By ALEX VEIGA, AP Business Writer

LOS ANGELES (AP) — Here’s another place the AI frenzy is making itself felt: the market for luxury homes.

High-income earners, many of them employees at AI companies, are snapping up multimillion-dollar houses in the San Francisco Bay Area, undaunted by the higher mortgage rates and rising home prices that have prevented many would-be buyers from affording a home.

The Bay Area buying spree is the clearest manifestation of a nationwide trend of sales of upper-end properties largely holding up better than sales of less expensive homes. Metro areas such as San Diego, Miami, Detroit, Nashville and Tampa, Florida, are also seeing upper-market homes sell at a faster pace.

The hotter market for luxury properties comes at a time when the broader housing market remains stuck in a yearslong rut. Sales of previously occupied U.S. homes were essentially flat last year, moored at a 30-year low. Most recently, they slowed again in July. Sales of newly built homes, which make up a far smaller part of the housing market, are also down this year.

Underpinning the luxury market are affluent home shoppers who can afford to shrug off rising mortgage rates and often pay all cash for a home or come up with a large down payment by raising funds through sales of stocks or other investments.

Stock market gains powered by the artificial intelligence boom have helped boost investors’ portfolios. The benchmark S&P 500 is up solidly this year and remains near its most recent all-time high.

“These people have lots of money and they’re just not going to be very sensitive to things like mortgage rates or home prices,” said Daryl Fairweather, chief economist at Redfin. “They want the home they want and they have the money to buy it.”

The trend is the housing market version of the “K-shaped” economy, where wealthier households pull ahead of middle- and lower-income ones. In this case, many would-be homebuyers remain on the sideline while affluent buyers drive sales of luxury homes.

Sales of pricier homes are holding up better

Nationally, sales of luxury homes, defined as properties in the top 5% of a metro area by price, rose 2% in the first half of this year, compared to the same period in 2025, according to data from Redfin. Sales of middle-of-the-market homes, or properties closest to an area’s median price, rose 1.9% in the same period.

The dichotomy in the market can better be seen in price appreciation. The median sales price of a luxury home nationally between January and June was roughly $1.37 million, a 4.3% increase from a year earlier. For homes in the middle of the market, the median sales price rose 1.4% to $377,245.

In the San Francisco metro area, sales of luxury homes soared 39.3% in the first half of this year compared to a year earlier, while middle-market home sales surged 15.1%.

And across the bay in Oakland, sales of upper-market homes jumped 13.3%, while sales of middle-market properties rose 3.9%.

Several other metro areas not plugged into the AI boom are also seeing sales and price growth for luxury homes.

Among the most notable examples: in the Tampa metro area, luxury home sales surged 35.5% in the January-June period, while sales of middle-market homes fell 5.1%. In Nashville, sales of upper-market homes jumped 10.8%, while sales of middle-market properties rose only 1.7%. And in Detroit, sales of higher-end properties vaulted 8.7% compared to a 6% decline in sales of middle-market homes.

All told, sales of luxury homes so far this year are outpacing or have declined less than those of middle-market homes in 44% of the nation’s 50 largest metro areas.

Urgency to buy a home before potential AI IPOs

In the Bay Area, tech companies bent on winning the race to develop artificial intelligence into a profitable business have juiced compensation to recruit talented executives and software engineers, widening the pool of high-income earners. Many of these employees have been buying homes, often outdoing rival buyers by offering well above the asking price, real estate agents say.

The Bay Area housing market could get even hotter should two of the biggest names in AI follow through on their intent to become publicly traded companies. OpenAI, creator of ChatGPT, and Anthropic, home to Claude, filed preliminary paperwork in June for initial public offerings. Neither has yet decided on the timing.

An analysis by Redfin that looked at how much employees at both companies stand to gain potentially from the companies going public estimated that the combined IPO earnings would be enough to buy nearly one-third of all homes in San Francisco.

Just the possibility of these two blockbuster IPOs is building pressure on some home shoppers in the Bay Area to buy sooner, rather than later. They worry they’ll face a flood of newly minted millionaires ready to pounce, further ratcheting up competition in the San Francisco housing market.

Julio Bermudez, an AI data infrastructure company executive in the Bay Area, had been looking to buy his first home for about a year, but his search took on new urgency.

“So, you start taking a look at that and you take a look at your own position — both from just a diversification standpoint, as well as the fact that we’re trying to set roots here, kids are in school, all that good stuff,” said Bermudez, 41. ”And it’s like we don’t want to be priced out, so we need to buy now.”

Recently, Bermudez entered into a contract to buy a five-bedroom, four-bath house in Orinda, about 17 miles northeast of San Francisco. The seller was asking $3.5 million, but agreed to sell for $3.3 million.

“I felt like this was sort of an interesting time and location to try to strike before it really does get crazy,” he said.

Ten California school districts have been under state and county oversight in the last 35 years because they were fiscally insolvent and required an emergency state loan to continue to operate. 

Currently, Plumas Unified, Inglewood Unified and South Monterey County Joint Union High School are repaying state loans. 

School districts projected to be unable to meet their financial obligations for the current or two subsequent fiscal years are placed on notice by their county superintendent of schools. If financial problems are not resolved, the county superintendent could assign a fiscal advisor to the district.

Five districts — Sacramento City Unified, Pleasanton Unified, Antioch Unified, San Ysidro Elementary and Weed Union — were unable to meet their financial obligations for two school years and were put on the state’s most recent fiscal warning list in May.

If a school district ultimately requires an emergency state loan from the Legislature, the loan comes with significant conditions — including the potential loss of local control. 

Here’s more on how the school takeover process works in California.

Legislation strengthened oversight

California legislators passed Assembly Bill 1200 in 1991 to strengthen fiscal oversight of schools and county offices of education after the bankruptcy of the Richmond School District, later renamed West Contra Costa Unified School District, according to the California Department of Education.

The law requires districts to do multiyear financial projections; identify sources of funding for substantial cost increases, such as employee raises; and make public the cost implications of such increases before approving employee contracts. County offices of education also receive funding to conduct reviews, examinations and audits of school districts. 

Loan means loss of local control

If a district’s emergency loan is 200% or more of its state-recommended reserve level, the school board loses its governing authority and the superintendent is removed, according to the California Department of Education. The elected trustees become advisers to an administrator appointed by the county superintendent and approved by state education leaders.

The administrator can make sweeping changes to both the district’s financial policies and education programs to cut costs. According to the state’s Fiscal Crisis and Management Assistance Team (FCMAT), the administrator can file for Chapter 9 bankruptcy and remove district-level administrators  who cannot demonstrate that they took steps to stop district trustees from making fiscally unsound decisions.

The administrator will remain in the district for at least one year or until the district’s finances improve, and county and state officials approve a recovery plan. Once those conditions are met, governing authority can be returned to the school board, with an appointed trustee providing oversight. The trustee can rescind board actions that he or she determines would negatively impact district finances. 

After the trustee has served three years and the state superintendent of public instruction determines that the district’s fiscal plan is sound, the trustee is removed. The county superintendent continues to have the power to stay or rescind any board action that affects the district financially until the emergency loan is repaid with interest.

If the district violates its recovery plan within five years of the trustee being removed or of the loan being repaid, the county office of education can set aside the school board and take control of the district.

School districts whose emergency loans are less than 200% of their recommended reserves will continue to be governed by their elected boards. In these cases, an appointed trustee will provide financial oversight and have the authority to rescind any actions by the board they determine are not fiscally responsible.

Fiscal insolvency is costly and time-consuming

Being placed under state or county oversight can be expensive for a district, which must pay interest on the loan and pay the county office of education for its services.

The district must also submit an annual fiscal report to state lawmakers that includes a copy of their budget, amount of district reserves, updates on their fiscal plan and the status of employee contracts. District leaders must also report on any obstacles that are impeding economic recovery.

There are checks and balances to the process. The school board must submit an annual evaluation of the appointed administrator to the governor, Legislature, state superintendent of public instruction, president of the state school board and the county superintendent of schools.

The superintendent of public instruction monitors the county office of education’s oversight and can assume authority over the district if he finds the county superintendent was not effective in resolving the school’s financial troubles, according to FCMAT.

Despite his signature last-minute maneuvering, Gov. Gavin Newsom couldn’t secure his final major deal with the California Legislature. 

The Democratic governor, who terms out in January, wanted to reduce how much utilities must pay after their equipment sparks wildfires by eliminating the ability of insurance companies to sue utilities to recoup costs. 

But on Tuesday, after weeks of pushback from lawmakers and survivors of the Los Angeles-area wildfires, the Assembly killed a compromise Newsom had previously agreed to, throwing into question whether the governor would call a special session to hammer out a deal before he leaves office. 

The bill before the Assembly, Senate Bill 492, amounted to a collection of “half measures,” Assembly Speaker Robert Rivas told reporters after the chamber adjourned. “I think Californians expect a lot more than half measures,” he said. (Senate Pro Tem Monique Limón said her chamber was prepared to pass the deal.)

The unsuccessful last-minute scramble, and ultimately the deal’s death, illustrates the limits of a lame-duck governor’s power in his last legislative session — even for one as high-profile and ambitious as Newsom.

The governor himself acknowledged the fumble.

“Simply put, this measure did not meet the gravity of this moment,” Newsom said in a statement. “California cannot settle for half measures.”

‘Jamming’ the Legislature

Newsom has become accustomed to pushing priorities through the Legislature in the days before a deadline, a practice known as a “jam” in Sacramento. The move has previously helped Newsom score carveouts to the state’s landmark environmental law and a measure to fast-track infrastructure construction 

“Jamming the Legislature” involves closed-door negotiations with interest groups and legislative leadership, from which compromise legislation emerges often just days or hours shy of the deadline. 

Lawmakers are then left with little time to make amendments or hold public hearings, and opponents have little opportunity to object. 

Late last week, a Newsom aide conceded in a memo to legislative leaders that the governor’s measures “do not appear to have a path” and instead presented a narrower set of reforms that the administration and legislative leaders agreed upon. Still, Newsom’s office balked at the suggestion that the governor capitulated to lawmakers’ and wildfire victims’ demands.

“All other outstanding issues are off the table,” his office wrote in the memo obtained by CalMatters. Last Friday, share prices of the state’s three major investor-owned utilities tumbled. On Monday, the companies’ stock continued to plunge; Southern California Edison and Pacific Gas & Electric saw more than 20% declines. 

‘Too late to do anything’

Some lawmakers expressed frustration at the compressed timeline on Monday night during an informational hearing on the wildfire bill in the Assembly utilities committee. 

“Here we are with a bill, where we’re being yelled at that it’s inadequate, where most of the members of this committee didn’t actually get to see what was in it until the final days before it was too late to actually do anything on it,” said Assemblymember Chris Rogers, a Democrat representing Ukiah. 

The deal state lawmakers killed had already been stripped of several major provisions that Newsom wanted: no change to how insurance companies could recoup money from utilities, and no changes to other damages he wanted to limit utilities from paying, such as to fire victims and local governments. 

“I have a sell-by date. I get it,” Newsom acknowledged to reporters on Monday during a surprise visit to the Capitol. “I’m not going to be here to solve this, but it needs to be solved.”

The governor stated that the final version of SB 492 “did not address the underlying structural problem driving this crisis,” and he pointed to utilities’ plunging stocks as evidence. He urged lawmakers to pick up the issue next year and work with the next administration.

Jams worked, mostly

In the past, Newsom’s last-minute jams have proven fruitful. Last year, private negotiations over a Newsom-backed package of energy policies tied to the state’s carbon emissions-trading program dragged out so long the Legislature extended its session by a day. 

But this year, Newsom was forced to drop several of his priorities amid lawmaker opposition. 

He failed to push through a deal to fast-track a shipyard in the East San Francisco Bay for the tech billionaire-backed group California Forever, amid heavy resistance from some county leaders and only lukewarm support from the state lawmakers who represent the area. (Newsom said Monday that the Solano County supervisors’ vote to effectively kill the proposal this year “made no damn sense.”)

He was also forced to back away from an eleventh-hour attempt to exempt a Santa Monica housing project from the regular coastal development process, a move that would have benefitted one of his longtime donors whom Newsom had appointed to state commissions. 

And vocal opposition from transportation advocates, environmentalists and the oil industry led Newsom to abandon a plan to divert millions of dollars in road funding to Phillips 66’s Rodeo oil refinery in Contra Costa County.

Last-minute deals raise hackles

Some lawmakers and advocates were rankled over the last-minute dealmaking. Assemblymember Alex Lee, a San Jose Democrat, even offered Newsom a jar of “last-minute jam” in a tongue-in-cheek tribute to his “assertive leadership style with us in the Legislature.”

“Legislators want a governor who is present and that they can work with,” said Tim Rosales, a Los Angeles based political strategist for GOP causes and candidates. “Newsom has never had that kind of relationship with the Legislature and really has been focused pretty specifically on himself. I think that’s probably rubbed a lot of legislators the wrong way.”

Solano County Supervisor Mitch Mashburn, after voting against the California Forever proposal, said the only urgency was the concern about “whether the governor was going to jam it down our throats.”

“I ain’t really that afraid of the governor,” Mashburn said. “The governor doesn’t get to make law. The Senate and the Assembly get to make law. I don’t know that he’s got the juices and backbone to get that done. And so, I think that we have time.”

Lobbyist Chris Micheli said the notion of Newsom’s waning power has been “overplayed.” Micheli, a Capitol lobbyist since former Gov. Pete Wilson’s administration, argued that Newsom has tremendous power to sign or veto hundreds of bills over the next month. 

He said lawmakers largely rejected Newsom’s proposals this year out of fundamental philosophical disagreements rather than personal defiance. 

“They win some, they lose some, every single year,” he said, speaking of governors. “I don’t see it any more pronounced this year.”

Katelyn Roedner Sutter, who lobbies on behalf of the Environmental Defense Fund, agreed that a lot of Newsom’s priorities could have been ironed out if the governor’s office had started negotiating the wildfire package sooner and planted seeds earlier in the year about changing subrogation rules.

“There’s been a lot of talk about how this has been an issue ever since this governor has been in office,” said Roedner Sutter, speaking of investor-owned utilities and wildfire liability. “It’s been a growing issue for years. So we really should’ve started on this much sooner.”

‘Big complex things’

Sen. Josh Becker, a Menlo Park Democrat who was closely involved in the negotiations and authored the eventual wildfire legislation, was among the lawmakers more interested in Newsom’s proposals. He told CalMatters that lawmakers this year “ran out of time” to address those issues in depth. 

Still, he said he didn’t fault Newsom for pushing the proposals late in the session.

“These are big, complex things that take time,” he said. “I’m not going to fault the governor one way or another on this. He could have done nothing.”

Asked about the lawmakers’ opposition to his proposals last week, Newsom said many newer members of the Legislature didn’t understand the complex interplay between utilities and insurance companies.

Newsom on Monday again refused to rule out the possibility of a special session, a move that would put more time on the clock, but only if lawmakers were willing to play along. 

“I’m just not going to leave without trying,” the governor said last week before paraphrasing a famed football coach. “I feel like Lombardi or something: ‘Did you lose? No, we just ran out of time.’ I wish I had a few more months here.”

Newsom told reporters that critics who suggest his influence is waning as a lame duck “haven’t paid any attention — literally no attention.”

“We landed 90 planes on some of the toughest issues as relates to chatbot bills and child safety — a lot, a lot of issues,” Newsom said. “I decided to take a last at-bat on the toughest issue that I could,” he added, referring to wildfire liability. “And the good news is we made progress.”

Jeanne Kuang, Kate Wolffe, Nadia Lathan, Levi Sumagaysay and Yue Stella Yu contributed to this report.

At issue is California’s four-year-old Senate Bill 54 and its lack of clarity around regulating pyrolysis, a chemical recycling technology that has raised concerns among environmental watchdogs.

For Thomas Helme, a Modesto-based environmental justice advocate, the pyrolysis debate recalls a decades-long fight against an incineration plant that burned waste in Stanislaus County for 35 years. 

"The path to where we were – doing workshops, meetings with community members, local officials, city and county staff about waste – was because of the work we were doing around the incinerator," Helme said. 

Now, Helme is bringing that experience to his role as a member of California's SB 54 Packaging Producer Responsibility Advisory Board, a state-appointed body that makes recommendations for implementing SB 54.   

"One of the reasons I applied to be on this board was because of a conversation when I was learning about SB 54 [where] they said, if this doesn't go right, you could be looking at a pyrolysis facility where your incinerator used to be," Helme said. … "My one goal was to make sure that didn't happen."

In 2012, Helme, along with Emiliano Mataka and Bianca Lopez, co-founded the Modesto-based environmental justice group Valley Improvement Projects. Out of the gate, VIP joined a fight to shut down the incinerator in Stanislaus County. The group ran "zero waste" workshops in small towns like Grayson and Crows Landing, and pressed local officials to cut single-use plastics rather than chase new ways to burn or melt them.

The incinerator plant shut down in 2024. Now, SB 54 is slated to steer billions of dollars over the next 10 years toward cleaning up pollution from plastics, and Helme is trying to keep solutions that could result in hazardous waste from landing in the same communities that lived with the last one.

"Communities of color and low-income communities carry more of the burden of plastic pollution than other communities," he said.

Incineration burns waste directly in the presence of oxygen, converting it to ash and gas, often while generating electricity. Pyrolysis, by contrast, heats plastics, tires, plant waste and everyday trash in a sealed, oxygen-free chamber until it breaks down into oil, gas and an ash-like residue called char. It's a process the waste industry markets as a cleaner alternative to burning trash, but the EPA has described real-world pyrolysis as a two-chamber incinerator: an oxygen-starved first chamber, followed by a second "afterburner" chamber that completes combustion of the remaining gases.

Researchers who have studied pyrolysis plants describe a messier picture: the process can release toxic byproducts into the air and the ground, including dioxins, which, according to the Agency for Toxic Substances and Disease Registry, can cause cancer and can also harm a person's liver, immune system and ability to have healthy babies.

What is SB 54 supposed to do?

In 2022, Gov. Gavin Newsom signed Senate Bill 54, the Plastic Pollution Prevention and Packaging Producer Responsibility Act, into law. The bill requires companies that sell single-use packaging and plastic foodware in California to cut plastic waste and shift the costs of recycling and disposal from taxpayers to producers.

SB 54 also requires CalRecycle, the state agency that regulates recycling and waste disposal, to write regulations excluding any plastic recycling technology that produces "significant amounts of hazardous waste" from counting toward the law's recycling-rate targets, but the statute sets no threshold or definition of hazardous waste.

CalRecycle filled that gap by adopting the federal standard for what counts as hazardous waste. As a result, a substance considered hazardous waste under California's tougher standard, such as byproducts generated from pyrolysis, could still pass the federal test. 

Circular Action Alliance (CAA), the group representing producers of single-use plastic packaging and food-service ware, is now applying the federal standard in a “producer responsibility plan” it's drafting as a requirement of SB 54.

The Natural Resources Defense Council, a nonprofit international environmental advocacy group, said CalRecycle got it wrong. In written comments filed with CalRecycle on Oct. 7, 2025, NRDC suggested that California should use its own, broader rule for hazardous waste rather than the narrower federal one. 

The group also pointed to a letter State Sen. Ben Allen, author of SB 54, wrote to make his intent clear. The same day the Senate gave SB 54 its final 29-0 vote, Allen wrote that "technologies using pyrolysis, gasification, solvolysis, and similar technologies that involve combustion and incineration, as well as the generation of hazardous waste, are therefore prohibited from being considered 'recycling' under SB 54."

CalRecycle disagreed, saying it picked the federal rule because pyrolysis waste "may ultimately be processed outside of California." 

CAA is using that same federal rule to say pyrolysis counts as recycling. 

"When we're designing a plan, and the regulations are structured in a specific way that allows for certain recycling technologies, we're not going to close those off," said Shane Buckingham, chief of staff at CAA and advisory board member. "We've outlined a way to address the hazardous waste requirements in the regulations to ensure that any recycling technologies that do produce those types of waste are not producing a significant amount."

The CAA's draft

On June 26, the Packaging Producer Responsibility Advisory Board gathered in Sacramento, where CAA's draft plan drew scrutiny from board members and the public. The advisory board, which operates under CalRecycle, is made up of state-appointed members representing the private sector, local government and advocacy groups, including VIP. 

About a hundred other stakeholders – some advocating for plastic producers, some pushing for environmental safety and justice – filled out the meeting, where the issue of pyrolysis came up early and often.

"It should be about preventing the implementation of dangerous waste-generating technologies that are expensive, and they give cover for the creation of more plastic waste," said Rita O'Connell, a national organizer with the nonprofit Beyond Plastics. "I would strongly ask you to consider whether you would allow such a facility in your own community or backyard before you consider allowing one near anyone else's."

In addition to cancer-causing dioxins and other harmful byproducts, heavy metals often found in pyrolysis emissions carry their own risks: lead exposure is linked to neurological damage, particularly in children, while cadmium is classified as a human carcinogen tied to kidney damage and lung cancer, according to ATSDR toxicological profiles.

Buckingham defended the draft producer responsibility plan, adding that SB 54 does not mention transformation or pyrolysis in its list of recycling exclusions.

"The statute could have but did not categorically exclude specified chemical recycling technologies such as pyrolysis," Buckingham said. "Rather, it directed CalRecycle to develop criteria to evaluate such technologies and to exclude them if they produce significant amounts of hazardous waste."

Stanislaus County residents get an incinerator

In 1984, the California Waste Management Board paid a Los Angeles consulting firm, Cerrell Associates, to answer a single question: which communities would put up the least fight against a trash incinerator?

Cerrell used data on race, ethnicity, income, education and rates of non-English speakers to assess possible site locations, including Stanislaus County. In 1985, a year after the Cerrell Report's findings, the city of Modesto and Stanislaus County signed a deal that led to the construction of a facility at the county's Fink Road Landfill, operated by the Stanislaus Waste Energy Company, a subsidiary of Ogden Martin Systems, a waste-to-energy company based in New Jersey that rebranded as Covanta in 2001 and as Reworld in 2024.

In October 2015, more than 25 years after the incinerator opened, Senate Bill 350 declared that plants burning municipal solid waste don't count as sources of renewable energy, so the plant lost the extra revenue stream from its renewable status. 

In 2017, state regulators took away the plant's exemption from buying carbon pollution credits under cap-and-trade, and local air-quality regulators added a new rule around the same time, ordering the plant to install pollution-control equipment by 2024. Then, in September 2022, Assembly Bill 1857, co-sponsored by VIP, cut the county's ability to count incinerated trash toward its state-mandated recycling targets, wiping out the last financial incentive to treat incineration as recycling.

By 2023, the math no longer worked. An engineering firm studied five alternatives to the incinerator and found that none were financially sustainable. By late 2024, Reworld told Modesto and the county it couldn't afford to keep the incinerator running. The plant closed for good on Dec. 2, 2024.

Modesto and the county split a $4 million early termination settlement – 58% to Modesto and 42% to the county – and divided an $8 million reserve fund the same way. The closure also means the county's only landfill is now on pace to fill up nearly 10 years earlier than its 2050 target.

For Helme, the shutdown was the win VIP had spent over a decade fighting for, and created his path to the advisory board now debating the implementation of SB 54. For Lopez, the pull toward environmental justice goes back further than the incinerator.

The community fight

Lopez said the health toll of living near industrial pollution became personal long before she moved to Stanislaus County. She grew up in Cudahy, a Los Angeles County city where, she said, her brother's school was built in part atop a former toxic waste site.

"They built a school on top of a bunch of, like, oil barrels," Lopez said. "And that stuff started to leak, and it was seeping out of the cement, and teachers were getting sick, kids were getting headaches."

In 1990, the Los Angeles Times reported that after years of complaints about petroleum puddles surfacing during the summer months, the Los Angeles school board opted to seal the Park Avenue Elementary playground with a plastic liner topped with a layer of asphalt. A decade later, low levels of arsenic were detected on the playground.

In 2015, a battery recycling facility near Cudahy was forced to shut down after multiple reports revealed high levels of lead and arsenic contamination, resulting in elevated cancer risks. The findings reinforced Lopez's long-held suspicion that her mother's breast cancer was tied to toxic pollution where they lived.

"They put up these door hangers all around Cudahy that said, 'By the way, this house is built on top of a toxic site,'" she said. "At the time, I knew that it was messed up, but I didn't know how to act or what to do about it."

Lopez's mother died of breast cancer at 59, nearly seven years ago. Lopez said she did not learn until later in life that the community she was raised in had been polluted for decades.

She eventually met environmental justice advocates across the state and joined their efforts to stop pollution from making communities sick.

"We want to expose the sources of pollution so people become aware, make an informed decision and be civically engaged," she said. "Most of our time and our commitment is in the disadvantaged communities, monolingual communities, predominantly Latino here in Stanislaus County. It's the Black and brown communities who are often sacrificed or live in sacrifice zones where pollution and contamination is situated."

The SB 54 pushback

SB 54 is now caught between two lawsuits pulling in opposite directions. One suit says the law isn't strict enough. The other says it goes too far.

At the center of it all is a legal gray area: Does California's older list of recycling exclusions still apply, or does SB 54's newer, shorter list replace it? 

The first lawsuit came in June, when the Natural Resources Defense Council, along with two advocacy groups, sued CalRecycle in San Francisco Superior Court. The NRDC argues that CAA's draft plan wrongly counts pyrolysis as recycling. It also objects to a provision of SB 54 that allows plastic producers to pull money from the law's mitigation fund to help pay for pyrolysis plants, which the group says violates the law itself.

The second lawsuit, also filed in June, aims to loosen regulations. Nebraska, 16 other states, and a trade group called the National Association of Wholesaler-Distributors sued CalRecycle and CAA in federal court. Their claim: SB 54 illegally forces California's packaging rules on out-of-state companies that never agreed to follow them. Treating in-state and out-of-state businesses differently, they argue, violates the U.S. Constitution.

NAW says its members would get caught in the regulatory crossfire. The problem, according to NAW, is how SB 54 defines a plastic producer. If the company that actually makes a product has no operations in California, the law can instead pin that "producer" label on the retailer or distributor selling it. That means NAW's members could be held responsible for packaging choices they never made.

And the case boils down to a bigger question: Can one state use its market power to set packaging rules for the whole country?

Both cases are still pending. No hearing dates have been set.

More confusion

Toward the end of the June 26 meeting of the Packaging Producer Responsibility Advisory Board, after a few hours of public comment, the board turned to its own members for final questions. Helme took the floor and expressed frustration that, deep into the implementation process, the board was still debating the definition of recycling and whether pyrolysis is lawful in California.

"I still don't understand, with those definitions, I've been told over and over again by people smarter than me, ‘don't worry, this can't happen because of these definitions in California,’" Helme said. "Why is it still such an issue that it seems like we're still not clear on exactly if this is allowed? Is it going to be allowed?"

No one answered.

This story was produced by the Climate Solutions Studio, a project of the Central Valley Journalism Collaborative and its partner newsrooms.

Xavier Zamora is The Intersection’s reporting intern from the UC Berkeley Graduate School of Journalism. He covers health equity in the San Joaquin Valley. Contact Zamora at xavier@cvlocaljournalism.org.

By William Melhado, EdSource

Emily Enriquez didn’t need Sacramento State to mandate that she live on campus. She was already sold on the idea of living a short walk from classes and campus events.

Starting this fall, Enriquez and more than a thousand other first-year Sac State students will live on campus under a new requirement that university officials say will boost graduation rates and build a greater sense of community. 

It’s also the latest example of university leaders’ efforts to shed Sac State’s longstanding reputation as a commuter school.

“It’s better to live on campus … for meeting new people and learning how to be independent,” she said Wednesday while waiting in line to move into Mt. Whitney, a new dorm room on the California State University campus. 

Because she is from Sacramento, Enriquez isn’t required to live in dorms this year, unlike other students who are subject to a two-year, on-campus housing mandate at Sacramento State that went into effect this week. The cost of a bed on campus starts at just over $1,000 per month.

President Luke Wood said during a Thursday address to the campus that the university is trying to elevate Sacramento State’s “national brand” by expanding sports programs and growing programming that serves marginalized students. Wood said that the housing requirement is a key part of changing the university’s brand.

“Housing is critical because we want to make sure that our students are being successful,” Wood told EdSource after his address. He said students who live in campus housing are more likely to graduate on time with less debt, and are less likely to struggle with food and housing insecurity.

“It’s a single intervention that addresses a multitude of challenges, and so that’s why we’ve been so focused on housing, and it’s working,” Wood said.

Some students have raised affordability concerns about the requirement, arguing that finding housing off campus or living with family and friends is a cheaper option. The housing mandate will prevent some future students from applying, one student leader said.

In addition to the housing requirement, Wood is pursuing other efforts to move Sacramento State beyond its reputation as a commuter school. He spent $23 million to move the university’s football program into the Division I Mid-American Conference, calling the move an effort to put the “university on the map.” Wood also has big ambitions for a new multiuse football stadium to accommodate more fans. 

On Thursday, Wood also announced that the university will invest $150 million to build a new engineering building. 

There has not been a systemwide discussion about whether more campuses should adopt similar on-campus housing requirements, said Ray Murillo, CSU’s interim assistant vice chancellor of student affairs.

“Each campus has its autonomy to make its own decisions and determination on that … because they know their students’ needs best,” Murillo said.

At least eight of CSU’s 22 campuses have at one point required their first-year students to live on campus. San Jose State University first required first-year students to live on campus in 2011. San Diego State University, among other CSU campuses, expanded its policy to apply to sophomores in 2016, citing a substantial improvement in persistence rates for students who live on campus. 

Providing students with continuous residential, academic and community support, in addition to living on campus, was crucial to achieving better outcomes, an SDSU spokesperson said in a statement.

San Jose State University first suspended its on-campus requirement in 2020 due to the COVID-19 pandemic and has continued not to require students to live on campus because of the number of online courses offered, which “made a mandatory residency requirement inappropriate.”

SJSU spokesperson Michelle Smith McDonald said in a statement that “we have not identified recent SJSU-specific evidence showing that suspending the housing requirement has led to lower academic performance or retention.”

‘It’s like a little village’

Hundreds of freshmen arrived on campus early Wednesday morning, welcomed by the Sacramento State Cheer and Dance squad and a 30-person marching band. 

The towering parking structures surrounding the 300-acre campus underscores the fact that the vast majority of Sacramento State students will remain commuters.

In 2024, Sac State’s undergraduate enrollment eclipsed 28,000 — yet just 7% of the student body lived on campus. That figure will rise to 11% of the total student body, according to Nadine Kelley, the university’s executive director of housing services. She expects the total percentage of students who live on campus to increase by 1% next year, which is still below the university’s goal of 15% to 20%.

Students with the Sacramento State Cheer and Dance troupe and a 30-person marching band welcomed incoming first-year students to campus on Wednesday, Aug. 26.William Melhado / EdSource

In recent years, the demand for on-campus housing at Sacramento State has exceeded the number of beds.

Even with the recent construction of Mt. Whitney, a 335-bed residence hall, there were still 151 students on the wait list as of June. 

Mt. Whitney, built at a cost of $69 million and funded with a state student housing grant, will only serve some of the campus’s future housing needs. 

Kelley said plans to expand on-campus living will benefit students. They’ll be within walking distance of the library, can join student clubs without worrying about commutes and better connect with other students and educators, she said.

“What we found with students that chose to live on campus, they were a little bit more successful than our commuter students in graduating in four years,” Kelley said.

Sacramento State officials said they will monitor graduation rates to help measure the success of the housing requirement. Between 2015 and 2025, the university’s four-year graduation rate for freshmen increased from 9% to over 30% as a result of a $3 billion statewide initiative to increase Cal State’s four- to six-year graduation rates. 

The results were a mixed bag across CSU campuses. Despite the gains, Sacramento State’s four-year graduate rate remains in the system’s bottom half compared to the other Cal State campuses. 

For many years, universities across the country have introduced housing requirements to improve student outcomes, said Royel Johnson, the co-director of the Pullias Center for Higher Education at the University of Southern California.

Research has shown that living on campus for students’ first year in college is linked to higher GPAs and better retention, he said. While the benefits are not uniform across student populations, Johnson commended Sacramento State leaders for implementing the housing requirement. 

“Here’s an institution that is leveraging insights from research to make practical decisions that will hopefully boost student success,” Johnson said.

Living on campus is not practical for all students. There are lots of students who are juggling a range of personal-family commitments, such as parenting, for whom it makes sense to live off campus, he said. 

Sacramento State leaders have sought to generate student engagement on campus through various endeavors, including hosting free concerts after sporting events. 

“The relationships you make in the dorm, it’s like a little village,” said mechanical engineering senior Matthew Gonzales. A former on-campus resident, he was among several hundred volunteers helping students move into the Mt. Whitney dorms on Wednesday. 

Some students protest dorm housing costs

Top of the list of concerns over Sacramento State’s new housing policy is how much dorms cost students. Some students have expressed concern that the housing requirement will prevent future students from enrolling.

Sofia Gonzalez, a junior studying business and marketing, said that she would not have enrolled at Sacramento State if the housing requirements had been in effect two years ago because of the cost. Gonzalez is a leader of the group Students for Quality Education that organized a protest over the housing requirement last year. 

Gonzalez lived on campus her first year, which she acknowledged helped her feel more connected to the university community, but she said that her current $750 monthly rent is cheaper than on-campus housing.

“I feel bad for the students who can’t afford Sac State just because they can’t live there for two years,” Gonzalez said. 

The cost of room and board depends on the type of housing. The monthly cost ranges from $1,080 for a bed in a triple room, to $1,850 for a studio. Meal plans for the academic year cost between $4,550 and $6,030, depending on how many times per week students can visit dining halls. 

The housing requirement begins amid a multiyear increase to student tuition that the CSU Board of Trustees approved in 2023.

Anticipating pushback from some students over the mandate, the university created exemptions for several groups of freshmen, including students who are at least 21 years old, can demonstrate financial hardship, or live within 50 miles of the campus. The local residency exemption next year will only apply to students who live within 30 miles of the campus.

Enrollment numbers for 2026 are still being finalized, but last year Sacramento State enrolled about 3,700 freshmen. The university granted more than 1,900 exemptions to the housing requirement, the vast majority of which were for those who lived locally. 

Hope Holmes could have requested an exemption from the housing requirement, but opted not to. As she prepared to move on Wednesday, Holmes expressed some relief that she wouldn’t have to commute to and from her hometown of Stockton, about an hour’s drive from campus but within the 50-mile exemption limit. 

“I don’t know how I feel about living in a dorm with someone,” Holmes said, “but I’m excited to be on campus.”

Editor's Note: Sac State owns CapRadio's broadcast licenses and manages our finances. It does not oversee news or programming.