Top New Laws in California for 2026

Happy (early) New Year! Every year, January 1 brings with it a slate of new laws, and 2026 is no different. My criteria as to what constitutes a “top new law” are: what I find interesting, what will impact Heckman Law, PC clients the most, and how broad the change will be. These are focused largely on construction and real estate, but also with an eye toward business generally. Unless otherwise stated, these laws went into effect on January 1, 2026.

And I have done the same for Texas here.

5. New Retention Caps for Private Projects (SB 61)

SB 61 limits retention on most private construction projects to 5 percent of the contract value, a meaningful shift from the long-standing 10 percent norm. The change is designed to improve cash flow for contractors and subcontractors and reduce downstream payment pressure, particularly on longer projects. Owners and lenders, however, may need to rethink how they manage risk, including the use of performance bonds and other credit enhancements, as retention has historically served as a key risk-management tool.

4. Change Order Fair Payment Act (SB 440)

SB 440 introduces California’s first comprehensive, statewide framework for handling change orders on private construction projects. Beginning in 2026, owners must respond to change order requests within defined timelines and promptly pay undisputed amounts or face interest penalties. This statute represents a significant departure from traditional contracting practices, shifting leverage toward contractors and formalizing processes that were often left to negotiation or project-specific contract language.

3. Appliance Requirements for "Habitability" (AB 628)

AB 628 expands the definition of a “habitable” rental unit to require that leased dwellings include working stoves and refrigerators. While this may seem modest, it imposes new compliance and maintenance obligations on landlords and property managers statewide. Owners of older properties or portfolios with varied appliance standards will need to budget for upfront installation costs and ongoing replacement obligations.

2. CEQA Changes (AB 130/SB 131)

AB 130, part of a broader budget package, exempts many infill housing projects from environmental review, significantly shortening entitlement timelines and reducing exposure to CEQA-based litigation. For developers of urban housing and mixed-use projects, this bill removes a major source of uncertainty and delay that has long constrained project feasibility.

SB 131 builds on AB 130 by extending CEQA exemptions to additional categories of development, including advanced manufacturing facilities, wildfire mitigation projects, and certain infrastructure improvements. Together, these two bills signal a clear legislative intent to rebalance environmental review against housing supply, infrastructure resilience, and economic development priorities.

1. The "Abundant and Affordable Homes Near Transit" Act (SB 79)

Effective July 1, 2026, SB 79 mandates zoning reforms in transit-oriented areas, requiring local governments to allow mid-density residential development near major rail and rapid bus stops. The bill significantly limits local zoning discretion and is likely to reshape development patterns around transit hubs, increasing housing capacity while raising new questions about infrastructure, community impacts, and project economics.

Conclusion

On the whole, it looks like another year of California’s continued move toward a more centralized and prescriptive regulatory model for construction and real estate. While several of these changes are intended to promote housing production and project certainty, they also narrow flexibility for owners and developers and heighten compliance and planning demands.