing developers should benefit from faster approvals and new funds, even as they navigate robust tenant protection rules and ensure strict compliance with affordability commitments.
Los Angeles City Level
Section 8 Voucher Freeze: The Housing Authority of the City of Los Angeles (HACLA) has paused the issuance of new Section 8 housing vouchers due to federal funding uncertainty (LA housing authority suspends processing of applications). Approximately 3,300 applicants who recently received Section 8 vouchers or were next in line have had their processing suspended (LA housing authority suspends processing of applications). HACLA officials report that without additional HUD funds, they might run out of money to pay landlords by year-end, so the agency is focusing on protecting current voucher holders rather than adding new ones (LA housing authority suspends processing of applications). Critical programs for veterans (HUD-VASH) and project-based vouchers are not immediately affected by this pause (LA housing authority suspends processing of applications), but the cutback raises alarms – experts warn that reductions in Section 8 support, the city’s largest homelessness prevention tool, could lead to increased homelessness in L.A. (LA housing authority suspends processing of applications).
Citywide Upzoning Incentive (CHIP Ordinance): Los Angeles City Council adopted the Citywide Housing Incentive Program (CHIP) ordinance in February 2025 to meet state-required rezoning targets (SCitron_Exe25021915270). This new policy allows developers to build taller and denser residential projects in many commercial zones citywide if they include on-site affordable units (Citywide Housing Incentive Program (CHIP) Ordinance - LA Conservancy). In practice, CHIP functions like a sweeping density bonus – projects that reserve a percentage of units as affordable can bypass certain zoning limits, adding substantial capacity for mixed-income housing. Notably, after public feedback, the program excludes single-family neighborhoods, concentrating growth on commercial and multifamily corridors (Citywide Housing Incentive Program (CHIP) Ordinance - LA Conservancy). By leveraging CHIP, Los Angeles aims to enable over 250,000 additional housing units (toward its Housing Element goal) without case-by-case legislative actions.
Rent Stabilization Updates: Los Angeles has transitioned out of its pandemic-era tenant protections and is recalibrating rent control policy. On February 1, 2024, the city lifted a three-year freeze on rent increases for units under the Rent Stabilization Ordinance (RSO). Landlords of these older (pre-1978) rent-controlled apartments may now raise rents up to 4% (with an extra 1%–2% if they pay utilities) in a 12-month period through June 2025 (A 2025 Update for L.A. Renters Did you know that L.A. City’s existing rent stabilization rules have allowed annual rent increases to significantly outpace inflation? Back in November, the Los Angeles Housing Department (LAHD) shared a report with the L.A. City Council that recommended capping the maximum allowable rent increase—something we continue to fight for as part of the Keep LA https://www.saje.net/update-for-renters/) (A 2025 Update for L.A. Renters Did you know that L.A. City’s existing rent stabilization rules have allowed annual rent increases to significantly outpace inflation? Back in November, the Los Angeles Housing Department (LAHD) shared a report with the L.A. City Council that recommended capping the maximum allowable rent increase—something we continue to fight for as part of the Keep LA https://www.saje.net/update-for-renters/). This marks the first allowed increase since early 2020. At the same time, city officials are considering permanent changes to the RSO formula – the Housing Department recommended capping annual rent hikes at 3% going forward (instead of the previous inflation-linked formula that could reach 8% max) (A 2025 Update for L.A. Renters Did you know that L.A. City’s existing rent stabilization rules have allowed annual rent increases to significantly outpace inflation? Back in November, the Los Angeles Housing Department (LAHD) shared a report with the L.A. City Council that recommended capping the maximum allowable rent increase—something we continue to fight for as part of the Keep LA https://www.saje.net/update-for-renters/) (A 2025 Update for L.A. Renters Did you know that L.A. City’s existing rent stabilization rules have allowed annual rent increases to significantly outpace inflation? Back in November, the Los Angeles Housing Department (LAHD) shared a report with the L.A. City Council that recommended capping the maximum allowable rent increase—something we continue to fight for as part of the Keep LA https://www.saje.net/update-for-renters/). The City Council has not yet enacted that cap, but the proposal reflects L.A.’s post-pandemic shift toward stronger tenant protections. It’s also worth noting that as of 2023, new “just cause” eviction and tenant relocation assistance ordinances are in effect citywide: tenants in all units (even those not under RSO) now have eviction protections after 6 months, and landlords must pay relocation fees if a rent increase above 10% causes a tenant to move. These local rules work in tandem with California’s AB 1482 rent cap to shield Los Angeles renters.
Measure ULA Progress (“Mansion Tax” Funds): One year into implementation, L.A.’s Measure ULA – the voter-approved transfer tax on property sales over $5 million – is starting to deliver new affordable housing resources. Thus far, the ULA tax has generated funding to support about 800 new affordable homes in development and provided rental assistance to over 4,000 low-income households in the city (What has Measure ULA Done so Far? — Shelterforce Shelterforce) (What has Measure ULA Done so Far? — Shelterforce Shelterforce). Revenue has come in below initial projections (due in part to a slowdown in high-end sales), but receipts did rise in late 2024, and city officials plan to roll out additional ULA-funded programs focused on homelessness prevention and innovative housing models (such as community land trusts) (What has Measure ULA Done so Far? — Shelterforce Shelterforce) (What has Measure ULA Done so Far? — Shelterforce Shelterforce). Legal challenges by real estate interests – which had threatened to halt the tax – have so far been unsuccessful; a ballot initiative to repeal ULA was struck down, and lawsuits were dismissed or are expected to be resolved this year (What has Measure ULA Done so Far? — Shelterforce Shelterforce). With the legal cloud lifting, the city is moving ahead to deploy ULA funds more aggressively in the coming months, aiming to fulfill its promise of 11 new housing and homelessness programs (beyond the 6 programs launched in the first year) (What has Measure ULA Done so Far? — Shelterforce Shelterforce). This includes expanding rent relief, acquisitions of affordable housing, and financing for new construction to address Los Angeles’s housing crisis.
Brief Analysis: At the city level, immediate fiscal and regulatory changes are shaping the landscape for affordable housing developers. HACLA’s voucher freeze is a red flag for project operations and underwriting – developers planning on tenants with Section 8 subsidies (for instance, in new LIHTC buildings or lease-ups) may need contingency plans. Fewer available vouchers could slow the filling of low-income units or reduce the rent developers can count on, thereby squeezing cash flow. Projects in pre-development that were anticipating project-based vouchers or tenant voucher referrals must closely monitor HACLA’s funding situation or seek alternative support (such as local rental assistance or deeper income targeting) to maintain feasibility. On a positive note, Los Angeles’ aggressive rezoning via the CHIP ordinance creates new development opportunities. For developers, this means a much larger pool of viable sites and by-right density bonuses in commercial corridors, which can shorten the approval timeline and lower entitlement risk. Utilizing CHIP can make formerly marginal projects pencil out – the ability to add units in exchange for affordable housing can improve economies of scale. However, developers must also navigate community concerns and the logistics of delivering the required affordable units; careful site selection and community outreach will be important since single-family areas remain off-limits and some neighborhoods may resist increased height even on commercial strips.
The adjustments in rent control and tenant protections in L.A. require developers and owners to adapt their long-term financial expectations and property management practices. The end of the rent freeze provides some relief to landlords of rent-stabilized properties, enabling modest rent increases to help cover rising costs. Yet, the prospect of a stricter 3% cap would further limit revenue growth on those units, which is a consideration for anyone investing in or rehabilitating older multifamily buildings. Affordable housing developers, who often operate within even tighter rent restrictions, mostly see indirect effects: stronger tenant protections citywide mean more stable tenancies (fewer disruptive evictions) but also necessitate compliance (e.g. providing relocation assistance if required). Overall, L.A.’s trend toward robust tenant rights may moderate investor interest in value-add acquisitions of older buildings, but it aligns with the city’s goals of preventing displacement – a factor mission-driven developers incorporate into their models.
Finally, the Measure ULA funds beginning to flow are a significant boon for affordable housing finance in Los Angeles. These local funds – from new construction loans to anti-displacement programs – can fill critical gaps that federal and state programs might leave, especially in light of federal shortfalls. Developers should stay attuned to ULA-backed Notice of Funding Opportunities (NOFAs) and initiatives, as they represent new sources of capital and grants for projects (such as buy-downs for deeper affordability, acquisition of at-risk buildings, or gap financing to make projects viable). While the volume of ULA money is still ramping up (and dependent on luxury real estate trends), its availability improves the outlook for affordable housing project pipelines in the city. In summary, Los Angeles is concurrently grappling with challenges like federal funding cuts and leaning on local policy innovations – the net effect for affordable housing developers is a need to be flexible and proactive. Success will come from adjusting to funding volatility (ensuring projects can sustain tenant subsidies or operate with lower rents if necessary) and capitalizing on pro-housing policies and local funding when they arise. Developers who navigate these changes adeptly can find new opportunities in L.A.’s evolving market – from building more units under the new zoning incentives to preserving and operating housing with the support of strengthened local programs.
Sources: Federal updates from NLIHC (Federal Government at Risk of Partial Shutdown at Midnight Tonight – Take Action! | National Low Income Housing Coalition) (HUD AFFH Rule Revised | February 2025); California updates from CA Legislature, Governor’s office, and Terner Center (Governor Newsom Issues Executive Order Extending Protections for Homeowners and Renters Related to LA Fires | Snell & Wilmer - JDSupra) (Governor Signs Legislation Enacting Significant Amendments to SB 35, Increasing Opportunities for Development of Multi-Family Housing (Part I)) (California Housing Laws That Go into Effect in 2025 - Terner Center) (California Housing Laws That Go into Effect in 2025 - Terner Center); Los Angeles updates from HACLA statements and local news (LA housing authority suspends processing of applications) (Citywide Housing Incentive Program (CHIP) Ordinance - LA Conservancy) (A 2025 Update for L.A. Renters Did you know that L.A. City’s existing rent stabilization rules have allowed annual rent increases to significantly outpace inflation? Back in November, the Los Angeles Housing Department (LAHD) shared a report with the L.A. City Council that recommended capping the maximum allowable rent increase—something we continue to fight for as part of the Keep LA https://www.saje.net/update-for-renters/) (What has Measure ULA Done so Far? — Shelterforce Shelterforce).
