California Affordable Housing Faces Refinancing Hurdle

California is entering an affordable housing refinancing crunch, with Yardi Matrix reporting that roughly $860 million in commercial mortgages on fully affordable properties will mature in 2026.

That figure rises sharply to $6.9 billion by 2030 and $13.3 billion over the next decade, underscoring the scale of upcoming capital needs. The 2026 maturities are concentrated in the state’s largest markets: Los Angeles ($390.3 million), the Bay Area ($223.1 million), Orange County ($64.1 million), and the San Fernando Valley ($76 million), Globest reported. That’s a total of $21 billion needed in the next three years.

Despite these looming maturities, the sector is not facing widespread distress.

Affordable housing benefits from government-backed financing, subsidized revenue streams and longer loan terms, all of which have historically limited defaults. Recent policy changes in the federal One Big Beautiful Bill Act further reinforce stability. Enhancements to the Low-Income Housing Tax Credit program are expected to expand opportunities for recapitalization through resyndication, supporting both capital improvements and long-term affordability.

Yardi’s analysis draws from a national database of 26,000 fully affordable properties — defined as assets where at least 90 percent of units are rent-restricted through government programs — totaling 3.5 million units.

Industry leaders echo the view that the refinancing environment, while challenging, remains fundamentally strong.

California continues to attract lender participation due to high rental demand, meaningful rent advantages, and regulatory frameworks such as the Community Reinvestment Act and mandates for Fannie Mae and Freddie Mac, according to JLL’s David Lott. State-level supports — including the California Welfare Exemption and various soft subordinate debt programs — further bolster refinancing prospects.

Lott highlighted the recent reduction of the LIHTC “50 percent test” to 25 percent, a shift expected to unlock constrained tax-exempt bond capacity and stimulate both renovation and new development. The new law stipulates that to qualify for 4 percent bonds, a property must have at least 25 percent of its units affordable, compared to a previous threshold of half.

From a talent perspective, the new market is “creating opportunity” for people with the right skill set, Chris Papa of executive search firm Jackson Lucas told Globest.

“We’re seeing owners, lenders, and public agencies prioritize leaders who know how to navigate complex capital stacks, work with government programs, and stabilize assets,” he said. “Yes, refinancing will be more complicated in a higher-rate, higher-cost environment — but that pressure is precisely what’s driving demand for experienced talent.”

— Joel Russell