Highlights
- California Gov. Gavin Newsom signed into law Assembly Bill (AB) 130 and Senate Bill (SB) 131, which contain significant reforms to the California Environmental Quality Act (CEQA) relevant to housing projects. These reforms took effect immediately on June 30, 2025.
- AB 130 exempts qualifying "infill" housing-rich projects from CEQA, with no wage standard requirements for projects up to 85 feet. It also imposes a new 30-day deadline for agencies to act to approve or disapprove qualifying projects, which is a significant change from current law.
- SB 131 constrains CEQA review for housing projects that narrowly fail to qualify for a CEQA exemption. CEQA review for such projects is now limited to the environmental effects caused by the condition that precluded applicability of the exemption.
- It is highly recommended that project applicants with potentially qualifying projects consider whether they can benefit from these changes in law.
California Gov. Gavin Newsom signed into law Assembly Bill (AB) 130 and Senate Bill (SB) 131, which contain among the most significant California Environmental Quality Act (CEQA) revisions in recent history. The legislation reflects a high-stakes effort by Gov. Newsom to bypass the normal legislative process that has seen similar reforms watered down in recent years.
In notable contrast to recently enacted CEQA exemptions, neither law imposes new Below Market Rate (BMR) affordable housing requirements as prerequisites for applicability, nor do they impose new wage requirements on projects less than 85 feet in height.
The new laws took effect immediately upon the governor's signature June 30, 2025. It is highly recommended that project applicants with potentially qualifying projects – including housing projects currently undergoing CEQA review – consider whether they can benefit from these changes in law.
Both statutes contain additional reforms – including exempting Housing Element rezonings from CEQA, and provisions related to Vehicle Miles Travel (VMT) analysis – which Holland & Knight plans to cover in future analyses. The purpose of this alert is to focus on two provisions that create a new CEQA exemption for qualifying projects and a reform to the way CEQA review will be conducted for projects that narrowly miss qualifying for an applicable exemption.
AB 130: "Clean" CEQA Exemption for Housing-Rich Infill Projects
AB 130 incorporates the substance of Assemblymember Buffy Wicks' AB 609, which exempts qualifying housing-rich "infill" projects from CEQA.1 The bill is similar to, but much broader than, the "Class 32" categorical exemption from CEQA, which is currently the go-to exemption for housing developments that cannot meet the high prevailing wage or BMR housing requirements imposed by such laws as SB 35 and AB 2011. CEQA categorical exemptions (including Class 32) are promulgated as state regulations rather than statutes and are subject to disqualifying "exceptions" to the exemption. A common tactic of housing opponents has been to argue that a project involves "unusual circumstances" and, therefore, an environmental document must be prepared (e.g., Mitigated Negative Declaration or Environmental Impact Report). AB 130, by contrast, is a statutory exemption that creates a much more firmly defensible bar from CEQA not subject to disqualifying "exceptions." California courts have consistently upheld lead agencies' reliance on statutory exemptions as long as substantial evidence exists that a project meets all qualifying criteria.
Although AB 130 does not create a specific ministerial approval duty upon localities, it does impose a 30-day deadline for agencies to act to approve or disapprove a qualifying project, which commences when a specified Tribal consultation process is complete. Under the law, local governments must offer to consult with Tribes within 14 days of a "complete" application. But unlike other Tribal consultation processes, AB 130 specifies timelines within which consultation must conclude. Consultation is complete if no Tribe requests consultation within 60 days or, if any consultation is requested, within approximately 135 days. At the conclusion of this time frame, the agency's 30-day deadline to act commences. This newly created deadline to act on an application is a significant departure from the current Permit Streamlining Act, which imposes a duty upon an agency to act only once the agency agrees that CEQA review is complete, leaving numerous projects in CEQA limbo.
AB 130's CEQA exemption applies to housing-rich development projects that meet the following criteria:
- The project site is no more than 20 acres (or five acres for "Builder's Remedy" projects). This is a significant improvement upon the five-acre limit imposed by the Class 32 "categorical" exemption.
- The project site is within the boundaries of an incorporated municipality or "urban area" as defined by the U.S. Census Bureau.
- The project site was previously developed with "urban uses" or is substantially surrounded by sites developed with urban uses. There are several different ways of satisfying this requirement that create more flexibility than prior "infill" exemptions. 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" can qualify as an "urban use."
- The project is consistent with local zoning standards, applicable general plan standards and any applicable local coastal program, subject to deviations allowed by the State Density Bonus Law.
- The project's density must be at least 50 percent of the jurisdiction's "Mullin density," which ranges from 10 units to 30 units per acre, depending on the jurisdiction.
- The project will not require demolition of a historic structure that was placed on a historic register before the project's preliminary application was submitted.
- For projects submitted after Jan. 1, 2025, no portion of the project will be used as a hotel, motel, or bed and breakfast.
- All project sites must satisfy SB 35's site eligibility criteria to access the exemption (farmland, wetlands and conservation/species habitat areas are excluded, and coastal sites, fire hazard zones, hazardous waste sites, earthquake fault zones and flood areas are subject to specified restrictions).
- Projects within 500 feet of a freeway must meet additional air filtration and air quality requirements to qualify for the exemption and cannot have balconies facing a freeway.
- Projects must complete a Phase I environmental assessment and mitigate any Recognized Environmental Conditions identified by the assessment.
Notably, for most projects up to 85 feet in height, there are no wage requirements needed to access this exemption. Projects that exceed 85 feet in height must meet SB 35/SB 423's prevailing wage requirements, with additional "skilled and trained workforce" requirements applicable if a prime contractor receives at least three bids for construction work that can meet the "skilled and trained workforce" requirement. However, 100 percent affordable projects must pay construction workers prevailing wage. Further, projects in San Francisco that propose 50 or more units must satisfy higher labor standards.
Importantly, although AB 130 does not impose specific wage requirements upon projects under 85 feet, invoking the exemption does impose new potential liability upon development proponents for unpaid wages. A development proponent – not just the contractors on the project - can be held liable for unpaid wages owed to workers, pursuant to Labor Code section 218.8. Compliance can be enforced in court by joint labor-management cooperation committees.
AB 130 does not specifically require the provision of affordable housing to access the CEQA exemption (although some affordable housing may be required to satisfy the local government's inclusionary standards, subject to Density Bonus Law modifications).
AB 130's CEQA exemption for infill housing is effective immediately. As such, it is highly recommended that potentially qualifying projects currently undergoing CEQA review immediately consider whether those projects qualify for AB 130's provisions. The new CEQA exemption may still require a detailed analysis of the project and the project site. Please reach out to Holland & Knight's West Coast Land Use and Environmental Group for assistance
SB 131: Constrained CEQA Review for Housing-Rich Projects That Narrowly Fail to Qualify for a CEQA Exemption
SB 131, which incorporates many key provisions from Sen. Scott Wiener's SB 607, constrains CEQA review for projects that narrowly fail to qualify for a CEQA exemption (including AB 130's new statutory exemption for infill housing). Under SB 131, if a housing project would qualify for a CEQA exemption "but for a single condition" of that exemption, CEQA review for the housing project is limited to environmental effects caused by that single condition. Thus, the initial study or environmental impact report for these "near-miss" projects is only required to examine environmental effects that are caused "solely" by the presence of the single condition that precluded qualification. Further, environmental impact reports for these "near-miss" housing projects are not required to include any discussion of alternatives to the project or of the growth-inducing impacts of the project.
SB 131's "near-miss" streamlined review does not apply to housing projects that:
- are "not similar in kind" to projects that typically qualify for the exemption
- fail to satisfy a CEQA exemption due to the presence of two or more conditions
- include a distribution center
- include oil or gas infrastructure
- are on natural and protected lands
As with AB 130, SB 131's provisions are effective immediately. As such, for project applicants whose projects narrowly failed to qualify for a CEQA exemption, it is highly recommended to review these provisions and determine whether those projects are now entitled to narrower CEQA review.
Footnote
1. A project can qualify for the exemption if at least two-thirds of its square footage is devoted to residential use. Other large mixed-use projects may also qualify depending upon the specific features of the site and the project.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
