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.
