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.