This is our third update on the important changes in the two budget trailer bills, AB 130 and SB 131, after previous posts addressing the new CEQA exemption for infill housing and the “near miss” CEQA streamlining process. While the first two posts covered the most significant changes, the legislation also introduced changes to the mitigation options for vehicle miles traveled (VMT), additional focused CEQA exemptions, and other amendments to land use processes.

New VMT Payment as Mitigation Option

SB 743, enacted in 2013, directed that CEQA’s analysis of transportation impacts no longer study intersection “level of service,” or congestion, and instead study VMT, a requirement that finally went into effect on July 1, 2020. The topic has been challenging for many projects, especially outside of transit-rich urban areas and projects that do not fit into residential, office, or retail categories. The ruling in Cleveland National Forest Foundation v. County of San Diego (2025) 110 Cal.App.5th 948 created additional uncertainty by rejecting locally adopted thresholds that “screened out” infill and smaller projects because the City relied on generalized assumptions rather than location specific evidence. While the court acknowledged that SB 743 was intended to promote infill development, it found that infill development does not by definition have a less than significant VMT impact. AB 130 creates a new funding regime allowing projects to mitigate their VMT impact, at the lead agency’s discretion, by paying a fee to fund transit-oriented development and affordable housing.

The fees will be deposited into a fund administered by the Department of Housing and Community Development (HCD) that will fund VMT reducing projects, including “affordable housing or related infrastructure projects, including infrastructure necessary for higher density uses.”

The theory is that this option will make mitigating VMT impacts predictable and feasible. However, AB 130 does not specify the amount of the fee, nor does it confirm whether payment of the fee will fully mitigate project impacts. The Governor’s Office of Land Use and Climate Innovation (LCI, previously the Office of Planning and Research) is required to issue initial guidance for using this new mitigation by July 1, 2026 that will set forth the following details:

• Methodology for determining the amount of the fee;
• Definition of “location-efficient areas” that reflects a reasonable nexus between the transportation impact of the development project and the location of the project to be funded as mitigation;
• Process for validating that the fee satisfies mitigation requirements for significant transportation impacts; and
• Methodology for estimating the anticipated reduction in VMT resulting from payment of the fee.

LCI is required to issue subsequent guidance at least once every three years, which includes starting the rulemaking process for any subsequent guidance by January 1, 2028.

The unresolved issues that LCI is directed to resolve are challenging, and critical to whether the mitigation is a feasible and predictable option to address VMT. When LCI starts the official rulemaking process, it will include opportunities for developers and other interested parties to provide input. Developer input may be critical to making the program workable.

Additional CEQA and Land Use Amendments

In addition to the topics we’ve written about before and above, the two bills also provide a number of significant changes:

• Legislative Intent of CEQA: SB 131 clarifies the legislative intent that CEQA is primarily an environmental safeguard that should not be used for reasons unrelated to environmental protection (e.g., economic leverage, competition, or to delay projects). While this intent language does not change CEQA requirements, it will be an important tool in litigation regarding whether a CEQA petitioner is using the litigation to pursue an improper, non-environmental purpose.
• Coastal Commission Appeals: AB 130 narrows the type of residential projects that can be appealed to the Coastal Commission.
• Removal of Sunset Dates: A number of important provisions in 2019’s SB 330 had sunset dates, which were originally set for January 1, 2025, and which were later extended until January 1, 2034. AB 130 eliminates several of these sunset dates entirely, including: the “vesting” provided by submittal of a preliminary application; limiting the number of hearings to five; requiring that historic properties are identified up front; and prohibiting enacting policies that are more restrictive to housing in areas already zoned for housing.
• Housing Element Rezoning Exemption: SB 131 creates a new statutory exemption that exempts from CEQA certain rezonings that implement a schedule of actions in an approved housing element.
• Advanced Manufacturing Exemption: SB 131 also creates a statutory exemption for projects consisting exclusively of “advanced manufacturing” facilities, as defined in Public Resources Code section 26003, when located on sites zoned exclusively for industrial uses and not located on certain “natural and protected lands” as defined in Public Resources Code section 21067.5.
• Administrative Record: SB 131 narrows the scope of the administrative record contents for CEQA litigation by excluding staff notes, memoranda related to the project or CEQA compliance, and other internal agency communications (unless the project includes certain distribution centers or oil-and-gas infrastructure). Compiling the administrative record can be one of the more time consuming steps in CEQA litigation, so this is an important reform.
• Temporary Freeze on Local Agency Modifications to Building Codes: Effective October 1, 2025, through June 1, 2031, AB 130 bars cities or counties from establishing more restrictive building standards, including green building standards, applicable to residential units, unless limited exceptions apply.
• Urban Infill Mapping: SB 131 tasks LCI with posting, by July 1, 2027, a statewide online map of “eligible urban infill sites” in every Census-defined urbanized area or cluster, which may qualify for infill-based exemptions or streamlining.

This list is not exhaustive, but it is indicative of the extensive adjustments the Legislature has made to remove barriers for housing and other prioritized development projects. The Coblentz Real Estate Team has extensive experience with the state’s latest land use laws and can help to navigate their complexities and opportunities. Please contact us for additional information and any questions related to the impact of this legislation on land use and real estate development.

By Miles Imwalle, Megan Jennings, and Alyssa Netto

Following up on our earlier coverage of the new California Environmental Quality Act (CEQA) exemption passed as part of budget trailer bill AB 130, another significant CEQA pathway was created through its companion legislation, SB 131. Among other things, SB 131 includes a new CEQA process that limits the environmental review required for “near-miss” housing development projects—those projects that meet all criteria for a CEQA exemption, except for a single disqualifying condition. Specifically, the environmental review in these instances is restricted to analyzing impacts stemming exclusively from the single condition that disqualifies the project from receiving a statutory or categorical exemption.

Which exemptions form the basis for “near-miss” streamlined review?

Housing development projects may qualify for streamlining if they meet all but one condition for the following exemptions:

• Any statutory exemption, including the new exemption for housing development projects created by AB 130
• Certain categorical exemptions, including in-fill development projects, as follows:
  • Class 1: Existing Facilities
  • Class 2: Replacement or Reconstruction
  • Class 3: New Construction or Conversion of Small Structures
  • Class 4: Minor Alterations
  • Class 5: Minor Alterations in Land Use Limitations
  • Class 12: Surplus Government Property Sales
  • Class 15: Minor Land Divisions
  • Class 20: Changes in Organization of Local Agencies
  • Class 27: Leasing New Facilities
  • Class 30: Minor Actions to Prevent, Minimize, Stabilize, Mitigate, or Eliminate the Release or Threat of Release of Hazardous Waste or Hazardous Substances
  • Class 32: In-fill Development Projects

Which projects qualify?

This process is only available for “housing development projects” as defined under the Housing Accountability Act. This definition includes mixed-use projects, which typically means that two-thirds of the square footage must be dedicated to residential use (although for projects with over 500 units, this is reduced to 50% and can be less for certain redevelopment projects). Projects must also meet the following conditions:

• Must not include a distribution center
• Must not include oil and gas infrastructure
• Must not be located on specified natural or protected lands
• Must be “similar in kind” to projects described in the exemption

What constitutes a “condition” for purposes of nearly missing an exemption?

SB 131 defines a “condition” as a physical or regulatory feature of the project or its setting or an effect upon the environment caused by the project. The “effect on the environment” category is a familiar concept that should be straightforward to implement. For example, the Class 32 infill exemption requires that projects not have certain impacts, such as to traffic, noise, or air quality; an impact in one of those categories would be a “condition” that disqualifies a project from using the exemption. The exceptions under CEQA Guidelines Section 15300.2 that bar the use of all categorical exemptions in certain situations, such as when there are impacts to historical resources, would also be familiar “conditions” that relate to environmental impacts.

The term “condition” is broader, as it also includes “physical” or “regulatory” features of the project or the “setting,” which are new concepts. For example, the Class 32 exemption has a 5-acre limit, so if a project’s size is the one reason it does not qualify for the exemption, that would qualify as the single physical “condition.” Or the AB 130 statutory exemption prohibits hotels; including a hotel within a mixed-use project that otherwise meets the definition of a housing development project would likely qualify as a single “condition.” But qualifying conditions are limited by the other requirement that projects must be “similar in kind” to those described in the exemption. Presumably that language was added so that projects could not point to a totally unrelated exemption as the basis for streamlining (as an extreme example, using the Olympic Games statutory exemption, and claiming the one disqualifying “condition” is not being the Olympic Games).

What type of environmental analysis is required?

An initial study or environmental impact report must be prepared, but it is only required to examine impacts resulting solely from the disqualifying condition. If an EIR is necessary, it need not address project alternatives or growth-inducing impacts, which would typically be included in an EIR.

The scope and depth of analysis required will vary depending on the nature of the disqualifying condition. When the condition is an impact on the environment, such as impacts to air quality or historical resources, or the “unusual circumstances” exception to categorical exemptions, the review would focus only on these environmental issues and because the “condition” is an environmental impact, how to conduct that analysis would be relatively straightforward. The result would be a narrow environmental analysis that could be completed more quickly and would generally be more legally defensible because it would cover a single topic.

However, if the disqualifying condition is not due to an environmental impact, but instead is “physical” or “regulatory” or relates to the “setting,” how to conduct the analysis may be less straightforward. For example, the new AB 130 exemption has a maximum project size of 20 acres, and minimum residential density requirements. It is unclear how to analyze the impacts caused solely by a project being 21 acres instead of 20, or having insufficient density. Or infill projects sometimes meet the criteria for a Class 32 exemption but for the fact that they are located outside of city limits; it is unclear how to address the impacts caused solely by lying in an urbanized but unincorporated area. In practice, the answer may often be that these kinds of conditions do not cause any unique environmental impacts, and the resulting initial study may be brief.

While this “near-miss” streamlined review is promising, and should help to avoid some full-blown EIRs for projects that are otherwise close to qualifying for an exemption, it creates a new process and raises questions that will require careful consideration for individual projects.

By Miles Imwalle and Megan Jennings

Governor Gavin Newsom signed two budget trailer bills on June 30, 2025, enacting the most substantial reforms to the California Environmental Quality Act (CEQA) in over five decades—most significantly by introducing a new statutory exemption for infill residential projects, although there are other changes to CEQA that apply to additional types of projects.

Assembly Bill 130 and Senate Bill 131 were adopted on the last day of the 2024-25 fiscal year after the Governor made it clear he would not approve the budget without meaningful CEQA reforms. Although the final legislation moved quickly, the bills drew heavily from earlier proposals by Senator Scott Weiner (SB 607) and Assemblymember Buffy Wicks (AB 609), respectively, to streamline review for infill housing and other priority projects. (See our earlier coverage of those bills here).

While not the sweeping “rollback” of environmental review that some sources have claimed, the legislation will undoubtedly smooth the road for approval for certain kinds of development, particularly infill housing. Below, we focus on the criteria for using the new exemption for housing development projects in AB 130, and a subsequent post will address other CEQA reforms in both bills.

How Do I Know if my Housing Project Qualifies for the New CEQA Exemption?

To qualify for the new CEQA exemption, a housing development project must meet all of the following conditions (codified at Public Resources Code section 21080.66):

Size & Location:

• No larger than 20 acres (5 acres for “builder’s remedy” projects)
• Located within an incorporated city or urbanized area
• Site was either previously developed with urban use or substantially surrounded by urban uses
• Not located on certain sensitive sites, such as certain sites in the coastal zone, fire hazard zones, and sites with certain natural resource features, among others

Land Use Compatibility:

• Must be consistent with the general plan and zoning ordinance, or if the general plan and zoning ordinance are not consistent with one another, consistency with either one (not necessarily both) is sufficient
• Use of density bonus waivers or concessions does not make the project inconsistent with zoning or the general plan

Density and Use Characteristics:

• Must be at least 50% of the applicable density identified in Government Code section 65583.2(c)(3)(B); this equates to a density of between 5 and 15 units per acre, depending on how urbanized the jurisdiction is
• May be fully residential or mixed use, as defined in Government Code section 65589.5(h); this generally requires two-thirds of the square footage to be dedicated to residential, but this can be reduced to 50% for projects with at least 500 units

Development Features:

• No demolition of any structure listed on a historic register before the preliminary application was submitted
• No part of the project may be used as a hotel, motel, or for transient lodging (with exceptions for residential hotels and post-occupancy short-term rentals)
• Generally, no ongoing releases of hazardous substances that could cause significant health hazards for future occupants (see discussion below regarding Phase I Environmental Site Assessment)
• For projects within 500 feet of a freeway, particular air quality management requirements apply

Will any Labor Requirements Apply to my Project?

Only projects that meet any of the criteria listed below are subject to labor requirements; there are no labor standards for other projects.

Projects Subject to Prevailing Wage Requirements:

• Projects where 100% of the units are affordable to lower-income households
• Buildings over 85 feet above grade; must also comply with health care and “skilled and trained” workforce requirements of Government Code section 65913.4(a)(8)
• San Francisco projects of 50 units or more, for certain construction crafts

Enforcement:

• If a subcontractor or lower-tier contractor fails to pay workers properly on a CEQA-exempt housing project, the developer can now be held liable for those unpaid wages, pursuant to Labor Code section 218.8
• Joint labor-management cooperation committees may enforce compliance through court actions

Are There any new Procedural Requirements?

The legislation includes two unique procedural requirements for all projects using the new exemption, beyond the typical procedure for a statutory exemption:

Consultation with Native American Tribes:

• Local governments must formally notify all California Native American tribes traditionally and culturally affiliated with the site, within 14 days of the application being deemed complete (or for projects deemed complete before July 1, 2026, within 14 days of the lead agency being notified that the project qualifies for the exemption)
• Tribes have 60 days to accept the invitation to consult; if no response is received, the consultation is deemed waived
• If consultation is requested, it must start and conclude on a specified timeline
• Unless mutually waived, certain conditions must be included in project approvals, including tribal monitoring, treatment of discovered resources, and adherence to appropriate tribal cultural protocols

Phase I Environmental Site Assessment:

• All projects must complete a Phase I Environmental Site Assessment as a condition of approval, and must take appropriate steps to address releases of hazardous substances as warranted by that analysis

Because AB 130 and SB 131 were adopted as part of the budget process, they became effective immediately upon the Governor’s signature.

While the legislation is complex and contains many new conditions that will require fact-specific interpretation, we do expect that many projects will qualify. This is a meaningful change in the law that promises to remove CEQA as a barrier to the approval of many housing projects. Developers should work closely with land use counsel to ensure compliance with all statutory criteria and procedural obligations.