The Biggest Rewrite of California’s Environmental Law in Fifty Years Just Happened, and More Is Coming
For most of its history, the California Environmental Quality Act has been one of the most powerful tools available to anyone who wants to slow down, condition, or stop a development project. Enacted in 1970, CEQA requires public agencies to study and disclose the environmental effects of projects they approve, and it has long given opponents of a project a legal avenue to challenge that approval if the environmental review was inadequate.
In 2025, that landscape changed more dramatically than it has in decades. On June 30, 2025, Governor Newsom signed two budget trailer bills, AB 130 and SB 131, into law. Described by the Governor’s office as the most significant overhaul of California’s housing and environmental review laws in decades, both bills took effect immediately. Months later, additional reforms followed. And on the horizon for November 2026, California voters may be asked to approve the most far-reaching CEQA restructuring yet attempted, a ballot initiative that has already drawn intense opposition from environmental groups.
This article walks through what actually changed in 2025, what additional reform is pending or proposed for 2026, and what property owners, developers, and anyone navigating the California permitting process needs to understand about where CEQA stands today.
What CEQA Has Required for More Than Fifty Years
Before getting into what changed, it helps to understand what CEQA does in its traditional form.
CEQA requires that before a California public agency approves a project, it must evaluate whether the project may have a significant effect on the environment. If it might, the agency generally must prepare an Environmental Impact Report, a detailed study examining the project’s potential impacts and identifying ways to avoid or reduce them. For projects without significant impacts, or where impacts can be mitigated to a level of insignificance, an agency may instead prepare a less involved Negative Declaration or Mitigated Negative Declaration.
CEQA also created a body of categorical exemptions, types of projects presumed not to have a significant environmental effect, which can proceed without an EIR or Negative Declaration. But these categorical exemptions, created through regulation rather than statute, are subject to exceptions. A common strategy for project opponents has been to argue that a project involves “unusual circumstances” that disqualify it from an otherwise applicable categorical exemption, forcing full environmental review regardless.
This combination, the EIR requirement, the exception-laden categorical exemptions, and CEQA’s private right of action allowing lawsuits over inadequate environmental review, has made CEQA both an essential tool for environmental protection and, according to its critics, a significant contributor to California’s housing shortage and infrastructure delays.
What Changed on June 30, 2025: AB 130 and SB 131
AB 130 and SB 131 were enacted as part of the 2025-2026 state budget, which allowed Governor Newsom to bypass the standard legislative process that has historically watered down similar CEQA reform efforts. Both took effect immediately upon signing.
AB 130 created a new statutory exemption for housing-rich infill projects. Codified as Section 21080.66 of the Public Resources Code, this exemption is broader than the existing “Class 32” categorical exemption that has been the standard pathway for housing developments unable to meet prevailing wage or below-market-rate requirements under laws like SB 35 and AB 2011. The critical distinction is that AB 130’s exemption is statutory rather than regulatory. Categorical exemptions promulgated as regulations are subject to disqualifying exceptions, including the “unusual circumstances” argument that has been a favored tool of project opponents. A statutory exemption is not subject to those same exceptions, giving qualifying projects a much more firmly defensible bar from CEQA review.
To qualify, a project must generally be located on a site under 20 acres (or five acres for “builder’s remedy” projects), situated within an incorporated municipality or urban area as defined by the U.S. Census Bureau, and meet other infill, zoning, and site-suitability requirements. Hospitality uses such as hotels and motels do not qualify.
On labor standards, AB 130 imposes no new Below Market Rate affordable housing requirements as a general matter, and most projects under 85 feet face no new prevailing wage requirements, a departure from other recent housing streamlining laws. However, this is not unconditional: 100% affordable housing projects must pay prevailing wages regardless of height, and projects of 50 or more units in San Francisco are subject to additional labor standards regardless of height. Projects over 85 feet must also meet prevailing wage and “skilled and trained” workforce requirements.
AB 130 also imposes a new 30-day deadline for agencies to approve or disapprove a qualifying project once a tribal consultation process concludes. This is a significant departure from the existing Permit Streamlining Act, which only obligates an agency to act once it determines CEQA review is complete, a determination agencies have historically had considerable discretion over.
SB 131 narrowed the consequences for projects that nearly qualify for an exemption. Previously, if a project failed to meet the requirements for a CEQA exemption, even on a single technical point, the project could lose the exemption entirely and become subject to full CEQA review covering all of its potential impacts. Under SB 131, CEQA review for a project that narrowly fails to qualify for an exemption is now limited to the environmental effects caused specifically by the condition that precluded the exemption’s applicability. The rest of the project’s impacts, the ones that would have been exempt, remain outside the scope of review.
Both bills also include additional provisions, including exemptions for Housing Element rezonings and changes to how Vehicle Miles Traveled analysis is conducted, reflecting just how broad this legislative package was.
What Followed: SB 71 and SB 79
The 2025 reform activity did not stop with AB 130 and SB 131.
SB 71, signed October 13, 2025, broadened CEQA exemptions for transit projects. It newly exempts “transit comprehensive operational analysis,” meaning plans that redesign or modify a public transit service network, including the introduction or expansion of microtransit, paratransit, shuttle, and ferry services. It also expanded exemptions for “transit prioritization projects” such as bus shelters, lighting, wayside technology installation, and conversion of public roadways to dedicated transit lanes, along with pedestrian and bicycle safety improvements and parking-reduction planning decisions. SB 71 extended the CEQA exemption for projects used exclusively by zero-emissions vehicles, rail, cable cars, or vessels through January 1, 2040, and for near-zero-emission and hybrid vehicle projects through January 1, 2032.
SB 79, also signed in October 2025 and taking effect July 1, 2026, addresses housing development near transit. While SB 79 does not amend CEQA directly or create a new exemption, it has significant practical CEQA implications. At minimum, eligible projects must include at least five dwelling units, achieve a density of at least 30 dwelling units per acre or the local minimum if higher, and keep average unit size under 1,750 net habitable square feet, but this baseline figure understates how far the tiered system actually goes. Within one-quarter mile of a Tier 1 transit-oriented development stop, served by heavy rail or very high-frequency commuter rail, local governments cannot impose height limits below 75 feet or density maximums below 120 dwelling units per acre, four times the baseline figure. SB 79 also provides an “adjacency intensifier” for sites immediately adjacent to a qualifying stop, adding a further 20 feet of height, 40 dwelling units per acre of density, and 1.0 to the allowable floor area ratio. Qualifying transit-oriented housing projects are also eligible for streamlined ministerial approval under Government Code Section 65913.4. Because ministerial approvals are generally exempt from CEQA entirely, projects that qualify under SB 79 may proceed without project-level environmental review at all. SB 79 also provides that local zoning ordinances adopted solely to bring jurisdictions into compliance with the statute are not themselves considered “projects” under CEQA, meaning jurisdictions can implement these zoning changes without triggering CEQA review of the zoning change itself.
What’s on the Horizon for 2026: A Ballot Measure That Could Reshape CEQA Again
The most consequential CEQA development for 2026 is not moving through the legislature at all. It is headed for the ballot.
The California Chamber of Commerce filed the Building an Affordable California Act, known as BACA, with the California Attorney General in October 2025. The initiative proposes a new environmental review and permitting framework for projects designated as “essential,” a category that would include housing, water systems, clean energy infrastructure, broadband, public safety facilities, and wildfire resilience projects. Under BACA, public agencies would be required to determine whether an application is complete within 30 days, with applications automatically deemed complete if the agency fails to act. Judicial review of environmental documents for essential projects would be required to be filed within 30 days and resolved within 270 days, and an Environmental Impact Report’s alternatives analysis would be limited to one applicant-developed alternative plus the no-project alternative.
The Legislative Analyst’s Office and an independent research group reviewed the proposal and found it could deliver a multibillion-dollar boost to the state’s economy. The initiative is on track to appear on the November 3, 2026 statewide ballot.
The measure is not without controversy. Critics, including environmental advocacy organizations, have characterized the initiative as a significant rollback of environmental review, noting that the broad definition of “essential projects” could extend the streamlined framework well beyond the kinds of projects most associated with the housing shortage, potentially including large-scale subdivisions, industrial facilities, and major infrastructure such as dams, desalination plants, and freeways. The breadth and uncertainty of the “essential projects” definition has also drawn scrutiny from legal commentators, who note that without further clarification, the measure’s shortened review and litigation timelines could create new procedural challenges of their own, potentially overwhelming courts handling a much larger volume of accelerated CEQA litigation.
AB 1083, by contrast, represents the opposite direction. Currently pending in the legislature, AB 1083 would narrow the CEQA exemptions for advanced manufacturing that SB 131 recently established, introduce additional administrative record requirements for agencies, and expand protections for environmentally sensitive lands. The bill also proposes a new initial screening process for tribal consultation, including early coordination between lead agencies and affected tribes to identify and mitigate potential impacts before project approval. AB 1083 illustrates that the reform conversation in California is not moving in a single direction. While AB 130, SB 131, SB 71, SB 79, and BACA all generally streamline or exempt projects from CEQA review, AB 1083 would tighten procedural requirements and expand protections in specific areas.
What This Means If You’re a Property Owner or Developer in California
For anyone with a current or planned project in California, the practical implications of this reform wave depend heavily on the type of project and its location.
Housing-rich infill projects that may previously have struggled with the “unusual circumstances” exception to the Class 32 categorical exemption now have access to a statutory exemption under AB 130 that is not subject to that same vulnerability. Projects that fall just short of qualifying for an exemption under SB 131 face a meaningfully narrower scope of CEQA review than they would have before, limited to the specific condition that disqualified them rather than the project as a whole. Transit, transportation, and zero-emission infrastructure projects have access to broadened and extended exemptions under SB 71. Housing development near transit stops may, under SB 79, bypass project-level CEQA review entirely through the ministerial approval pathway, once the law takes effect on July 1, 2026.
At the same time, none of this means CEQA has disappeared, or that every project now proceeds without environmental review. The exemptions and streamlined pathways created by these laws have specific, detailed eligibility criteria. Whether a given project actually qualifies, and whether an agency’s determination that it qualifies is defensible, remains a fact-specific legal question. And for projects that don’t fall within any of these new categories, the traditional CEQA framework, EIR or Negative Declaration requirements and the litigation risk that comes with them, remains fully in place.
The reform landscape is also, by definition, unsettled. BACA, if approved by voters in November 2026, would introduce an entirely new and substantially different framework for “essential projects” running alongside the existing CEQA structure created and modified by AB 130, SB 131, SB 71, and SB 79. AB 1083, if enacted, would add new procedural requirements in specific areas even as other reforms streamline review elsewhere. Property owners and developers evaluating projects in this environment are navigating a CEQA landscape that looks substantially different from the one that existed at the start of 2025, and one that may look different again by the end of 2026.
Where CEQA Reform Intersects With Property Rights
CEQA reform is fundamentally about the relationship between environmental review and the right to develop private property, and that relationship has long been a central theme in California land use and property rights law.
For decades, CEQA review has been one of the procedural mechanisms through which government agencies, and project opponents using CEQA litigation, could delay or condition development on private land. The Environmental Law practice at Kassouni Law has represented private property owners and businesses navigating exactly this kind of government over-regulation, including CEQA-related delays that affect the value and usability of private property. The firm’s published work on the cost of regulatory delay reflects a consistent theme: when government processes, whether environmental review, permitting, or land use approval, impose costs on private property owners that go beyond what is proportional or justified, those costs raise questions that extend into constitutional property rights law.
The streamlining reforms of 2025 and the reform proposals on the horizon for 2026 represent a significant shift in how those questions will be litigated and resolved going forward. Whether a project qualifies for one of the new statutory exemptions, whether an agency’s CEQA determination is defensible under the new framework, and how the broader CEQA landscape continues to evolve are all questions that property owners and developers in California will need to navigate as this reform period continues to unfold.
The Land Use Law practice at Kassouni Law addresses the permitting, development, and zoning issues that sit at the intersection of these CEQA reforms and the practical process of getting a project approved in California.
Frequently Asked Questions
What is CEQA and why does it matter for development in California?
The California Environmental Quality Act, enacted in 1970, requires public agencies to study and disclose the environmental effects of projects before approving them. If a project may have a significant environmental effect, the agency generally must prepare an Environmental Impact Report. CEQA also allows lawsuits challenging inadequate environmental review, which has made it both a significant environmental protection tool and, according to critics, a major source of delay and cost in California development, particularly housing.
What did AB 130 and SB 131 change about CEQA in 2025?
AB 130 and SB 131, signed into law on June 30, 2025 as part of the state budget, took effect immediately and represent the most significant CEQA changes in decades. AB 130 created a new statutory exemption, codified as Public Resources Code Section 21080.66, for housing-rich infill projects that is not subject to the “unusual circumstances” exceptions that apply to regulatory categorical exemptions, and imposed a new 30-day deadline for agencies to act on qualifying projects once tribal consultation concludes. Most projects under 85 feet face no new wage standard requirements under AB 130, but 100% affordable housing projects must pay prevailing wages regardless of height, and projects of 50 or more units in San Francisco face additional labor standards regardless of height. SB 131 limited the scope of CEQA review for projects that narrowly fail to qualify for an exemption, restricting review to only the specific condition that disqualified the project rather than the project’s impacts as a whole.
Are there more CEQA reforms coming in 2026?
Yes. The most significant pending development is the Building an Affordable California Act, a ballot initiative filed by the California Chamber of Commerce that is on track to appear on the November 2026 statewide ballot. It would create a new streamlined review and permitting framework for projects designated as “essential,” including housing, water systems, clean energy, and infrastructure. Separately, Assembly Bill 1083, currently pending in the legislature, would move in the opposite direction by narrowing certain CEQA exemptions established by SB 131 and adding new administrative and tribal consultation requirements.
Does the Building an Affordable California Act eliminate CEQA?
No. BACA would create a new, additional review and permitting framework specifically for projects it designates as “essential,” running alongside the existing CEQA structure as modified by AB 130, SB 131, SB 71, and SB 79. Projects that qualify as “essential” would be subject to the new framework’s streamlined timelines and limited litigation review, while CEQA in its current and recently reformed form would continue to apply to projects outside that category. The definition of “essential projects” in the initiative is broad, and its precise scope has been a focus of debate among supporters and critics.
It is also worth noting that even where CEQA review itself is bypassed, exemption does not necessarily mean a project is free of environmental conditions altogether. AB 130’s infill exemption, for example, still requires that qualifying housing within 500 feet of a freeway incorporate enhanced air filtration and ventilation systems and avoid freeway-facing balconies, conditions that mirror the kind of mitigation measures CEQA review would otherwise impose, built directly into the statute itself. “Exempt from CEQA” and “no environmental requirements at all” are not the same thing.
How do these CEQA reforms affect property owners who are not developers?
Even property owners who are not actively developing may be affected by these changes, particularly where neighboring projects, zoning changes, or transit-oriented development near their property are involved. SB 79, for example, affects zoning standards near transit stops that could influence what can be built nearby. More broadly, CEQA review and litigation have historically been one of the mechanisms through which government decisions affecting private property are made, challenged, or delayed, and changes to that framework can affect how quickly and predictably property-related government decisions are reached. Where CEQA-related delays or agency decisions raise broader questions about how government regulation affects private property rights, Kassouni Law addresses these issues as part of its environmental law and constitutional property rights practice.
This article is for informational purposes only and does not constitute legal advice. No attorney-client relationship is created by reading this content. Contact Kassouni Law for a consultation regarding your specific situation.
