Executive Summary

California’s Assembly Bill 36 (AB‑36), authored by Assembly Member Esmeralda Soria and signed into Law on 10 October 2025 (Chapter 485, Statutes of 2025), converts the state’s “pro‑housing” designation framework from emergency to permanent regulations, aligns reporting with the state’s land‑use and climate apparatus, and streamlines how small and non-entitlement jurisdictions prove they deserve preference points in competitive funding programs.

In practical terms, AB‑36 seeks to lower administrative friction for compliant cities and counties, expand and stabilize incentives, and—beginning with the 7th housing element cycle—ground the designation in the materials localities already submit to the California Department of Housing and Community Development (HCD), rather than in parallel paperwork.

The Law arrives amid a multiyear push to accelerate housing production by rewarding jurisdictions that adopt local policies to remove barriers (zoning, parking minimums, permitting timelines) and advance affordability.  By clarifying renewal timelines—five years for non-entitlement jurisdictions (cities under 50,000; counties under 200,000) and at least four years for “small rural” jurisdictions (cities under 25,000; counties under 200,000)—AB‑36 gives smaller places breathing room to implement rather than constantly re-document their Status. 

Why AB‑36 Now?

California’s housing shortage is both chronic and policy-sensitive: production rises where local friction is lower, and state incentives visibly reward action.  The existing Pro-Housing Designation Program (PDP), created in the 2019–2020 Budget Act, demonstrated that bonus points in competitive grant scoring could nudge local behavior—but it relied on emergency regulations and often required additional submissions beyond the housing element process.  AB 36 hardens that framework into permanent rules and instructs HCD to look first at the housing element materials that the state already reviews for compliance.  This reduces duplicative documentation and ties incentives more tightly to the core planning instrument. 

That design choice matters.  The housing element is where jurisdictions quantify needs, inventory sites, commit to policies, and outline implementation timelines; leveraging those same materials to confer pro-housing Status reinforces a single source of truth and focuses local staff effort on planning quality rather than chasing separate program paperwork.  AB 36 also updates reporting lines—directing HCD to report designations to the Office of Land Use and Climate Innovation—a signal that housing policy will continue to be coordinated with climate and land use objectives. 

What the Law Actually Does

1) Moves from Emergency to Permanent Regulations

AB 36 instructs HCD to adopt permanent regulations governing the pro-housing designation, replacing the emergency rules that have been bridging the program since its inception.  Permanent rules mean more predictable criteria, clearer renewal and revocation procedures, and better alignment with other state programs that award preference points for pro-housing jurisdictions.

2) Uses the Housing Element Submission to Determine Status

Beginning with the 7th housing element cycle, HCD must evaluate a jurisdiction’s housing element materials to determine whether local policies are pro-housing.  The intent is to minimize supplemental documentation and lessen administrative burden—especially for smaller jurisdictions with lean planning staffs—while keeping the bar high: HCD performs this evaluation only for jurisdictions whose housing element is compliant.

3) Clarifies Timelines for Non-entitlement and Small Rural Jurisdictions

AB‑36 establishes renewal relief windows:

• Non-entitlement jurisdictions (cities < 50,000; counties < 200,000) cannot be required to renew their designation for at least five years.
• Small rural jurisdictions (cities < 25,000; counties < 200,000) get at least four years without renewal requirements and may request that HCD—“to the extent feasible”—base pro-housing determinations on housing element materials.  HCD retains authority to revoke designations when warranted. 

4) Aligns Reporting and Incentives

HCD must transmit designations to the Office of Land Use and Climate Innovation to reinforce cross-program coordination.  Designated jurisdictions continue to receive priority points in competitive state housing and infrastructure programs and access to the Pro‑Housing Incentive Program (PIP)—funding streams designed to advance production and preservation of affordable units.

Legislative Path and Vote Signals

The bill moved through the Legislature with comprehensive support: it passed the Assembly on 8 May 2025 (69‑0) and the Senate on 9 September 2025 (40‑0), signaling consensus that stabilizing the pro-housing framework is a low-risk, high-value refinement.  The Governor’s signature on 10 October 2025 completed chaptering as Chapter 485 of the Statutes of 2025.  For local governments and developers watching Sacramento’s signals, the vote margins and the calendar’s pace suggest a durable policy pivot rather than a temporary experiment. 

How AB‑36 Interacts with the Broader Housing Toolkit

California’s housing policy stack includes a web of laws that touch entitlement, zoning, and funding:

• SB 35 (2017): streamlines approval for qualifying projects in jurisdictions that fail to meet housing targets, reducing timeline risk when local processes have historically stalled production.  While AB‑36 doesn’t change SB‑35’s streamlining, a pro-housing designation can complement SB‑35 by signaling a jurisdiction’s broader willingness to reduce barriers and compete successfully for state funds.
• SB 262 (2025): AB‑36 includes a conditional clause that incorporates changes proposed by SB‑262 only if both are enacted and AB‑36 is enacted last, thereby embedding technical alignment across Government Code §65589.9.  This ensures consistency in definition and reporting across overlapping housing statutes. 
• Housing Element Enforcement: AB‑36 ties pro-housing Status to housing element compliance, which already carries enforcement teeth—from loss of local control in certain approvals to potential Attorney General enforcement in extreme cases.  Thus, the incentives of AB‑36 are layered on a backbone of compliance accountability.

Practical Implications for Cities, Counties, and Developers

For Local Governments

• Single‑Channel Documentation: Staff can lean on the housing element submission rather than building a separate pro-housing dossier.  This streamlining is especially valuable for smaller planning departments.
• Longer Designation Tenure: The four‑ to five-year renewal relief windows allow jurisdictions to focus on implementation, not paperwork cadence.  That time horizon can be used to push zoning changes, codify parking reforms, and implement ministerial approvals without fear of near-term paperwork lapses. 
• Competitive Edge: Designation translates into bonus points in state grant scoring.  Jurisdictions seeking funding for infrastructure (water, sewer, transit alignment) linked to housing can improve their odds by aligning local policy with pro-housing criteria.  [danharkey.com],

For Developers and Lenders

• Predictability: Projects sited in designated jurisdictions stand to benefit from a funding-friendly environment, potentially faster local processing, and a posture that favors production—factors that reduce entitlement risk and improve capital stack confidence.  [danharkey.com],
• Signal Value: Pro-housing Status is a credible signal that local political will favors new supply.  Combined with SB‑35 eligibility (where applicable), designation helps sponsors evaluate where deals are more likely to move through approvals and where infrastructure dollars may land.

What Counts as “Pro-Housing” Policy?

HCD’s pro-housing framework, now moving into permanent regulation, recognizes local actions that reduce costs, time, and uncertainty in bringing units online.

Examples include:

• Zoning Upzones (especially near transit or job centers),
• Deeply Reduced Parking Minimums for infill and affordable projects,
• By‑Right/Ministerial Approvals for qualifying projects,
• Objective Design Standards that limit discretionary delay,
• Fee Transparency and Caps or deferrals aligned with affordability goals,
• Streamlined ADU programs and flexible lot standards that unlock “missing middle” density.

While AB-36 does not enumerate each policy in the statute, it directs HCD to recognize evidence of these policies in the housing element and to grant designation accordingly.  Jurisdictions should treat their housing element as both a compliance document and a strategy book to earn pro-housing points.[danharkey.com]

Benefits—and the Tradeoffs

Benefits

·       Administrative Efficiency: Using housing element materials reduces redundant paperwork, freeing staff time for policy execution.

·       Durability: Permanent regulations and longer renewal intervals lower the chance that designations lapse due to process fatigue.

·       Funding Alignment: Pro-housing points improve competitiveness for infrastructure and housing grants—crucial for jurisdictions needing off-site improvements to unlock sites.  [danharkey.com],

Tradeoffs and Risks

·       Compliance Gatekeeping: If a jurisdiction’s housing element is not compliant, the streamlined evaluation doesn’t apply.  Some localities may still face technical hurdles to achieve compliance—especially around AFFH (affirmatively furthering fair housing) analyses and site inventories.

·       Revocation Authority: HCD maintains the right to revoke designations, a necessary backstop but also a risk for jurisdictions that secure points and then stall on implementation.

·       Capacity Constraints: Small rural jurisdictions may welcome reduced renewal frequency but still struggle with the staff capacity required to implement zoning changes or to prepare objective standards that satisfy HCD’s expectations. 

How Smaller Jurisdictions Can Use AB‑36 to Their Advantage

Smaller cities and counties often experience the steepest ratio of planning workload to staff capacity.  AB‑36 offers relief and leverage if they plan smart:

·       Anchor the Strategy in the Housing Element
Treat the housing element as the operational playbook—not just a compliance artifact.  Build in clear policy commitments, timelines, and objective standards that HCD can readily affirm as pro-housing without supplemental document chases.

·       Sequence Reforms to Funding Windows
Identify state grant cycles where pro-housing points are decisive, and stage local reforms (e.g., parking, lot coverage, ADU standardization) to precede application deadlines.  This ensures the jurisdiction extracts full point value when funds are on offer.  [danharkey.com],

·       Codify Ministerial Pathways
For categories eligible under SB‑35 or local by-right frameworks, adopt objective design standards early to keep approvals ministerial and defensible—reducing the litigation tail risk and elevating the jurisdiction’s attractiveness to sponsors. 

·       Pursue Regional Infrastructure Tie-Ins
Use pro-housing Status to compete for infrastructure grants (water, sewer, streets) that transform “paper capacity” into buildable capacity.  Production stalls when infrastructure is constrained; pro-housing points paired with targeted off-site upgrades can unlock stalled sites.  [danharkey.com],

Developer and Lender Playbook: Reading the Signals

• Map Designations to Pipeline: Update market scans to prioritize designated jurisdictions and those whose housing elements show the strongest pro-housing posture.  Points in funding and a favorable permitting climate support faster capital deployment and smoother takeouts.  [danharkey.com],
• Time Entitlements to Cycle Milestones: As the 7th cycle rules engage, monitor HCD compliance letters and local zoning ordinances.  Projects aligned with newly codified standards face fewer change‑order risks and less entitlement drift. 
• Stack SB‑35 Where Possible: In underperforming jurisdictions, SB‑35 ministerial benefits remain potent.  Combine them with AB‑36, which signaled political alignment for a double win on timing and predictability.

Metrics to Watch in 2026–2028

·       Designation Stability: How many jurisdictions maintain pro-housing Status across the four‑ to five-year renewal windows without revocation?  That will indicate whether permanent rules yield durable behavioral change.

·       Grant Award Correlation: Track whether designated jurisdictions capture a disproportionate share of competitive housing and infrastructure dollars—evidence that the point system truly affects outcomes.  [danharkey.com],

·       Production Uplift: Monitor permitting and starts in designated jurisdictions versus non-designated peers, controlling for job growth and interest‑rate trends to isolate policy effects. 

·       Compliance Bottlenecks: Note common reasons for non-compliance letters; if housing elements falter on AFFH or realistic site capacity, the streamlined evaluation will miss jurisdictions that might otherwise qualify as pro-housing. 

Frequently Asked Questions

Does AB‑36 change zoning directly?
No.  AB‑36 doesn’t rezone parcels; it rewards jurisdictions that voluntarily enact pro-housing policies.  Zoning reforms must be adopted locally and reflected in the housing element to earn designation. 

Can HCD revoke a designation?
Yes.  Even with extended renewal windows, HCD retains revocation authority if jurisdictions backslide or fail to implement committed policies.

Where do the incentives show up?
In competitive grant scoring across housing and infrastructure programs, and through the Pro‑Housing Incentive Program (PIP).  Designated jurisdictions typically earn bonus points or preferences that can tip the balance in their favor.  [danharkey.com],

AB‑36 can influence financing dynamics for developers and sponsors:

1. Lower Entitlement Risk = Better Capital Terms

• Why it matters: Lenders and equity partners price risk based on the level of entitlement uncertainty.  Jurisdictions with a pro-housing designation signal a friendlier permitting climate and alignment with state housing goals.
• Impact:
• Lower contingency reserves in pro formas.
• Reduced interest rate spreads on construction loans because the timeline risk shrinks.
• Higher leverage ratios are possible when lenders perceive lower political risk.

2.  Access to State Grants Improves Project Feasibility

• Designated jurisdictions earn priority points for competitive state housing and infrastructure grants.  If a city wins funds for water, sewer, or transit upgrades, developers avoid having to foot those costs.
• Impact:
• Lower site development costs → improved IRR.
• Better DSCR (Debt Service Coverage Ratio) because operating expenses tied to infrastructure are reduced.

3. Predictable Timelines = Lower Carry Costs

• Permanent regulations and streamlined evaluation mean fewer delays from local paperwork lapses.
• Impact:
• Shorter pre-development phase → less interest carried on land loans.
• Faster construction start → accelerates equity drawdown and reduces exposure to market volatility.

4.  Enhanced Exit Strategies

• Projects in pro-housing jurisdictions are more attractive to institutional buyers because they’re less likely to face compliance disputes or retroactive zoning challenges.
• Impact:
• Cap rate compression at disposition.
• Easier to secure takeout financing or permanent loans.

5.  Synergy with SB‑35 and Other Streamlining Laws

• Combining AB‑36 designation with SB‑35 eligibility creates a double-risk-reduction effect: ministerial approvals and a state-endorsed pro-housing posture.
• Impact:
• Equity partners are more willing to commit early.
• Construction lenders shorten underwriting cycles, improving deal velocity.

✅ Developer Financing Checklist: Using AB‑36 to Strengthen Your Capital Stack

1.  Confirm Jurisdiction Status

• Verify if the project site is in a pro-housing designated jurisdiction.
• Check renewal timelines (4–5 years) to ensure designation won’t lapse mid-project.
• Confirm housing element compliance—designation depends on it.

2.  Highlight Risk Reduction in Loan Applications

• Document streamlined entitlement benefits (shorter timelines, lower litigation risk).
• Include AB‑36 designation in your risk narrative for lenders and equity partners.
• Quantify expected time savings (e.g., 3–6 months faster approvals).

3.  Model Infrastructure Grant Impact

• Identify state programs awarding priority points to pro-housing jurisdictions.
• Estimate potential cost offsets for water, sewer, or transit improvements.
• Reflect grant assumptions in development budget and IRR calculations.

4.  Optimize Capital Structure

• Use reduced entitlement risk to negotiate:
• Lower interest rate spreads on construction loans.
• Higher LTC (Loan‑to‑Cost) ratios.
• Reduced contingency reserves in pro forma.

5.  Align with SB‑35 and Other Streamlining Laws

• If jurisdiction also qualifies under SB‑35, emphasize ministerial approval benefits.
• Combine AB‑36 and SB‑35 in your pitch deck for equity partners.

6.  Prepare Investor Messaging

• Create a slide showing:
• Designation benefits (priority points, faster approvals).
• Impact on IRR and DSCR from grant funding and timeline compression.
• Position AB‑36 as a risk‑mitigation lever in your capital raise narrative.

7.  Monitor Compliance and Renewal

• Track housing element updates—designation can be revoked if compliance lapses.
• Build a compliance calendar to avoid surprises during construction or lease-up.

Sources & Further Reading

• FastDemocracy (bill tracker): Status History, votes, chapter date (Chapter 485, Statutes of 2025).  [fastdemocracy.com]
• CalMatters Digital Democracy: Chaptered summary and cross‑references to SB‑262; small rural provisions and reporting alignment. [calmatters...ocracy.org]
• Assembly Committee on Local Government (Policy Analysis, 23 April 2025): Definitions of non-entitlement jurisdictions; evaluation via housing element materials; renewal timelines; revocation authority. [alcl.assembly.ca.gov]
• LegiScan (bill text and counsel’s digest): Permanent regulations directive; linkage to housing element cycles; statutory amendments to Government Code §65589.9.  [legiscan.com]
• PolicyEngage / TrackBill: Actions log; vote counts; conditional enactment language with SB‑262.  [trackbill.com]
• DanHarkey.com explainer: Program incentives and framing of PDP/PIP benefits; practical implications for jurisdictions and sponsors.  [danharkey.com]

Bottom Line

AB‑36 is a modest bill with outsized implications.  By anchoring pro-housing designation in permanent regulations and the existing housing element process, it trades paperwork for planning and stabilizes incentives that matter for both public and private actors.  Its most substantial promise lies not in a single headline reform but in reducing friction: fewer duplicative filings, more apparent timelines, better signaling to capital, and improved alignment with climate and land-use priorities.  The jurisdictions that will benefit most are those that use the new framework to codify objective standards, unlock infrastructure bottlenecks, and compete hard for state dollars—and then actually build.

Conclusion:

AB 36 is more than a technical adjustment—it’s a strategic signal to developers, lenders, and local governments that California intends to reward jurisdictions that actively dismantle barriers to housing production.  By embedding pro-housing designation into permanent regulations and linking it to housing element compliance, the state has created a cleaner, more predictable environment for capital deployment.  For developers, this means lower entitlement risk, improved access to infrastructure funding, and more substantial negotiating leverage with lenders and investors.  In a market where timing and certainty drive returns, AB‑36 offers a rare policy lever that can translate directly into financial advantage—if stakeholders move quickly to align their projects and strategies with the new framework.