CEQA Reforms Brighten California’s Housing Outlook
The environmental law has been called a “blob” because of how far-reaching it's become.
This week, multifamily investment and development professionals in California are applauding major updates to a 50-year-old environmental statute that many believe, among other impacts, has been largely responsible for the state’s severe housing crisis.
Changes to the California Environmental Quality Act came via two trailer bills (AB 130 and SB 131) attached to the state budget. The bills were championed by Democratic Governor Gavin Newsom, who called the 2025-2026 budget, the “most consequential housing and infrastructure reform in recent state history.”
One of the country’s most powerful environmental laws, CEQA was enacted in the 1970s. It established that state and local governments had to review any project requiring discretionary approval for its environmental impact. “Significant impacts” would require mitigation efforts. The law has succeeded in protecting the environment, but the process is lengthy, and it leaves every project under review vulnerable to lawsuits and delays.
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“It became a hugely rich person’s game to try and develop in California because you had to have such staying power,” said Jennifer Hernandez, a land use lawyer who runs the West Coast land use and environmental group for Holland and Knight.
Further, she said, CEQA “got morphed by court cases that hugely expanded the definition of environment.” Former Governor Jerry Brown was the first to refer to CEQA as a “blob” because of how amorphous it became.
What’s changing?
AB 130 will create a new CEQA exemption for environmentally friendly infill housing projects that meet local zoning, density and objective planning standards as long as they’re not located on environmentally sensitive or hazardous sites, according to the state’s website. The bill is targeted at helping produce more housing in areas designated for development, lowering housing costs and improving “environmental and climate outcomes” by steering growth away from undeveloped land.
AB 131 creates nine new CEQA exemptions: health centers and rural clinics, childcare centers, advanced manufacturing facilities, food banks, farm worker housing, clean water projects (except the Delta Conveyance) wildfire risk mitigation projects, broadband and parks).
The bill also aims to shorten the length of CEQA lawsuits by raising the standard of relevancy for administrative records that can be used in the lawsuit. It introduces streamlined environmental reviews for housing projects that “narrowly miss” an existing CEQA exemption. The bill also removes a duplicative requirement by exempting from CEQA rezonings that are undertaken to implement a Regional Housing Needs Assessment compliant housing element that has already gone through the CEQA process.
Hernandez expects the changes to unlock a number of projects that were weighed down by CEQA, though some of them may not match what residents are looking for today in terms of higher density and more affordability. “We don’t have the market demand that matches the entitled supply,” she said.
More changes to come
David McCullough, principal at McCullough Landscape Architecture, cautioned that the new exemptions announced are limited in the housing realm and reactionary in nature, particularly the exemption for fire mitigation. But he is nonetheless encouraged that reform has begun.
“They are trying to make changes, and I think this is one small step,” McCollough said.
To avoid triggering CEQA, McCollough said, many developers will propose projects that meet the zoning and don’t open them up for lawsuits. As more CEQA modifications emerge, McCollough envisions large projects that require zoning changes but have the potential to generate a lot housing, like transportation-oriented developments and Opportunity Zones, being exempt from the law. “I think exemptions are important,” he said.
