Legislative analysts tell subcommittee to monitor Department of Real Estate fund as license applications drop

The Department of Real Estate (DRE) told the Senate budget subcommittee it oversees licensing for approximately 434,000 licensees and is funded entirely from the Real Estate Fund, but Legislative Analyst Office staff told the panel that recent declines in new-license applications have pushed reserves lower and warrant close monitoring.

DRE overview and request: Sonia Paladino, assistant commissioner of legislation for DRE, summarized the department's statutory duties: enforcing real estate law, reviewing public reports for subdivisions, issuing licenses to sales agents, brokers, mortgage brokers and property managers, and handling investigations and discipline. The department reported 383 positions across five offices and said it does not receive general fund dollars. For 2025'26 the department requested an increase in expenditure authority of $2,644,000 from the Real Estate Fund for increased facility rent at the Maly State Office Complex (the department said the request covers tenant departments for a shared tenant BCP).

Fund condition concerns: Heather Gonzales from the LAO told the committee DRE has been spending down reserves despite recent fee increases and that the number of new license applications and renewals is trending downward, particularly for new licensees in the first two quarters of 2024'25. The LAO recommended the legislature ask DRE to report at the May revise on application counts and related revenues and to identify contingency actions the department could take to raise revenue or reduce costs if low application rates persist.

Department response and plan: Shelly Wilson, assistant commissioner of administration, said DRE has reduced position authority by 12 positions and cut costs by about $1.7 million, adjustments that were made permanent with enactment of the 2025'26 budget. The department said it would continue to monitor revenues closely, implement additional cost-saving measures where possible (including deferring hiring and cutting non-critical spending), and pursue outreach to attract new licensees through education partnerships with California State University, community colleges and the CSU system.

Committee discussion and follow-up: Senators asked whether automation or market structure changes could be driving lower application rates. DRE said licensees must be California-licensed to practice in the state, and the department has not identified automation as a confirmed cause but has engaged CSU San Luis Obispo on a proptech study and will look further at long-term trends. The LAO recommended short-term monitoring and a contingency plan so the legislature is not forced into emergency measures inconsistent with legislative policy if the fund weakens further.

Ending note: The subcommittee held the DRE items open to monitor fund condition and to allow follow-up reporting on application volumes and possible contingency actions.