In a deal brokered Thursday between Gov. Gavin Newsom and the California legislature, California cities may soon face lawsuits and six-figure fines if they don’t produce enough new housing to satisfy capitol demands.

Newsom and lawmakers broke a stalemate over the new state budget with a fresh proposal (which will have to pass in both chambers of the legislature) that would allow the state to sue California cities that fail to live up to their housing goals and permit the court to penalize cities found flagrantly underperforming with fees ranging from $10,000 per month all the way up to $600,000.

Financial penalties wouldn’t start to add up until a year after the sentence, giving cities time to start building before facing the a bill. The Thursday deal also includes a $1 billion fund to reward “pro-housing” cities with new incentives to keep producing.

In a joint statement between Newsom, Assembly Speaker Anthony Rendon, and Senate President pro Tem Toni Atkins, the trio declared:

“The high cost of housing is chief among the affordability and quality of life challenges families face. Importantly, we have come to agreement on a package of housing measures, one that creates strong incentives—both sticks and carrots—to help spur housing production across this state, all while providing significant levels of funding to fight homelessness.”

SF-based State Sen. Scott Wiener—long an advocate for putting the state’s weight behind housing goals—commented via email, saying “I support the housing budget trailer bill and thank the governor and legislative leadership,” but added, “California’s existing housing laws, even with better and more effective enforcement, are inadequate to solve our state’s massive housing shortage.”

Mayor London Breed praised the budget but did not mention the trailer bill. San Francisco is unlikely to fall into the state’s bad books on housing production, making potential penalties a moot point locally.

San Jose Mayor Sam Liccardo also praised the plan, saying, “We’re at a point in this crisis where we need more than just carrots. We need sticks.”

Full details on the execution of the new housing proposal are forthcoming. For more on the state’s new 2019-2020 budget, go here.