California's condominium construction has collapsed to a fraction of its former glory during the mid-2000s housing boom. Two bills moving through the state legislature aim to unlock a market that has been effectively frozen for a generation of would-be homeowners. AB 1406 and AB 1903 represent the most significant attempt in over a decade to address the regulatory barriers that have made condo projects financially untenable for all but the largest, best-capitalized developers.

The Big Picture

California faces a quiet but deeply structural crisis in condominium construction. While demand for affordable housing reaches historic record levels, with median prices exceeding $800,000 in many metropolitan areas, the supply of for-sale units has plummeted to lows not seen since the Great Recession. Developers have mass-migrated to rental projects over the past decade, drawn to more predictable business models with less litigation exposure. This exodus has left a critical void in the entry-level housing segment that historically represented the gateway to homeownership for young professionals, emerging families, and moderate-income workers.

The persistence of this problem over nearly two decades has made it a structural obstacle to economic mobility in California. The Great Recession decimated the construction industry broadly, but the revealing part is that while single-family homes and rental projects recovered, condos never did. In 2005, during the peak of the last cycle, condos represented approximately 20% of all new residential construction in the state. Today, according to data from the Terner Center for Housing Innovation, that figure barely exceeds 5% in key metropolitan markets like the San Francisco Bay Area, Los Angeles, and San Diego. The toxic combination of construction defect litigation, stratospheric insurance costs, and restrictive regulations has created an environment where building for sale is financially untenable for all but the largest, best-capitalized developers.