By Vanguard Staff
SACRAMENTO, CA – The Assembly Judiciary Committee on Tuesday advanced Senate Bill 61, legislation aimed at helping California accelerate the construction of affordable housing and rebuilding from wildfire destruction, by easing financial strain on contractors.
Authored by Sen. Dave Cortese (D-San Jose), SB 61 would reduce the amount of money withheld from construction contractors and subcontractors on private projects—from 10 percent to 5 percent—bringing private-sector rules in line with public works standards. The practice of withholding retention funds until a project’s completion is intended to ensure quality work, but critics argue the current 10 percent rate disproportionately burdens small and minority-owned businesses that depend on steady cash flow to cover labor and materials.
“This will help small business owners and minority contractors working on private projects keep the cash flow going for materials and labor just like its public works counterparts,” said Cortese, a longtime labor advocate. “Keeping the cash flow flowing will reduce construction timelines and costs.”
SB 61 would limit retention withheld between owners and direct contractors as well as between contractors and subcontractors. The bill also allows for the award of attorney’s fees to the prevailing party in any enforcement action and includes exemptions for some residential projects and for cases where a required bond is not provided.
Cortese’s proposal builds on recent efforts to streamline and expand privately financed affordable housing in California. With new laws designed to speed up permitting and reduce regulatory delays, advocates say SB 61 addresses one of the most common financial barriers that slows down construction: limited liquidity among smaller firms.
More than 20 states, including Oregon, Nevada and New York, already limit retention on private projects to 5 percent. California’s public works projects have operated under that standard for years. Supporters argue that adopting the same policy for private development will increase fairness, reduce reliance on expensive lines of credit, and encourage broader participation by small businesses in the state’s urgent housing development push.
The bill now moves to the full Senate for a vote.
