California has recently made significant changes in its efforts to tackle housing shortages and environmental regulations with the passage of AB 130 and SB 131. Signed into law by Governor Gavin Newsom on June 30, 2025, these bills fundamentally alter the California Environmental Quality Act (CEQA) to promote housing development.
The Impact of CEQA on Housing Development
Historically, CEQA was intended to safeguard the environment; however, it has often been used to delay or prevent housing projects. Local opposition groups sometimes leverage CEQA lawsuits for this purpose, resulting in:
- Soaring housing costs
- Project delays
- A regulatory bottleneck leading to one of the worst housing crises in the country
Key Changes Introduced by AB 130 and SB 131
The new laws aim to facilitate housing development by implementing several key reforms:
- Time Limits on CEQA Litigation: Lawsuits must be resolved within 270 days for qualifying projects.
- Expanded CEQA Exemptions: More projects near transit and urban areas can bypass comprehensive CEQA reviews.
- Faster Judicial Review: Large-scale developments meeting specific standards will receive expedited treatment.
- Enhanced State Oversight: The Governor’s Office of Planning and Research will have increased authority in local CEQA implementation.
Reasons Behind the Legislative Changes
The urgency for these changes arises from several critical factors, including:
- The need for 2.5 million new homes by 2030
- Pressure on local governments from the Housing Accountability Act and RHNA targets
- Rising living costs and homelessness
- Climate concerns
Ongoing Environmental Compliance
Despite these reforms, developers must still comply with other environmental regulations, including:
- Clean Water Act
- Endangered Species Act
- California Air Resources Board (CARB) Regulations
- California Building Standards Code
- California Housing Accountability Act
- COSO Internal Control Framework for risk and compliance controls
Recommendations for Companies
To navigate this new regulatory landscape successfully, companies should:
- Reassess Project Portfolios: Identify projects that may qualify for exemptions.
- Update Compliance Frameworks: Align policies with new requirements.
- Strengthen Internal Controls: Implement real-time tracking for documentation.
- Enhance Third-Party Oversight: Review vendor contracts to ensure compliance.
- Train Staff: Educate teams on new CEQA protocols.
- Engage Legal Counsel Early: Seek legal advice on project eligibility for exemptions.
- Monitor Regulatory Updates: Stay informed on any future amendments.
Conclusion
These reforms not only present challenges but also opportunities for cities and developers. Rapid and responsible adaptation can unlock new housing pipelines while balancing environmental stewardship. The spotlight is now on California as it seeks to become a model for sustainable development in the housing sector.
