California Legislature Enacts Significant Revisions To CEQA

On June 30, 2025, Governor Newsom signed Assembly Bill 130 (AB 130) and Senate Bill 131 (SB 131), two budget trailer bills that significantly modify the California Environmental Quality Act (CEQA), effective immediately. The information outlined below focuses on CEQA-specific provisions of AB 130 and SB 131, but the bills also make substantial changes to State housing law.

AB 130

AB 130 creates a new statutory CEQA exemption for qualifying housing development projects that are 20 acres or less in size (or, in the case of a builder’s remedy project site, five acres or less) and meet all of the following criteria:

Are located in an incorporated city or urban area, and either previously developed or surrounded by urban uses;
Are consistent with applicable general plan and zoning ordinances, as well as any applicable specific plan and local coastal program;
Meet minimum residential density requirements of five units per acre in unincorporated nonmetropolitan counties, 10 units per acre in suburban jurisdictions, or 15 units per acre in metropolitan jurisdictions;
Do not require demolition of a historic structure and avoid hazardous sites and sensitive lands (e.g., prime farmland, wetlands, etc.);
Do not include any transient lodging (e.g., hotel, motel, or bed and breakfast inn);
Meet specific tribal consultation requirements and include mitigation for tribal cultural resources;
Include a condition of approval requiring an environmental assessment for hazardous substance releases, with mitigation requirements based upon results;
Comply with specific environmental hazard and air filtration standards if within 500 feet of a freeway; and
Comply with labor requirements, including payment of prevailing wage for 100 percent affordable projects and use of a skilled and trained workforce for buildings exceeding 85 feet in height.

AB 130 establishes a statewide Vehicle Miles Traveled (VMT) mitigation bank that allows developers to satisfy transportation-related CEQA mitigation requirements. Developers can do so by funding affordable housing and infrastructure projects through the Transit-Oriented Development Implementation Program, administered by the Department of Housing and Community Development. Beginning on July 1, 2026, developers may contribute to a state-managed fund in lieu of on-site VMT mitigation, with contribution amounts and eligibility determined by guidance from the Office of Land Use and Climate Innovation.

SB 131

SB 131 creates new statutory CEQA exemptions for the following types of projects, as well as exempting, subject to certain requirements, any rezoning action that implements a jurisdiction’s housing element. However, many of these exemptions are limited based on a project’s location or environmental context, such as on natural or protected lands.

agricultural employee housing (Pub. Resources Code, § 21080.44);
disadvantaged community water systems (Pub. Resources Code, § 21080.48);
wildfire risk reduction activities (Pub. Resources Code, § 21080.49);
climate adaptation planning updates (Pub. Resources Code, § 21080.55);
certain public park and trail projects (Pub. Resources Code, § 21080.57);
day care centers (Pub. Resources Code, § 21080.69);
rural health clinics (Pub. Resources Code, § 21080.69);
food banks (Pub. Resources Code, § 21080.69);
advanced manufacturing facilities (Pub. Resources Code, § 21080.69); and
facilities supporting high-speed rail (Pub. Resources Code, § 21080.70.)

SB 131 establishes a streamlined CEQA process for housing development projects that narrowly fail to qualify for a CEQA exemption due to a single disqualifying condition. In such “near miss” instances, it limits CEQA review to those environmental effects caused solely by that condition, and waives the need for analysis of project alternatives, cumulative impacts, and growth-inducing effects. However, these “near miss” provisions do not apply to projects with multiple disqualifying conditions, or to projects involving distribution centers, oil and gas infrastructure, or on protected lands.

Finally, SB 131 streamlines CEQA litigation by narrowing the scope of the administrative record. It clarifies that, with limited exceptions, staff notes and internal agency communications (like emails) are not required to be included in the administrative record if they were not presented to the project’s final decision-making body.

Best Best & Krieger LLP attorneys Amanda Daams, Sarah Owsowitz and Tiffany Michou will continue to monitor and provide updates on changes to State housing law in subsequent alerts.

Disclaimer: BBK Legal Alerts are not intended as legal advice. Additional facts, facts specific to your situation, or future developments may affect subjects contained herein. Seek the advice of an attorney before acting or relying upon any information herein.