Several significant federal developments in June 2025 have impacted housing laws, regulations, and eviction processes, affecting property managers and landlords, including those operating in California. Staying informed about these changes is critical, as they carry implications for eviction proceedings, regulatory compliance, and overall risk management strategies.
In this article, we take a closer look at the most relevant updates for California rental property managers. These include:
- A major federal court decision affecting landlord compensation claims tied to the COVID-19 eviction moratorium
- New legislation expanding federal housing credit programs and reshaping affordability incentives
- Reintroduced bipartisan proposals to scale up the Low-Income Housing Tax Credit
- Budget and funding shifts that may affect the future of HUD programs and rental assistance
- Section 8 program updates and HUD’s adjusted shortfall policies for public housing authorities
- Revisions to Fair Housing regulations that streamline compliance with AFFH rules
- Emergency Rental Assistance program developments as funding phases out
Each section explains what these changes mean in practical terms for California landlords and property managers, especially as they relate to eviction-related procedures, tenant interactions, and risk exposure.
*This article is for educational purposes only and does not constitute legal advice. Educating yourself is crucial and can help streamline and reduce your legal risk. However, seeking professional legal counsel consolidates your efforts and pre-emptively ensures compliance whenever issues inevitably arise.
Major Federal Court Decision on Eviction Moratorium Claims
Federal Circuit Denies Government Rehearing on COVID Eviction Moratorium
On June 6, 2025, the U.S. Court of Appeals for the Federal Circuit issued a decision with far-reaching implications for property owners. It denied the federal government’s petition for a rehearing in the Darby Development Company, Inc. v. United States case. This 7-3 ruling affirms the court’s earlier finding that the federal eviction moratorium imposed during the COVID-19 pandemic constituted a physical taking under the Fifth Amendment’s Takings Clause.
The decision allows landlords nationwide to pursue financial compensation for losses incurred. This is due to those affected being prohibited from evicting tenants under the Centers for Disease Control and Prevention’s (CDC) public health orders. The court held that by blocking evictions and requiring property owners to continue housing tenants without payment, the federal government effectively appropriated private property for public use, triggering the requirement for “just compensation.”
Legal experts estimate that the ruling could open the door to billions of dollars in potential claims against the federal government, as landlords across the country begin to file takings lawsuits tied to their losses during the moratorium period.
Implications for California Landlords and Property Managers
This decision provides a possible legal path for recovering unpaid rent and financial losses incurred during the federal moratorium period. While California enacted its own more restrictive rules during the pandemic, this federal decision sets a precedent that may influence how courts handle similar takings claims at the state and local level.
Here’s what this means in practical terms:
- Potential Claims for Past Losses: Property owners affected by the federal moratorium in 2020 and 2021 may now have grounds to pursue compensation claims against the U.S. government, especially if they can document specific financial harm.
- Precedent for Local Restrictions: The ruling could also strengthen legal challenges to California’s state and local eviction restrictions, particularly those that went beyond federal mandates. Ongoing or future litigation against state or municipal governments may be shaped by this decision.
- Portfolio Risk Management: Property managers should revisit how moratorium-era losses are documented within their systems. Having clean records from that period may support future legal action or settlement opportunities tied to this ruling. It’s also worth noting that maintaining excellent documentation routines can be helpful in ways you can’t expect.
While the long-term outcome of this case’s ripple effects remains uncertain, it’s clear that Darby Development represents a pivotal shift in how courts are approaching landlord claims for pandemic-related losses. California landlords should stay alert for new legal developments as related claims and cases begin to work their way through the courts.
Housing Credit Expansion Legislation
In May 2025, the U.S. House of Representatives passed a sweeping reconciliation package known as the One Big Beautiful Bill Act. Among its many components, the bill includes the most significant expansion of the federal Low-Income Housing Tax Credit (LIHTC) program in more than two decades.
Key housing-related provisions include:
- A 12.5% increase in the volume cap for 9% LIHTC properties, applied annually from 2026 through 2029
- A reduction in the bond financing threshold from 50% to 25% for 4% LIHTC developments
- Authorization for state agencies to apply a 30% basis boost to properties in rural and Native American communities
If enacted into law, these changes would open up significant new housing credit capacity and boost the financial viability of more affordable housing projects in underserved areas.
Affordable Housing Credit Improvement Act
Also reintroduced in May 2025 with record-setting bipartisan support, the Affordable Housing Credit Improvement Act seeks to further expand and strengthen the LIHTC program. Backed by more than 100 original congressional cosponsors, this standalone bill would increase the overall Housing Credit authority by 50 percent and implement technical changes designed to make affordable housing development more accessible and efficient.
Unlike the One Big Beautiful Bill Act, which is part of a broader fiscal package, this bill is solely focused on improving affordable housing policy and carries strong support from housing coalitions across the country.
Implications for California Landlords and Property Managers
This proposed expansion could substantially increase the pipeline of subsidized housing projects across the state. While not a direct eviction policy, it will affect housing market behavior in ways that intersect with eviction exposure and compliance strategies:
- Heightened Competition for Voucher-Eligible Tenants: With more LIHTC units entering the market, landlords may face stiffer competition when leasing to tenants who rely on vouchers or other forms of housing assistance.
- Affordability Pressure on Market-Rate Units: The presence of additional subsidized inventory in certain zip codes could exert downward pressure on market rents, particularly in mixed-income areas or lower-demand markets.
- Longer Compliance and Occupancy Periods: Owners of LIHTC-participating properties will need to review their compliance obligations, particularly when planning lease terminations or enforcing eviction clauses tied to changes in income or occupancy.
In practical terms, California property managers should assess whether any of their properties or those of their competitors may be affected by new LIHTC funding cycles. Staying aware of how credits are deployed statewide can help forecast shifts in rental demand and avoid unexpected vacancies or rent roll disruptions.
Federal Budget and Funding Changes
2025 Continuing Resolution: Mixed Results for HUD Programs
In March 2025, Congress passed a year-long continuing resolution that maintained government operations through the end of the fiscal year. For the Department of Housing and Urban Development (HUD), the resolution produced mixed funding outcomes.
The final agreement provided a boost to specific programs, including:
- $32.14 billion in funding for the Tenant-Based Rental Assistance (TBRA) program, marking a $3.65 billion increase from the previous year.
Despite this increase, analysts project that the program may still experience a net loss of approximately 32,000 housing vouchers due to attrition and delayed turnover. While more funds were appropriated, cost growth and utilization rates outpaced the increase, limiting the program’s expansion capacity.
Proposed FY 2026 Budget: Deep Reductions to HUD Programs
Following the continuing resolution, the Trump administration released its proposed FY 2026 budget, which includes sweeping cuts to HUD funding. The proposal outlines a $32.9 billion reduction to the department’s budget, including a $26.7 billion cut to federal rental assistance programs.
Key components of the proposal include:
- Phasing out Section 8 and other housing voucher programs
- Replacing traditional voucher systems with state-based block grants
- Reducing funding for public housing operations and development
Although this proposal is unlikely to pass in its current form, it signals a strong policy direction that may influence future negotiations or alternative budget frameworks in Congress.
The contrast between the 2025 resolution and the 2026 proposal creates uncertainty for program administrators, housing authorities, and the broader rental housing sector. Property managers who rely on tenant subsidies—either directly or indirectly—should closely monitor the budget process heading into FY 2026, as program availability and payment reliability could shift with short notice.
Section 8 Program Updates
In parallel with the federal funding decisions, the Housing Choice Voucher (HCV) program—commonly known as Section 8—received targeted adjustments in FY 2025.
Congress approved a $1.2 billion increase to the program, which HUD has begun implementing through updated guidance to Public Housing Authorities (PHAs). These updates include:
- Revisions to protected reserve levels for PHAs, offering more flexibility in managing funding fluctuations
- Adjusted shortfall funding policies to better respond to localized budget gaps
- Updated administrative guidelines to streamline voucher allocation and tenant screening practices
While these updates do not overhaul the voucher program, they aim to stabilize administration at the local level and reduce disruption during periods of funding uncertainty. HUD’s updated notices provide clearer expectations for PHAs managing shortfalls, helping to minimize sudden disruptions to voucher holders or participating landlords.
Fair Housing Act Revisions
AFFH Rule Changes
In April 2025, the U.S. Department of Housing and Urban Development (HUD) issued an interim final rule modifying the regulations related to the Affirmatively Furthering Fair Housing (AFFH) requirement under the Fair Housing Act. The rule marks a significant departure from previous versions of AFFH policy, emphasizing simplification and administrative relief while retaining core nondiscrimination mandates.
Key changes introduced by the new rule include:
- A streamlined certification process for jurisdictions and housing authorities
- The elimination of mandated fair housing planning tools, such as the Analysis of Impediments or Equity Plans
- Removal of reporting and assessment requirements that had previously required extensive data collection and public engagement
- Retention of the basic duty to comply with the Fair Housing Act and avoid discriminatory housing practices
By focusing on compliance rather than planning, HUD aims to reduce administrative burdens while still enforcing the underlying intent of the Fair Housing Act. The revised framework seeks to enhance participation and mitigate procedural barriers, particularly for smaller jurisdictions and agencies with limited resources.
The interim final rule is currently in effect. However, HUD is accepting public comments that may inform any future modifications. Housing providers should continue to monitor updates while ensuring that their policies remain aligned with the Act’s nondiscrimination standards, particularly in the context of tenant screening, lease enforcement, and eviction practices.
Emergency Rental Assistance Program Status
As of June 2025, the Emergency Rental Assistance (ERA) programs authorized during the COVID-19 pandemic continue operating in a limited capacity under ERA 2, which remains active through September 30, 2025.
Many states have fully exhausted their allocations under both ERA 1 and ERA 2 programs, leading to closures for new applications. However, several jurisdictions still have unspent ERA 2 funds and continue to process rental assistance applications, often with modified eligibility criteria or reduced benefit amounts.
In June 2025, the U.S. Department of the Treasury issued updated reporting requirements for program administrators. These updates focus on:
- Improved tracking of remaining ERA 2 funds
- Increased transparency around state- and county-level program status
- Guidance for reallocating unobligated funds to high-need areas
The ERA program has been a crucial source of support for tenants and landlords during the pandemic recovery, but its sunset date is rapidly approaching. As funding winds down, property managers may notice a shift in tenant behavior and an increase in nonpayment situations that had previously been mitigated through emergency assistance. Landlords should check with their local agencies for updates on funding status and consider alternate rent recovery strategies as the program concludes.
Key Takeaways
- Landlords may pursue federal compensation claims for COVID-era eviction moratorium losses following the Darby Development ruling.
- Housing credit expansions may alter rental market dynamics and increase the supply of subsidized housing.
- Proposed legislation could intensify competition for voucher-eligible tenants and influence rent trends.
- FY 2025 budget increased rental assistance, but the FY 2026 proposal targets major HUD program cuts.
- Section 8 updates offer temporary administrative relief but signal long-term uncertainty.
- AFFH rule revisions reduce compliance burden while preserving core nondiscrimination obligations.
- ERA 2 funds expire September 30, 2025; availability varies by jurisdiction.
Mehigan Law – Professional Eviction Legal Services
Mehigan Law has served California’s property management and independent landlord communities for over 45 years. We take pride in our ability to give your business and each case the personal attention it deserves.
We understand that every business and property environment is different. Each requires a thorough understanding of the unique challenges and needs to manage eviction compliance successfully. We consider all overlapping layers of legal jurisdiction and help you navigate disruptions to normal business operations efficiently.
