CaliforniaAB 5072025-2026 Regular SessionHouseWALLET

Adaptive reuse: streamlining: incentives.

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Bill Overview

Analyzed Economic Effects

12 provisions identified: 7 benefits, 2 costs, 3 mixed.

Long-term affordable homes in reuse projects

The law requires affordable homes in adaptive reuse projects. Rental projects must set aside either 8% of units for very low‑income and 5% for extremely low‑income, or 15% for lower‑income households. These rental limits last 55 years. Owner‑occupied projects must set aside 30% for moderate‑income or 15% for lower‑income households for 45 years. If your city’s rules are stricter or target lower incomes, those stricter rules apply.

High‑rise projects: skilled workforce rules

Starting July 1, 2026, for projects with 40+ homes and a building over four stories: the applicant may hire only prime and sub‑contractors who use a skilled and trained workforce for apprenticeable trades. Primes and subs must sign affidavits and send monthly compliance reports; the applicant must give the city monthly reports. If at least three compliant bids are not received for a work scope, the skilled‑workforce rule can be waived for that scope. At least 14 business days before bids are due, the applicant or prime must notify local building‑trade unions and contractor groups; on request, they must share bidder names and license numbers within three business days. Missing a monthly report can cost 10% of that month’s construction value (up to $10,000), and not using a skilled workforce can cost $200 per day per worker. Penalties can be assessed within 18 months and paid to enforcement funds or the local agency; local governments can also sue and must pay recovered wages and penalties to workers.

Low‑rise projects: apprenticeships and health care

Starting July 1, 2026, for projects with 40+ homes and no building over four stories: contractors with craft workers must join an approved apprenticeship program or request apprentices. They must spend on worker health care each hour at least the cost of a local Covered California Platinum family plan. Contractors must keep payroll records and send them to the Labor Commissioner monthly, and report any change in apprenticeship or health spending to the city within 10 business days. The proponent must send monthly compliance reports while construction contracts are being performed. Missing monthly reports can cost 10% of that month’s construction value (up to $10,000). Not meeting the labor rules can cost $200 per day for each affected worker. A joint labor‑management committee and the Labor Commissioner can enforce, and penalties may be assessed within 18 months and go to the State Public Works Enforcement Fund.

Less parking needed for new units

For the adjacent part of a project next to the reused building, cities cannot require parking if it is within 0.5 mile of transit, in a historic district, when on‑street permits are required but not offered to residents, or when a car‑share is within one block. In other places, parking for that adjacent portion is capped at one space per home. This lowers parking mandates and can reduce project costs.

By-right approvals and faster timelines

Adaptive reuse that meets the law is a use‑by‑right. Cities must process it ministerially, without discretionary permits that trigger CEQA. If staff finds the project meets objective rules, approval happens within 60 days (150 units or fewer) or 90 days (more than 150). Design review must be objective, and consistent subdivisions are exempt from CEQA. An approval never expires if the project has public investment beyond tax credits and at least 20% of homes are affordable at or below 80% AMI; otherwise it lasts three years, with one possible one‑year extension for progress.

Faster, uniform approvals for conversions

Local governments must decide requested project changes in 60 days, or 90 days if design review is needed. They must use the objective rules in place when the original application was filed; new rules can apply to adjacent parts only if units or square feet change by 15%, or by 5% to avoid a specific, adverse impact. A city or county cannot use approvals for public improvements on its own land to slow or block a qualifying project. A zoning rule that allows adaptive reuse overrides conflicting parts of a specific plan. These rules apply statewide, including charter cities.

Limits on local add-ons and fees

Cities cannot force changes to a building’s exterior envelope unless the building code requires it. They cannot demand studies or pre‑approval conditions that are not tied to objective planning rules. Impact fees are banned unless they are tied to the change of use and roughly match the added impacts; this ban does not cover any new adjacent building. After approval, the city must issue later permits without delay using the rules in place when you first applied, unless you agree to other rules.

Clearer, faster state housing plan checks

When the state finds a draft housing plan is not compliant, it must send a letter that lists each missing legal part and gives the exact text or analysis to add. Before adoption, the local council must consider the state's findings and required fixes; if the state letter is late, the council may still act. After adoption, the state reviews within 60 days and again lists any missing parts with the exact text or analysis to reach compliance.

Local tax-backed incentives for reuse housing

Beginning July 1, 2026, cities and counties may create a local incentive program for adaptive reuse. It uses the extra property tax from the project’s higher assessed value (“adaptive reuse investment funds”). After a certificate of occupancy, a city or county may pay those funds to the proponent for up to 30 straight fiscal years to subsidize required affordable homes. Special districts or cities may transfer their share to help fund those subsidies. A lease may direct some payments to a lessee, who then counts as a proponent.

Site, historic, and safety rules

Projects must submit a Phase I environmental study and clean up or mitigate hazards before people move in. Projects qualify only on sites 20 acres or less. You may add new housing on the same or an adjacent parcel if you follow state rules and do not remove historic open space. For buildings over 50 years old, the city decides within 90 days if it is historic; if so, you must follow federal rehab standards or use historic rehab tax credits, and the city may deny or add conditions to prevent major harm.

Prevailing wage and labor rules apply

Adaptive reuse projects must follow state labor standards. Workers on covered projects that are not entirely public works must be paid at least the prevailing wage, with apprenticeship exceptions. Larger projects (50+ homes) and very tall buildings (over 85 feet) face extra labor standards. The Labor Commissioner, workers, and joint labor‑management committees can enforce unpaid wages and penalties up to 18 months after the project ends.

New workforce and PLA rules in 2026

Beginning July 1, 2026, contracts cannot shift a project applicant’s duties or penalties under the skilled‑workforce rules to the prime contractor. If every contractor and union is under a multicraft project labor agreement that requires a skilled and trained workforce and covers all crafts, that agreement replaces the statute’s skilled‑workforce rules. On parts of a project that are not a public work, a valid collective bargaining agreement may change how employer payments count toward wages if it says so. Prevailing wage rules do not block approved alternative workweek schedules on non‑public‑work portions.

Sponsors & Cosponsors

Sponsor

Matt Haney
Democratic • House

Cosponsors

Mark Mark GonzÃ¡lez
Democratic • House
Catherine Stefani
Democratic • House

Roll Call Votes

All Roll Calls

Yes: 219 • No: 19

House vote • 9/11/2025

Item 28 — Assembly AFLOOR

Yes: 70 • No: 4

Senate vote • 9/10/2025

Item 224 — Senate SFLOOR

Yes: 30 • No: 9

legislature vote • 8/29/2025

Vote in CS61

Yes: 6 • No: 1

legislature vote • 8/18/2025

Vote in CS61

Yes: 7 • No: 0

legislature vote • 7/15/2025

Vote in CS75

Yes: 8 • No: 2

legislature vote • 7/2/2025

Vote in CS82

Yes: 5 • No: 2

House vote • 5/23/2025

Item 37 — Assembly AFLOOR

Yes: 64 • No: 1

legislature vote • 5/14/2025

Vote in CX25

Yes: 10 • No: 0

legislature vote • 4/30/2025

Vote in CX15

Yes: 9 • No: 0

legislature vote • 4/24/2025

Vote in CX10