(Written by Jonathan Kim)

California’s budget is projected to be in the red. With rising costs and ongoing tariffs, the state is projected to be at a $18 billion deficit. Legislatures are proposing massive spending cuts on numerous sectors, with Gavin Newsom proposing major cuts to Medi-Cal, public university funding, and housing assistance programs. Meanwhile, there are rumblings of the Trump Administration implementing significant changes and cuts to Federal housing assistance programs. The Department of Housing and Urban Development anticipates to shift a majority of its funding away from permanent housing programs and into temporary shelters. With looming cuts and changes to both state and federal housing assistance programs, Landlords working with HUD and Section 8 tenants must prepare for a more volatile landscape heading into 2026.

While Washington D.C. and Sacramento determine how they want to budget, Landlords should be proactive in assessing their exposure to risk. Those working with Section 8 and HUD subsidies must brace for the possibility of delayed payments, reduced rental support, or stricter eligibility requirements for tenants. Moreover, agencies may tighten eligibility requirements, leading to sudden tenant disqualifications and potential loss of subsidy income.

Furthermore, policymakers recognizing housing assistance budget cuts may also implement additional tenant protections. Using the COVID‑19 pandemic as a recent example, landlords may see renewed pushes for expanded ‘just cause’ requirements, extended notice periods, limitations on rent increases, and heightened procedural hurdles for evictions particularly those involving nonpayment of rent. When state and federal support shrinks, legislatures often shift the burden onto property owners through stricter regulations designed to prevent displacement. Landlords should be prepared for the possibility that, even as subsidy programs shrink… compliance obligations and eviction restrictions may expand.

In a volatile climate, preparation and adaptability will distinguish those who weather the storm from those caught off guard by it. Building financial reserves, reinforcing communication channels with tenants, and monitoring legislative developments will be essential steps in mitigating the impact of shifting policies. This is not merely a time for financial forecasting, it is a time for legal preparedness, documentation review, and policy awareness. Kendall Law is here to provide legal support for eviction proceedings, compliance matters, and proactive planning as a period of increased regulatory scrutiny and reduced housing assistance funding approaches. Contact Kendall Law today to schedule a consultation.