By Jenna Abbott, Executive Director California Council for Affordable Housing
California’s housing crisis demands bold, creative approaches – and AB 130, along with SB 686 delivers one. Signed into law in June 2025 as part of Governor Newsom’s budget package, this bill introduces the ability to repay Department of Housing and Community Development (HCD) loans early, unlock equity, and reinvest that capital into other projects.
For years, developers with HCD financing have been locked into loans that couldn’t be repaid until maturity. That structure limited flexibility, especially for owners who wanted to generate capital to preserve or build new affordable housing. AB 130 changes that. It creates what’s called the Affordable Housing Excess Equity Program, which lets developers repay qualifying HCD loans early and use the released equity for reinvestment.
This new approach works a bit like a revolving fund. Once a property is stabilized, the equity can be extracted and put to work again – rather than sitting idle. It’s a way of recycling public investment to create even more affordable housing. And thanks to companion legislation, SB 686, there’s now clearer language around how that equity can be used and how the program will be administered.
So what can developers actually do with the freed-up funds? The law allows equity to be reinvested in a wide range of uses, from acquiring or developing new affordable housing, to rehabilitating existing properties, to covering predevelopment expenses. It can also be used to fill financing gaps on projects that are close but not quite fully funded, or even to replenish reserves and repay deferred developer fees. HCD will review and approve all reinvestment plans to ensure the capital goes back into affordable housing.
It’s important to note that paying off the loan early does not lift affordability restrictions. The property must still operate under the original regulatory agreement for the full term, and HCD will continue to monitor compliance and collect oversight fees. In other words, affordability protections remain intact -what changes is the developer’s ability to unlock and redeploy equity.
For developers, this is a big deal. It means stabilized properties can become a source of capital for the next wave of housing. It means aging communities can access funds for much-needed rehabilitation. And it means the sector as a whole can move faster in responding to California’s urgent housing needs.
Now is the time for developers to take stock of their portfolios and start identifying which properties might benefit from this new flexibility. It’s also the time to be in close conversation with HCD as the department finalizes the details of the program. Having a reinvestment plan ready – showing exactly how equity will be used to build or preserve affordable housing – will put you ahead of the curve once the rules are fully in place.
At CCAH, we see AB 130 as a milestone moment. It transforms public financing from a fixed tool into a renewable engine that can keep fueling housing production and preservation. As always, we’ll be here to help our members understand the details, explore the possibilities, and make the most of this opportunity. If your organization is looking for guidance, resources, or a network of peers who are working through the same questions, this is the moment to get involved. Join CCAH today and be part of the coalition turning new tools like AB 130 into homes for Californians.