In a critical move to address California’s ongoing housing crisis, Governor Gavin Newsom signed into law two key bills on July 2, 2025—Assembly Bill 130 (AB 130) and Senate Bill 131 (SB 131). These bills amend the California Environmental Quality Act (CEQA), a law that has historically been used to assess the environmental impact of development projects. By introducing exemptions and streamlining certain provisions, the reforms aim to fast-track the approval process for housing projects, particularly in urban areas where the need for affordable homes is greatest.
What Does the Reform Entail?
The new CEQA reforms, which specifically target urban infill development—projects in existing urbanized areas—are designed to eliminate some of the more lengthy and bureaucratic environmental review processes that have often delayed construction. Previously, developers seeking approval for housing projects in cities like Los Angeles, San Francisco, and San Diego were often caught up in prolonged CEQA reviews and environmental lawsuits, which could add years to the development timeline.
Under the new laws, housing projects that fall within the boundaries of urbanized areas will be eligible for exemptions from the CEQA review process, significantly reducing delays. The legislation primarily targets affordable housing projects but also includes exemptions for other housing types, such as market-rate developments in cities facing acute housing shortages.
Why is CEQA Reform Necessary?
California’s housing crisis is well-documented. According to a report by the California Housing Partnership, the state needs to build 180,000 new homes every year to keep pace with population growth. However, the state has consistently fallen short, building fewer than 100,000 homes per year, largely due to regulatory delays, rising construction costs, and complex zoning laws.
These reforms come as part of California’s broader strategy to address the 3.5 million housing deficit. The state has seen its population continue to grow, especially in urban areas, while housing production has failed to keep up. This imbalance has driven up housing costs, making it increasingly difficult for middle-class families, in particular, to find affordable homes.
Impact on Developers and the Real Estate Industry
Developers and homebuilders have largely supported the CEQA reform, with industry leaders saying it will help facilitate the construction of much-needed housing across the state. For years, developers have criticized the CEQA review process for creating unnecessary roadblocks. Ray E. Porter, president of the California Building Industry Association (CBIA), commented, “This new law strikes a balance between protecting the environment and addressing the housing shortage. It will allow us to build the homes that California desperately needs without sacrificing environmental safeguards.”
The California Association of Realtors (CAR) echoed similar sentiments, praising the bill’s potential to ease restrictions and bring down housing costs. As cities like Los Angeles and San Francisco continue to experience sky-high rent prices, the reforms are expected to pave the way for a more rapid response to the housing demand.
Environmental Concerns and the Pushback
However, not everyone is on board with the new legislation. Environmental advocacy groups, such as California’s Greenbelt Alliance and The Sierra Club, have raised concerns that the reforms could undermine key environmental protections, particularly around sensitive ecosystems and public lands. These groups argue that streamlining the CEQA review process may result in developers cutting corners when it comes to environmental assessments.
Catherine Reheis-Boyd, president of the Western States Petroleum Association, expressed concerns about the long-term consequences, stating, “While housing is desperately needed, the process that evaluates the environmental impact of projects is essential to ensure that we don’t sacrifice our natural resources and public spaces in the name of progress.”
In response, lawmakers have assured critics that while the review process will be streamlined, it will still incorporate adequate environmental protections. Projects that potentially impact critical habitats will still be subject to environmental review, but many urban infill housing projects are considered to have minimal environmental impact due to their location within already developed areas.
Looking to the Future: Addressing California’s Housing Needs
This legislative change is just one part of the broader efforts to fix California’s housing crisis. In addition to streamlining approval processes, the state is also focusing on increasing affordable housing investment, tackling zoning issues, and enhancing construction practices to make housing more affordable for all residents.
Many experts agree that while CEQA reform is a vital step forward, California still faces significant challenges in meeting its housing goals. The state will need to expand housing infrastructure further, particularly in regions with limited space, and work on policies that make affordable housing development more financially viable.
The new legislation is expected to lead to the construction of tens of thousands of additional homes over the coming years, helping to alleviate the strain on California’s housing market. The pace of construction will depend heavily on how swiftly developers can navigate these new rules and adapt to local government regulations.
