- Anthony Reyes
- (916) 319-2078
- Anthony.Reyes@asm.ca.gov
SACRAMENTO, CA — The California State Assembly today passed Assembly Bill (AB) 1406, a measure to address California’s severe shortage of for-sale housing by incentivizing condominium development. The bill modernizes the state’s outdated liquidated damages law, helping unlock financing and expand access to homeownership.
“California’s housing crisis reflects a long-standing failure to produce attainable homeownership opportunities. The state now has the nation’s second-lowest homeownership rate,” said Assemblymember Chris Ward, the bill’s author. “AB 1406 removes a major barrier that has stalled condo construction for over a decade and helps drive entry-level homeownership.”
California’s homeownership rate has steadily declined over the past two decades and now sits at just over 55 percent. Despite strong demand, condos make up only 3 percent of newly constructed housing, far below production levels in peer states, limiting entry-level ownership opportunities, particularly in dense urban areas where single-family homes are out of reach.
A primary obstacle to condo production is California’s lowest in the nation 3 percent liquidated damages cap, which limits how much of a buyer’s deposit a developer may retain, if a purchaser cancels a contract. This cap increases project risk, discourages lender participation, and raises development costs. AB 1406 would raise the cap to 6 percent, aligning California more closely with other states, while preserving existing bonding and consumer protections. Greater certainty for lenders would reduce reliance on costly financing and discourage speculative purchasing that destabilizes projects.
“The opportunity to own a home remains central to the California dream,” said Brian Hanlon, CEO of California YIMBY. “AB 1406 updates outdated financing rules, lowers construction costs, and helps bring homeownership within reach for more Californians. I applaud Assemblymember Ward’s continued leadership on housing.”
According to the California Association of Realtors, only 15 percent of California households can afford the median-priced home, while 25 percent can afford a median-priced condo or townhome; yet limited condo supply continues to block access to these more attainable options. AB 1406 improves the feasibility of condos, expanding the supply of entry-level, for-sale housing.
“AB 1406 will create more attainable homeownership opportunities by facilitating condominium construction,” said Michael Lane, State Policy Director for SPUR. “The bill recognizes the real financial risks these projects face, improves access to favorable lending terms, and aligns California law more closely with industry practices in other states.”