By Jenna Abbott, Executive Director, California Council for Affordable Housing
California’s affordable housing developers have a new tool to accelerate production and reinvest in future projects, thanks to a provision in Assembly Bill 130 and Senate Bill 686. AB 130, signed into law in June 2025, allows developers to repay certain Department of Housing and Community Development (HCD) loans early—unlocking equity that can be used to fund new affordable housing developments.
AB 130 established the Affordable Housing Excess Equity Program, which enables developers to repay HCD loans ahead of schedule and redirect the resulting equity into new projects. This is a significant shift in how public financing can be leveraged, offering developers more flexibility and speed in responding to California’s urgent housing needs. SB 686, expected to pass off the floor and move to the Governor’s desk this week, adds clarifying language to make usage of AB 130 easier.
Once a loan is repaid early, developers can use the equity for a range of affordable housing activities, including:
- Acquisition and development of new affordable housing sites
- Rehabilitation of existing affordable housing stock
- Predevelopment costs for projects nearing readiness
- Gap financing for developments facing funding shortfalls
This approach creates a revolving fund model, allowing stabilized properties to generate capital for future developments—without waiting for new public funding cycles. Perhaps more importantly, the funds repaid to HCD may then be recycled out to other development projects, in essence creating additional funding opportunities. Based on our quick, “back of the napkin” estimates, this program could produce hundreds of millions of dollars in HCD repayments to be redeployed.
While AB 130 is now law and SB 686 seems headed for the Governor’s desk, developers should note that HCD is still in the process of drafting regulations and implementation guidelines for the Affordable Housing Excess Equity Program. These rules will clarify eligibility, documentation requirements, and the approval process. We anticipate that developers interested in pursuing early repayment should prepare for some, or all, of the following steps:
- Confirm Loan Eligibility
Not all HCD loans may qualify. Review your loan documents and consult with legal counsel or HCD staff. - Ensure Property Stabilization
The property should be fully leased and generating consistent income. - You May Need To Conduct a Valuation
A third-party appraisal may be required to assess the property’s current value and available equity. - Submit a Formal Request to HCD
Include financial documentation, valuation reports, and a proposed reinvestment plan. - Undergo Compliance Review
HCD will verify that the repayment and reinvestment plan align with affordability covenants and program rules. - Receive Approval and Reinvest
Once approved, developers can use the equity to fund eligible new projects.
CCAH will continue to monitor HCD’s progress and share updates with our members as soon as they are available. We encourage developers to begin reviewing their portfolios and identifying stabilized properties that may benefit from this new opportunity.
AB 130 and SB 686 reflect California’s commitment to abundance over scarcity in housing policy. By allowing developers to unlock and reinvest equity, the state is empowering the affordable housing sector to build more, faster—and with greater financial independence.
Stay tuned for more updates as HCD releases its program guidelines. In the meantime, CCAH is here to support our members in navigating this new pathway.