The Future of Nonprofit Housing Development: Trends to Watch in CA

With increased housing shortages, rising rents, stagnant wages, and increasing homelessness, California is seeking policies that change or bypass current legislation to address the affordable housing crisis. Nonprofit housing development faces mounting challenges, including insufficient funding and affordable land, strict sustainability codes, and rising construction costs.

A March 2025 California Affordable Housing Pipeline report by Enterprise Community Partners found that many affordable homes and developments are unable to begin construction due to a lack of funding, which isn’t news to developers. The needed funding is estimated at $1.79 billion in state subsidies and $574 million in state tax credits. At the end of 2024, 44,723 new affordable homes were ready to start construction as soon as financing was secured.

Several new laws aimed at increasing housing production took effect in 2025, including:

• SB 1037 penalizes local governments that fail to meet the requirements of the housing element law, whether by blocking or delaying the approval of housing. The law imposes penalties of up to $50,000 per month, and the funds raised would be used to support affordable housing in those same areas.
• AB 3093 charges cities and counties with planning for everyone’s housing needs, including those at the lowest income levels.
• SB 1395 makes it easier to develop and operate interim housing, including emergency shelters and designated public facilities, designed to help users with housing assistance, healthcare, and other services.

By scaling funding for affordable housing development in California, the stalled pipeline of projects can be cleared, and progress can be made in addressing homelessness.

The good news is that certain state trends are helping developers and nonprofits overcome these obstacles. Some provide funding and tax credits to incentivize sustainable housing development, while others seek to reduce construction costs amid skyrocketing prices driven by inflation, tariffs, and a shrinking labor pool.

Here’s a closer look at five of the top nonprofit housing development trends taking place in California.

1. The Affordable Housing Bond Act of 2026

If passed, the Affordable Housing Bond Act of 2026 will provide immediate funding for shovel-ready affordable housing projects in the state. The measure, potentially on the state’s November 2026 ballot, includes $10 billion in bonds to finance programs for affordable rental housing and home ownership programs. This includes $7 billion for the Multifamily Housing Program, which supports permanent and transitional rental housing for low-income families through low-interest loans. Other programs that will benefit from the act include the CalHOME and the MyHome down payment assistance programs and the Portfolio Reinvestment Program.

Additionally, the act helps fund a new program that supports affordable housing with long-term affordability restrictions on each unit.

2. Housing BOOM Act

The national Housing BOOM Act seeks to improve affordable housing options, reduce homelessness, protect renters, and help fund federal housing programs by providing tax credits for shovel-ready projects. It creates a housing construction fund for middle-income homeowners and expands the federal low-income housing tax credit program. The act has been referred to the Committee on Finance for review.

3. San Francisco’s Family Zoning Plan

With an ever-increasing population comes increased demand for land to build on. Rising land costs make it difficult to fund affordable housing development, leaving developers unable to start new projects.

To help alleviate land shortages and high costs, San Francisco’s Family Zoning Plan allows for denser housing development in certain parts of the city. This may help denser projects reduce costs, making them more viable.

However, while passed by city residents in December 2025 and taking effect in January 2026, the law has been challenged in court, with a decision pending. The case argues that approving the plan without sufficient environmental review violates the California Environmental Quality Act. According to the case, the city relied on an addendum to an environmental impact report rather than preparing a new one, and it doesn’t fully account for all the construction that would be allowed if the plan is implemented.

4. Increase in Sustainable Building Practices

With strict state regulations regarding environmental protection, carbon emissions, air quality, and water conservation, affordable housing developments can incur higher costs and delays in project approval. To help offset these costs, certain projects may be eligible for additional tax credits or other financial assistance.

Green construction methods include adding renewable energy, using energy-efficient materials, and other advanced technologies.

5. Rising Land and Construction Costs

Land prices have been steadily rising due to growing demand driven by state population growth. This has also limited the options for affordable housing developments. Additionally, higher interest rates have increased the cost of land and construction loans, making it more difficult for nonprofits to fund their projects.

Along with these increases, construction costs have risen. Mortenson’s Quarterly Cost Index showed an increase in overall construction costs of 7.35% in 2025. Additionally, tariffs have increased the prices of imported products and materials, including steel and aluminum. Associated General Contractors noted a steep increase in tariffs on these metals in 2025 (tariffs were raised to 25% on March 12 and to 50% on June 4). Additionally, inflation and labor shortages have driven up labor costs.

Options for developers include tax incentives, fee reductions, and subsidies for mixed-use projects that combine residential, commercial, and recreational development. Mixed-use projects can help create neighborhoods where people can live, work, and play within a short radius, reducing traffic and improving livability.

Positive Outlook for Nonprofit Housing Development in California

Nonprofit developers can hope to see an increase in nonprofit housing funding and reduced land costs due to higher development density. Additionally, higher construction costs can be mitigated by leveraging the advantages of mixed-use development, including tax credits and funding availability for these project types.

Working with a contractor experienced in nonprofit housing developments, one that has seen trends come and go, will provide you with increased cost transparency, enabling you to make informed decisions early in the project. James E. Roberts-Obayashi Corporation’s proactive risk management and expert advice can help reduce surprises, enhance funder and partner confidence, protect project budgets, and ensure affordability.

Discover how James E. Roberts-Obayashi Corporation’s cost-estimating solution can transform your development process by providing reliable, market-aligned budgets from the earliest stages. With enhanced cost transparency and proactive risk management, you can safeguard your project’s financial health and build confidence with funders and stakeholders. Contact us today to learn more about how we can support your affordable housing initiatives and help you deliver successful, budget-conscious projects.