Newsom signs extension of California historic rehab tax credit through 2031

Governor Gavin Newsom signed AB 1265, extending California’s Historic Rehabilitation Tax Credit through 2031 and giving developers more certainty to finance the reuse of older buildings. The law also puts a bigger emphasis on housing, with new scoring preferences and a statewide push to turn existing structures into homes, commercial space and mixed-use projects.

Why it matters: - AB 1265 keeps a key California preservation incentive alive through 2031, making it easier to finance the repair and reuse of historic buildings. - The law is aimed at housing production, downtown revitalization and adaptive reuse at a time when older buildings often need costly seismic, accessibility and systems upgrades. - The extension could unlock projects that would otherwise not pencil out, especially in communities trying to add homes without new construction.

What happened: - Governor Gavin Newsom signed AB 1265, authored by Assemblymember Matt Haney (D-San Francisco), on Oct. 1, 2026. - The bill extends California’s Historic Rehabilitation Tax Credit through 2031. - The measure was co-sponsored by the California Preservation Foundation and AIA California. - The law strengthens a state incentive for rehabilitating certified historic structures for housing, commercial space and mixed-use development.

The details: - For taxable years 2027 through 2031, the credit equals 20% of qualified rehabilitation expenditures on certified historic structures. - The credit is capped at $5 million per taxpayer. - Competitive scoring gives added weight to projects that create, preserve or rehabilitate housing. - Twenty percent of available credits is reserved for projects with less than $2.5 million in qualified rehabilitation costs. - Two application cycles will be held each year beginning in August 2027. - Credits will be distributed across the state to the extent feasible. - AB 1265 makes housing an explicit priority of the program and aligns the credit with California’s housing production, infill and conversion policies. - The first round of the program awarded $10.4 million toward the $52 million rehabilitation of Building 8 at the former Naval Air Station Alameda for residential and commercial use. - The first round also awarded $29.6 million toward the nearly $162 million conversion of San Francisco’s Hearst Building from offices to a hotel. - Together, $40 million in state credits supported more than $200 million in rehabilitation investment. - A 2024 economic impact report prepared by Rutgers University for the National Park Service found that the federal Historic Tax Credit generated $54.3 billion in federal tax revenue against $48.5 billion in inflation-adjusted credit costs.

Between the lines: - AB 1265 builds on California’s first Historic Rehabilitation Tax Credit, created by SB 451 in 2019. - The new law updates the program for current housing shortages and downtown reuse needs. - The credit structure favors projects that can add housing while preserving older buildings, which makes preservation policy part of the state’s housing strategy. - The program’s budget allocation will shape how many projects move forward, so implementation may matter as much as the statute itself.

What’s next: - The annual credit allocation will be set through the state budget. - CPF and AIA California plan to push for a strong allocation in the 2027-28 budget. - The next major test is whether the state funds the program at a level that can support projects statewide.

The bottom line: - California is keeping a proven preservation tax credit in place and steering it more directly toward housing, reuse and downtown recovery.