An important new CEQA statutory exemption for urban infill residential and mixed-use projects went into effect on June 30, 2025 after Governor Newsom signed the budget trailer bill, Assembly Bill (AB) 130. While the exemption comes with detailed criteria, the exemption's reach is broader overall than existing urban infill exemptions and could encompass projects that currently do not qualify for other CEQA exemptions. This new exemption should result in shorter processing and approval times for eligible residential and mixed-use projects, adding another tool in the state's effort to address the housing supply crisis.
The bill was first introduced this legislative session by Assemblymember Wicks as AB 609, but during the legislative session it gained the support of the Governor, who pushed to include it in a budget trailer bill (AB 130), becoming Section 59 of that bill. The new exemption, codified as Public Resources Code section 21080.66, has a long list of site and project eligibility requirements, which are briefly discussed below and will need to be evaluated in detail for each project.
Exemption Requirements
Compared to other exemptions commonly used for infill housing and mixed-use projects, such as the Class 32 categorical exemption or the statutory Sustainable Communities Project Exemption ("SCPE"; CEQA Section 21155.1), this new statutory exemption has some advantages for certain projects. For example, the maximum site area of 20 acres will accommodate large-scale projects (as compared to the 5-acre and 8-acre limits under the Class 32 and SCPE exemptions, respectively). In addition, the exemption does not (i) require affordable housing, (ii) limit the number of units in the project, (iii) require proximity to major transit facilities, and (iv) for many projects, require the payment of prevailing wages. Because the exemption is codified in the Public Resources Code, it is also not subject to the "unusual circumstances" and other exceptions that limit the use of categorical exemptions. The Class 32 and SCPE exemptions are unaffected by AB 130 and, given some of AB 130's requirements, may provide a better path for some projects.
Below are details as to key elements of the new exemption:
1. Construction Labor Standards.
- Buildings up to 85 feet in height are not
subject to prevailing wage or other construction labor standards,
except for certain projects in San Francisco.
- In San Francisco, projects up to 85 feet in height and 50 units or greater are subject to the labor standards set forth in AB 2011 for mixed-income projects (i.e., prevailing wages, health insurance and apprenticeship requirements) on a trade-by-trade basis. If a construction trade was paid prevailing wages on at least 50 percent of the market-rate multifamily housing projects completed from 2022 through 2024, that trade must be paid prevailing wages.
- All buildings over 85 feet in height are subject to the prevailing wage and "skilled and trained" construction labor requirements of SB 35.
- Projects that are 100 percent affordable to lower income households must pay prevailing wages.
2. Tribal Consultation Rights.
The exemption requires a special consultation process with Native American tribes, which may add time to the approval process. Within 14 days after the project application is deemed complete, the local government must notify the tribes that are traditionally and culturally affiliated with the project site and invite them to consult on the project's potential effects on tribal resources. The tribe then has 60 days to notify the local government as to whether it wants to consult. If the tribe elects to consult, the local government must initiate the consultation within 14 days and the consultation must conclude within 45 days, subject to one 15-day extension upon request by tribe participating in the consultation. With the tribe's consent, the project applicant may participate in the consultation. The exemption requires the local government to include conditions of approval to address effects on tribal resources. In addition to any enforceable agreements reached during consultation, the local government must also require the following measures (unless the tribe and project proponent mutually agree to exclude them): (i) construction site monitoring by the tribe, to be paid for by the applicant, (ii) the avoidance of tribal resources where feasible, and (iii) if resources are discovered during construction, handling them in accordance with certain legal requirements.
3. Hazardous Materials.
The local government must include a condition of approval requiring a Phase I report and, if a recognized environmental condition is found, a preliminary endangerment assessment to determine the existence of any hazardous substance on the site and the potential for exposure of future occupants to significant health hazards. If hazardous materials are present, they must be removed or otherwise mitigated to satisfy current federal and state standards before a certificate of occupancy can be issued.
4. Site and Project Requirements.
To be eligible for the exemption, the project must meet the following requirements:
- Housing Development Project: The exemption is available for all "housing development projects" as defined in Government Code section 65905.5(b), which includes projects consisting of (1) residential units only, whether single-family or multi-family and includes applications for one single-family home, and (2) mixed-used projects meeting certain requirements, (3) transitional housing, and (4) farmworker housing.
- Maximum Site Area: The project site must be no more than 20 acres, except for "builder's remedy projects" as defined in Government Code section 65589.5(h)(11), which must not exceed 5 acres.
- Urban Area: The project site must be located in an incorporated municipality, or an urban area as defined by the U.S. Census Bureau.
- Infill: The project site must meet one of the following criteria: (1) it was previously developed with an urban use, (2) 75 percent or more of the site perimeter adjoins parcels developed with urban uses, (3) 75 percent or more of the area within a quarter-mile of the site is developed with urban uses, or (4) for sites with four sides, three of four sides are developed with urban uses and at least two-thirds of the site perimeter adjoins parcels developed with urban uses.
- General Plan and Zoning Consistency: The project must be consistent with the applicable general plan and zoning ordinance, and any applicable local coastal program, but consistency is determined after accounting for density bonus waivers and concessions/incentives.
- Minimum Density: The project's density is at least one-half of the applicable minimum density required in the housing element law, Government Code section 65583.2(c)(3)(B). For example, to qualify for the exemption a project in a jurisdiction in a metropolitan county must have a density equal to at least one-half of the applicable 30 units per acre standard.
- Historic Resources: The project must not require the demolition of a historic structure that was placed on a national, state, or local historic register before the date of the project's preliminary application.
- No Hotels: No portion of the project may be designated for use as a hotel, motel, bed and breakfast inn, or other transient lodging.
- Additional Site Requirements: The project site must also meet certain SB 35 site requirements; i.e., the site must not be (i) in certain areas of the coastal zone, (ii) on prime farmland, (iii) in wetlands, (iv) in a high fire severity zone, (v) on a hazardous waste site listed on the so-called Cortese list, (vi) in a designated earthquake zone, (vii) in special flood hazard area, (viii) in a designated conservation area, or (ix) on protected habitat.
Conclusion
This new CEQA exemption has the potential to be a game changer for infill residential development. Not only is the exemption broad in its applicability, it is attractive because it comes with fewer developer commitments as compared to other exemptions and streamlining provisions saddled with more onerous requirements. For example, as noted above, the exemption does not require affordable units or proximity to transit and many projects will not have to pay prevailing wages for construction. In addition, with a 20-acre maximum for most projects and no cap on the number of units, this new exemption is one of the broadest CEQA exemptions available to residential developers.
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