New California Law Protects Affordable Housing from Preventable Foreclosure

SACRAMENTO, CA - Today, California Governor Gavin Newsom signed Assembly Bill (AB) 2020, bipartisan legislation authored by Assemblymember Jesse Gabriel (D-Encino) that supports the development and maintenance of affordable housing by enabling builders to use their existing portfolio resources to stabilize at-risk affordable housing developments and protect vulnerable residents who rely on them.

"California's affordable housing developments currently operate on razor-thin margins," said Assemblymember Jesse Gabriel (D-Encino). "We cannot afford to lose units that took years and significant public investment to create - especially to a foreclosure that could have been prevented. Preserving what we've built is far more cost-effective than starting over. AB 2020 gives the state a smart, practical tool that helps keep these properties afloat and keeps vulnerable Californians housed, and I applaud Governor Newsom for his signature on this important measure."

How AB 2020 Protects Tenants

Affordable housing developments financed by the state are required to remain affordable to low-income households for extended periods, often 55 years or longer, and operate with limited financial margins that depend on carefully structured reserves and operating income to remain solvent over that entire span.

During and after the COVID-19 pandemic, many of these properties were required to draw down operating reserves to offset lost rental income, while insurance, maintenance, and financing costs rose sharply. As a result, a growing number of developments now face operating deficits and heightened foreclosure risk, threatening the permanent loss of affordable units at a time when California can least afford to lose them.

Preserving an existing affordable home is significantly more cost-effective and expeditious than constructing a new one. Until now, state law has not clearly authorized a developer to transfer funds between properties within its own portfolio to prevent such a loss, even when a financially stable building exists alongside a struggling one under common ownership.

AB 2020 addresses this issue head-on. The new law authorizes the California Department of Housing and Community Development (HCD) to approve the transfer of excess reserves or the department's share of residual receipts between affordable housing developments that share the same sponsor or affiliated ownership and are subject to a departmental regulatory agreement. In practice, this means a builder managing multiple properties can use funds from a financially stable building to stabilize a distressed one within the same portfolio, subject to HCD's approval on a case-by-case basis.

What Housing Leaders Are Saying

"Preserving the state's existing affordable housing is one of the most cost-effective investments California can make. It is far cheaper to stabilize a distressed property today than to replace it tomorrow. AB 2020 gives housing providers a no-cost tool they can use in partnership with government and private lenders to keep affordable homes stable and performing for the low-income Californians who depend on them. We are grateful to Assemblymember Gabriel for his leadership on this important bill." - Matt Schwartz, President and CEO of California Housing Partnership

"The rising insurance premiums and other operating cost pressures are threatening the sustainability and viability of affordable housing providers. AB 2020 represents a targeted tool to protect the long-term stability of affordable housing, ensuring Californians can remain in their homes and communities. We are grateful to Assemblymember Gabriel and his office for their leadership on this important effort." - Jimar Wilson, Enterprise Community Partners Vice President and Southern California Market Leader

"Affordable properties that fall into distress do not fail suddenly. Their stability erodes over several years as insurance, maintenance, and financing costs increase, and the moment to intervene is well before a recapitalization becomes the only option. AB 2020 gives HCD a targeted way to act early without touching the payment rights of any city, county, or housing authority. For our members operating older properties with thin margins, that flexibility can be the difference between a stable building and losing affordable homes that we have all worked so diligently to create. We thank Assemblymember Gabriel for advancing a practical fix at a moment when the sector needs every tool available to keep homes affordable for low-income Californians." - J.T. Harechmak, Policy Director, Non-Profit Housing Association of Northern California (NPH)

"This is a common-sense change that is critical to the long-term stability of, not only California's supply of affordable homes, but the long-term stability of rural, agricultural, and Native communities and families. Assemblymember Gabriel's leadership on this issue was key to moving this critical policy." - Alicia HF Sebastian, Executive Director of the California Coalition for Rural Housing