Governor’s May Revise Emphasizes Need for Urgent Advocacy Now to Restore Affordable Housing Investments

On May 14, Governor Newsom released his May Revise to the 2025-26 state budget, announcing a $12B deficit and offering a dire updated proposal with no funding for the major state housing programs. Our takeaway is four key points on what this updated proposal means for our collective work ahead as the affordable housing industry:

1. The state’s financial outlook has greatly worsened since the Governor’s January proposal. While the administration anticipated a $363M surplus this year, market instability, uncertainty, massive cuts on the federal level, and the devastating Los Angeles fires have plummeted the revenue outlook.

2. This proposal is harmful to our progress, but there are important areas of consensus. The May Revise does not include any funding for the Multifamily Housing Program (MHP), the state Low Income Housing Tax Credits (LIHTC), Homeless Housing Assistance and Prevention (HHAP), CalHOME or other programs, which are critical programs identified in the housing coalition’s budget ask, of which NPH is a part. Such a loss of funding would significantly slow affordable housing production in the Bay Area over the next few years – at a time when economic uncertainty is high. Because of the long timeline of development, we and our housing-insecure neighbors will feel this lapse in funding for years. 

However, the Governor does continue to support the creation of the California Housing and Homelessness Agency (CHHA) that could streamline our state’s fractured housing finance system, helping our members build more affordable homes more quickly for our communities. The Governor also came out strongly in support of a combined Housing and Infrastructure bond for 2026 and discussed a few pro-housing bills he will include in the budget trailer bills to implement the budget – Assemblymember Wick’s AB 609 to streamline infill housing; AB 1244 to fund infill development with Vehicle Miles Traveled (VMT) fees; and Senator Wiener’s SB 607 to relax requirements on Environmental Impact Reports for infill. These areas of consensus are strong starting places in this next stage of negotiations, and offer California important ways to advance housing goals beyond the ups and downs of budget cycles. 

3. We are now in the height of budget season and have work to do. The May Revise is the start of highest level negotiations between the Assembly Speaker, the Senate President Pro-Tempore, and the Governor. Legislative leaders declared at session start that they are focused on restoring affordability for Californians and we saw this priority in their initial response to the January budget proposal, in which they restored funding to key housing programs. We now turn to our housing champions in the Legislature who have one month to revise the proposal and pass a balanced budget. The Governor will then have two weeks to sign it. In that time, we need to do outreach to legislators and stress that investments in affordable housing are even more important in times of economic uncertainty. 

4. NPH is counting on our members and partners to show up for housing in the next month. The Bay Area has 44,723 affordable units in the pipeline right now, only waiting for the investment needed to begin construction. We must urge our local lawmakers, and especially within districts with affordable developments, to fight for affordable housing investments. First, use this comprehensive budget advocacy toolkit from Enterprise to make the case for how this lack of funding for programs, like MHP or the state LIHTC, impacts your work and your community. Second, if you have won or plan to apply for AHSC funding, please stress the importance of housing’s allocation from the Greenhouse Gas Reduction Fund (GGRF).

What’s in the May Revise?

The Governor’s May Revise updates California’s fiscal situation based on April tax revenue, providing the legislature with the financial snapshot they will use to craft their proposed budget. The update is a reserve-conscious approach to a less-than-ideal revenue outlook. While the Governor maintains some core investments in health, education, and climate, the proposal leans heavily on fund shifts, programmatic delays, and cost reductions to meet the constitutional requirement of a balanced budget. Housing programs felt the pinch especially hard. What is more, a number of federal cuts that could make this situation even more difficult are noticeably absent from potential funding scenarios; this situation could get worse.

In recent years, the May Revise proposed some increased funding for housing, but this year is different. Programs like the Multifamily Housing Program (MHP), the state Low Income Housing Tax Credit (LIHTC), Homeless Housing Assistance and Prevention (HHAP), and CalHome are presently receiving no funding allocations. Key budget implications for affordable housing, homelessness solutions, and the agency reorganization from the Governor’s May Revise are highlighted below:

Housing 

NPH has spent much of 2025 advocating for additional funding for affordable housing production by focusing on reinstating two sources: 1) the enhanced State Tax Credits, the program offering the best opportunity to leverage billions of local and federal dollars, and 2) HCD’s Multifamily Housing Program, the most flexible source of funding for our members to achieve our broad spectrum of housing goals. We also join a broad spectrum coalition of housing groups in asking for support across the continuum of housing. 

While a strong group of legislators in the Assembly and the Senate have made similar, formal budget requests to fund these programs, we need to continue our outreach to members of the legislature and stress the importance of our work at budget hearings.

Homelessness 

Again departing from the last few years, the Governor’s budget update does not fund Homeless Housing, Assistance, and Prevention (HHAP) grants but does continue the administration’s focus on accountability and performance outcomes, including: 

• Proposed reforms to better align local homelessness spending with state housing, behavioral health, and encampment resolution goals
• Underscored Proposition 1’s integration of mental health care and substance use treatment with housing-first models under CARE Court and Behavioral Health Community-Based Continuum Infrastructure programs 

Agency Reorganization 

Most of the May Revise’s section on housing deals with the proposed California Housing and Homelessness Agency (CHHA). This would create a new, cabinet-level position for housing and homelessness by reorganizing existing agencies and removing them from under the umbrella of California Business, Consumer Services and Housing Agency (BCSH). This new agency, combining HCD, CalHFA, and others, would be able to combine and streamline various sources of funding like AHSC and the SuperNOFA. 

CHHA would make awards under a new oversight body, similar to CDLAC and TCAC’s committee structure. NPH convened focus groups with members earlier this year to explore the potential of the agency and, based on your feedback, we have been supportive of the effort and are eager to work with the administration to see this reorganization through. The May Revise contains some funding to support the logistics of this endeavor and we applaud this effort as a way to support affordable housing even in a difficult budget year. 

Critical Next Steps

NPH remains committed to partnering with the Governor and Legislature to identify solutions that balance the fiscal reality facing California’s budget while also meeting the most critical housing affordability and homelessness needs across the state.

After negotiations between the Governor and the Legislature, the Legislature must pass a balanced budget by June 15 and the Governor needs to approve it by July 1. NPH will be working to raise the profile of programs that need investment and we need your support, too. It’s critical that we all contact our state legislators and urge them to support statewide housing funding and the AHSC program.

In addition to budget negotiations, NPH will also turn its focus to supporting the newly rebranded “Cap and Invest” program. While this program is separate from the annual budget process, its reauthorization looms large in 2030 and is a major achievement of the Newsom administration. Cap and Invest funds the Greenhouse Gas Reduction Fund and, in turn, the Affordable Housing and Sustainable Communities (AHSC) program. While the Governor has expressed support for AHSC and housing, we will still need to convey the importance of the program to legislators.

In the midst of this confusing time, NPH and our members continue to work to achieve our vision of a future where everyone has access to safe, stable, and affordable housing. To this end, we will work with the Governor and Legislature to develop solutions that address California’s fiscal challenges while prioritizing the state’s most pressing housing affordability and homelessness issues.