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On Friday, September 19th, Governor Newsom reauthorized California’s Cap-and-Invest program (formerly known as Cap-and-Trade), by signing AB 1207 (Irwin) and SB 840 (Limón) into law. Together, these bills will create more sustainable communities by extending critical state investments in affordable housing, transportation, and environmental justice programs through 2045.
Beginning next year, the Affordable Housing and Sustainable Communities (AHSC) program – which funds affordable housing and co-located transportation infrastructure – will receive an annual $800 million through Cap-and-Invest, more than it has ever received in a single year. This will enable the state to fund thousands of greenhouse gas reducing affordable homes and related infrastructure improvements for low-income Californians every year.
This win for climate-saving affordable housing and transportation investments was far from certain and made possible in large part by extraordinary efforts by advocates. When Governor Newsom announced his intent in February to see Cap-and-Invest reauthorized during this legislative session, the Legislature began a process to reconsider the program’s structure and investments. This put funding for the AHSC program, which has historically received a continuous appropriation of 20% of the Greenhouse Gas Reduction Fund (GGRF) auction revenue proceeds, at risk.
GGRF revenues from the Cap-and-Trade program have grown from under $500 million in 2006 to over $5 billion in FY 2023–24, making AHSC the state’s largest affordable housing funding source. Under the new Cap-and-Invest framework (starting FY 2026–27), GGRF funds will be allocated as fixed amounts instead of percentages: $1 billion for high-speed rail, $1 billion for legislative use, and $2 billion for continuously appropriated programs, including $800 million for AHSC. Going forward, AHSC will receive its full allocation only if total revenues exceed $4 billion; otherwise, funding will be reduced proportionally. Fortunately, current projections suggest this threshold will be met for the foreseeable future.
Securing $800 million for the AHSC program in a contentious reauthorization process is a historic win for affordable housing, transportation, and environmental justice. This success is a product of collaboration with our partners in the Legislature and the Administration, as well as our close coalition partners, including Enterprise Community Partners, the Nonprofit Housing Association of Northern California, Transform, MoveLA, Public Advocates, and Seamless Bay Area. Many other organizations supported this work through contacting their representatives and signing onto advocacy letters. Most of all, this is a win for the thousands of low-income renters who will have the opportunity to live in affordable homes accessible to transit and jobs for decades to come.
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