In October 2025, Governor Gavin Newsom signed into law two bills – SB 79 and AB 1050 – that will significantly influence the landscape for commercial real estate development in California. Both laws take effect in 2026 and are designed to expand housing opportunities on underutilized commercial, industrial, and transit-adjacent land by reducing regulatory and private barriers. Together, they reflect the state's continued push to address the housing shortage and increase housing supply, particularly in transit-rich and underutilized areas.
As a result, property owners and developers should take note: these new laws remove both public (zoning) and private (CC&Rs) barriers that have historically restricted the ability to reposition commercial sites for housing or mixed-use development.
SB 79 – Expanding Housing Near Transit
SB 79 – also known as the Abundant & Affordable Homes Near Transit Act – takes effect July 1, 2026. It authorizes local governments to adopt "transit-oriented development (TOD) alternative plans" to increase housing capacity near major transit stops. The law allows multifamily housing on parcels zoned for residential, mixed-use, commercial, or light industrial uses within defined TOD zones, subject to height, density, and floor area ratio (FAR) standards.
The California Department of Housing and Community Development (HCD) will oversee compliance, and metropolitan planning organizations must map qualifying transit stops and TOD zones. Certain hazard areas, such as high fire-risk zones or sea-level-rise areas, are excluded. Additionally, local governments may adopt limited exemptions by ordinance.
Why SB 79 Matters for Owners and Developers:
- More redevelopment options. Properties near transit may now qualify for multifamily or mixed-use housing, even if local zoning previously limited those uses.
- Streamlined approvals. SB 79 can override conflicting local zoning provisions, making it easier to obtain housing entitlements in TOD zones.
- Potential increase in property value. Commercial or light industrial parcels near transit may become more valuable as redevelopment opportunities expand.
- New partnership opportunities. Transit agencies can apply TOD zoning standards to their own properties, creating new possibilities for joint development.
Action Items:
- Map your portfolio. Identify parcels within a half-mile radius of major transit stops.
- Evaluate zoning potential. Assess whether underutilized commercial or light industrial properties could qualify for multifamily or mixed-use conversion.
- Monitor local implementation. Ensure your jurisdiction adopts the required TOD zoning standards and HCD approvals.
- Assess site constraints. Verify that no hazard-zone exemptions apply to your property.
- Engage early. Work with planning staff or transit agencies now to position sites for redevelopment once SB 79 takes effect next July.
AB 1050 – Clearing Outdated Private Restrictions
AB 1050 – which takes effect January 1, 2026 – builds on prior legislation (AB 721) by making it easier to remove private covenants, conditions, and restrictions (CC&Rs) or reciprocal easement agreements that prohibit residential uses. The law allows property owners to petition for removal of these "unlawfully restrictive covenants" if the property is zoned, or has been rezoned, for residential or mixed-use development.
AB 1050 applies to covenants recorded decades ago that still limit modern housing opportunities – particularly on former commercial or industrial sites now eligible for housing under state law. The law does not override zoning; rather, it removes private barriers that conflict with housing-enabled zoning.
Why AB 1050 Matters for Owners and Developers:
- Unlocks development sites. Properties previously blocked by private restrictions can now be repositioned for residential or mixed-use projects.
- Facilitates redevelopment. Shopping centers, parking lots, or other underutilized commercial parcels can be reimagined for housing once restrictive CC&Rs are cleared.
- Reduces title risk. Clearing unlawful covenants improves financing and resale flexibility.
- Complements SB 79. Together, SB 79 and AB 1050 eliminate both public and private barriers to housing development.
Action Items:
- Review title reports. Identify CC&Rs or easements that restrict residential use.
- Confirm eligibility. Ensure the property is zoned for or permits residential or mixed use.
- Consult counsel. Initiate the AB 1050 process to determine whether covenants qualify as "unlawfully restrictive."
- Plan for timing and costs. Incorporate covenant-removal timelines into acquisition and entitlement schedules.
- Coordinate with title insurers. Confirm how covenant removals will affect title coverage and lender requirements.
What This Means for Commercial Asset Strategy
Together, SB 79 and AB 1050 represent a significant shift in California's approach to housing. Transit-adjacent commercial site may gain substantial new value, while many properties previously held back by outdated private barriers can finally be repositions. For owners and developers, now is the time to evaluate new opportunities and strategic decisions: identifying eligible parcels, clearing title restrictions, and aligning entitlement strategies to take advantage of the new legal landscape.
At Harvest LLP, we help owners and developers navigate these complex transitions, from assessing eligibility under SB 79 to implementing AB 1050 covenant removals and integrating these new tools into project planning.