On June 30, 2025, Governor Newsom signed two budget trailer bills into law: Assembly Bill 130 and Senate Bill 131, which reform the California Environmental Quality Act (CEQA) effective immediately. As explained by the Governor, the bills constitute “the most consequential housing and infrastructure reform in recent state history.” The Governor made it clear that his approval of the 2025-2026 state budget was contingent on these bills, which helped expedite an otherwise controversial and lengthy approval process by the State Legislature. 

The bills, which include provisions from Senate Bill 607 (Wiener) and Assembly Bill 609 (Wicks), touch almost every major land use statute in California and include changes that affect various types of development projects. A summary of the most significant changes is provided below.

New CEQA Exemptions

The following projects are now exempt from CEQA if they meet the prescribed statutory requirements.

Urban Infill Housing Development Projects

The following requirements must be met to qualify for the new CEQA urban infill exemption:

• The project must qualify as a “housing development project,” meaning that the project must dedicate at least two-thirds of the square footage for residential use, unless the project proposes at least 500 net new residential units and qualifies for 50% residential pursuant to Government Code Section 65589.5(h)(2).
• The project sponsor must meet specified labor requirements, but those requirements only apply to: (i) 100% lower-income projects (where labor requirements are typically already imposed), (ii) projects over 85 feet in height, and (iii) other specified projects in the City and County of San Francisco with at least 50 dwelling units. 
• The project must be consistent with the applicable general plan, zoning ordinance, and local coastal program (if applicable). If the zoning and general plan are inconsistent, the project shall be deemed consistent with both if consistent with one. The project shall be deemed consistent if there is substantial evidence to allow a reasonable person to come to that conclusion. Any density bonus and related incentives/concessions, waivers/reductions of development standards, or reduced parking ratios shall not be grounds for an inconsistency determination.
• The proposed residential density must be at least 50% of the minimum residential density deemed appropriate to accommodate housing for the jurisdiction, as specified in Government Code Section 65583.2(c)(3)(B). That calculation translates to at least 15 dwelling units per acre for a jurisdiction within a metropolitan county and 10 dwelling units per acre for a suburban jurisdiction.
• The project site may be up to 20 acres. Builder’s Remedy projects are limited to five acres. 
• The project site must be within the boundaries of an incorporated municipality or located within an urban area, as defined by the United States Census Bureau.
• The project site must be an urban infill site, meaning that: (i) the site was previously developed with an urban use; (ii) at least 75% of the perimeter of the site adjoins parcels that are developed with urban uses; (iii) at least 75% of the area within a one-quarter mile radius of the site is developed with urban uses; or (iv) for sites with four sides, at least three sides are developed with urban uses and at least two-thirds of the perimeter of the site adjoins parcels that are developed with urban uses. The term “urban use” is defined to mean “any current or previous residential or commercial development, public institution, or public park that is surrounded by other urban uses, parking lot or structure, transit or transportation passenger facility, or retail use, or any combination of those uses.”
• The project site must meet all of the SB 35 siting criteria under Government Code Section 65913.4(a)(6), which prohibits projects within environmentally sensitive areas, including: certain coastal zone areas; habitat for protected species; wetlands; very high fire hazard severity zones; hazardous waste sites; delineated earthquake fault zones; special flood hazard areas; regulatory floodways; and land dedicated for conservation in an adopted natural community conservation plan or conservation easement (as defined and specified and subject to certain exceptions).
• The project must not require the demolition of a historic structure that was placed on a national, state, or local historic register before the SB 330 preliminary application was filed for the project (pursuant to Gov. Code § 65941.1).
• A Phase I Environmental Assessment (ESA) must be conducted for the project site (as a condition of project approval), and if a recognized environmental condition is found, specified requirements must be met.
• For any housing within 500 feet of a freeway: (i) the building must have a centralized heating, ventilation, and air-conditioning system and the outdoor intakes for that system cannot face the freeway; (ii) the building must provide air filtration media for outside and return air that provide a minimum efficiency reporting value of 16, which must be replaced as specified; and (iii) the building must not have any balconies facing the freeway.
• The local government must provide notice to and consult with any interested California Native American tribes traditionally and culturally affiliated with the project site (and incorporate related conditions of project approval), but that consultation process will be expedited (as specified).
• For new projects “deemed complete” on or after January 1, 2025, no portion of the project may be designated for use as transient lodging (as defined). “Deemed complete” means that an SB 330 preliminary application or a complete application (pursuant to Gov. Code § 65943) has been submitted for the project.

The CEQA reform legislation also directs the Governor’s Office of Land Use and Climate Innovation to map “eligible urban infill sites” (as specified) by July 1, 2027. That should in turn expand the availability of not only the new CEQA urban infill exemption but also the existing Class 32 urban infill exemption.

Housing Element Rezoning

Rezoning (typically upzoning) that implements the schedule of actions contained in an “approved” housing element (i.e., to meet Regional Housing Needs Allocation (RHNA) requirements) are now exempt from CEQA. Previously, local agencies were often able to rely on the Environmental Impact Report (EIR) prepared for the housing element (where applicable).

This exemption does not apply to rezoning that allows for (i) the construction of a warehouse distribution center (as defined) that is 50,000 square feet or larger; (ii) the construction of oil and gas infrastructure (as defined); or (iii) construction on any “natural and protected lands” (as newly defined in Public Resources Code § 21067.5, with the exception of farmland).

Advanced Manufacturing, Semiconductors, and Broadband Projects

Advanced manufacturing projects (as defined) located on sites zoned exclusively for industrial uses are now exempt from CEQA. Examples of such projects include manufacturing in the areas of microelectronics and nanoelectronics (including semiconductors); advanced materials; integrated computational materials engineering; nanotechnology; additive manufacturing; and industrial biotechnology. The CEQA reform legislation also expands the existing CEQA exemption for linear broadband deployment.

The exemption does not apply to projects on natural and protected lands (as defined).

High-Speed Rail Projects

Specified projects related to the California high-speed rail project (and other high-speed rail projects that are planned to connect directly to the California high-speed rail project) are now exempt from CEQA. Those projects include the development, construction, or operation of a high-speed rail maintenance facility (not defined) and the development, construction, or modification of a high-speed rail passenger rail station. Specified requirements must be met, including that a prior EIR must have evaluated a similar California high-speed rail project and the project incorporates all applicable mitigation measures in that EIR. 

The exemption does not apply to projects on natural and protected lands (as defined). The exemption also does not apply to other facilities, structures, or uses “not expressly identified” in the prior EIR.

Other Specified Projects

The following projects are also now exempt from CEQA (as defined and as specified):

• Day care centers not located in residential areas.
• Rural health clinics, federally qualified health centers, and nonprofit food banks/pantries.
• Agricultural employee housing projects.
• Certain wildfire risk reduction projects.
• Certain public parks and nonmotorized recreational trail facilities.
• Certain community water system and sewer service projects.
• Updates to the state’s climate adaptation strategy.

Limited CEQA Review 

The CEQA reform legislation provides for limited CEQA review for housing development projects (as defined) that would otherwise be exempt from CEQA under a statutory exemption or a specified categorical exemption (Class 1 through 5, 12, 15, 20, 27, 30, or 32), but for a single condition. In such cases, CEQA review will focus only on the single condition that renders the exemption inapplicable. If an EIR is prepared, it is not required to include a discussion of project alternatives or growth-inducing impacts (which are otherwise required).

The foregoing does not apply to housing development projects that (i) include a warehouse distribution center (as defined) that is 50,000 square feet or larger, (ii) include oil and gas infrastructure (as defined), or (iii) are proposed on natural and protected lands (as defined, with the exception of a very high fire hazard severity zone).

Other CEQA Reforms

The CEQA reform legislation also provides for the following (as specified):

• Mitigation of significant Vehicle Miles Traveled (VMT) impacts by funding or otherwise facilitating housing or related infrastructure projects, including by making contributions to the HCD Transit-Oriented Development Implementation Fund.
• The exclusion of certain internal agency communications from the CEQA administrative record (for CEQA lawsuits) for specified projects.
• Updates to the CEQA Guidelines (by the Office of Land use and Climate Innovation) by January 1, 2027, and every two years thereafter, to “better incentivize affordable and smart infill housing growth” and “address any rigid requirements, lack of clarity in vague terminology, and the potential for excessive exposure to frivolous litigation over lead agency determinations to make tiering under [CEQA] work more effectively.”
• A legislative declaration that “CEQA should not be used primarily for economic interests, to stifle competition, to gain competitive advantage, or to delay a project for reasons unrelated to environmental protection.” This declaration will likely be cited by courts in future CEQA litigation.

Other Notable Changes 

Assembly Bill 130 also:

• Provides that the Permit Streamlining Act applies to a housing development project regardless of whether a discretionary or ministerial permit is required, which means that ministerial permits must also be approved or disapproved (as specified) within 60 days of receipt of a complete application.
• Newly requires the Coastal Commission to meet Permit Streamlining Act requirements related to the approval or disapproval of a development project within specified timeframes.
• Prohibits appeals to the Coastal Commission for specified residential projects.
• Temporarily freezes building code standards applicable to residential units (as specified), except for certain changes (e.g., emergency public health and safety standards).
• Deletes various statutory expiration dates from the Housing Accountability Act, Permit Streamlining Act, and Housing Crisis Act.
• Removes the provision that previously allowed certain local agencies to impose objective standards (including but not limited to design, development and historic standards) on ADUs.

Implications

AB 130 and SB 131 represent the most significant shift in California’s land use regime in at least the past decade and as we previously reported, there have been signs that these reforms were coming over the course of the past year.

One of the most notable changes for housing development projects is the overhaul of the existing Class 32 urban infill categorical exemption under CEQA Guidelines Section 15332 (Class 32 Exemption). The Class 32 Exemption is limited to five acres and requires an analysis of potential impacts related to biological resources, traffic, noise, air quality, and water quality. That in turn delays the processing of Class 32 Exemptions, often for many months. The Class 32 Exemption is also subject to exceptions under CEQA Guidelines Section 15300.2. Those exceptions include, but are not limited to, “where there is a reasonable possibility that the activity will have a significant effect on the environment due to unusual circumstances.” This provision is often cited by project opponents challenging a categorical exemption for a project and has led to legal uncertainty. The Class 32 Exemption is also not available for remediated Cortese List sites.

The new urban infill CEQA exemption allows for qualifying housing development projects on up to 20 acres and is a statutory exemption versus a categorical exemption, meaning that it will not be subject to the aforementioned exceptions. Furthermore, unlike the Class 32 Exemption, an analysis of potential impacts related to traffic, noise, air quality, and water quality will not be required to support the exemption. Instead, the project site must meet all of the SB 35 siting criteria (see above). Therefore, qualifying housing development projects should be processed much more quickly since technical studies should not be required, with the possible exception of a biological resources survey.