Alert 06.18.25
Alert
Alert
By Allan C. Van Vliet, Matthew Olhausen, Eric Moorman, Robert C. Herr
07.07.25
On June 30, 2025, California Governor Gavin Newsom signed two major bills—Assembly Bill 130 (AB 130) and Senate Bill 131 (SB 131)—into law, enacting sweeping reforms to the California Environmental Quality Act (CEQA). Passed as part of the state budget package, these bills aim to reduce regulatory barriers and litigation risks for new infill housing and other community-oriented infrastructure projects. Together, AB 130 and SB 131 represent “the most significant reforms to CEQA ever considered by the Legislature,” according to State Sen. Scott Wiener.
Context on CEQA
CEQA was enacted in 1970 and is modeled after the federal National Environmental Protection Act (NEPA). Its purpose was to protect California’s natural environment by requiring state and local agencies to conduct a comprehensive environmental impact review prior to approving a project or taking any major action and further requiring that any feasible mitigation measures be adopted as part of any project approval, going a step further than NEPA. These requirements have imposed significant costs on development projects of all kinds, including housing and commercial developments, by delaying projects to accommodate lengthy review periods and by requiring project sponsors to pay for consultants and studies to support the environmental review process. Project opponents or other interested third parties have frequently filed CEQA lawsuits, where a third party claims that a project’s sponsor or the approving agency failed to meet CEQA’s requirements, to either extract additional concessions from developers (e.g., labor unions using CEQA lawsuits to force developers to engage unionized labor forces for their projects), or to block projects from proceeding entirely (e.g., the owner of one gas station in San Jose sued the owner of another gas station across the street to prevent an expansion).
Overview of AB 130 and SB 131
AB 130 and SB 131 were originally introduced as AB 609 (Wicks) and SB 607 (Wiener), respectively, but were ultimately incorporated into the legislature’s final package of budget bills. AB 130 creates a new categorical CEQA exemption for infill housing projects that meet applicable density, zoning and other objective planning standards in the relevant jurisdiction. SB 131 creates several additional categorical exemptions, and also drastically narrows the scope of environmental review required for certain housing projects not eligible for a categorical exemption from CEQA. The following is intended as a general overview and does not address all aspects of the new legislation. Other requirements of AB 130 and SB 131 may be covered in future client alerts.
AB 130 focuses on streamlining the approval of urban-infill housing. AB 130 creates a new categorical CEQA exemption, significantly reducing entitlement timelines, for residential and mixed-use housing projects that meet the following requirements:
For qualifying projects, the following requirements will still apply:
SB 131 complements AB 130 by removing CEQA hurdles for a broader range of project types and land use decisions:
- agricultural employee housing;
- advanced manufacturing facilities;
- parks;
- broadband;
- nonprofit food banks;
- clean water infrastructure;
- wildfire risk reduction projects in high-fire-hazard zones;
- childcare centers; and
- health care clinics.
SB 131 will also reduce the size of the administrative records prepared in CEQA litigation for most types of projects by excluding staff notes and internal agency communications from the record.
Implications for Developers and Investors
The passage of AB 130 and SB 131 signals a new era of streamlined development in California. For real estate professionals, these changes carry several notable benefits:
Considerations and Compliance Notes
While these new laws offer powerful incentives, developers should still proceed with diligence. CEQA exemptions do not override local zoning authority. Projects must be fully consistent with general plan and zoning codes to qualify under AB 130 or SB 131. These bills also do not exempt projects that are located in environmentally sensitive locations, like wetlands, so it remains important for developers to understand the environmental and geotechnical attributes of a project site before proceeding with entitlements. Lastly, though these bills significantly reduce the risk of CEQA litigation and delays for public comment periods during environmental review, public opposition to a project can still pose an obstacle to a successful development. Developers should proactively engage with interested stakeholders and work to identify potential sticking points early in the process to ensure a smooth development process.
AB 130 and SB 131 dramatically change the development landscape in California for some projects, providing a new level of regulatory clarity and opportunity for the real estate sector. These reforms not only remove key barriers to development, particularly for multifamily housing projects, but also realign the state’s environmental laws with the urgent need for housing and climate-resilience by promoting urban-infill development projects in transit-rich areas of the state.