California’s CEQA Overhaul: What You Need to Know in 2026

In a landmark move to address California’s housing crisis and accelerate infrastructure development, Governor Gavin Newsom signed Assembly Bill (AB) 130 and Senate Bill (SB) 131 into law on June 30, 2025. These budget trailer bills represent the most sweeping reforms to the California Environmental Quality Act (CEQA) in over five decades. The changes took effect immediately on July 1, 2025, reshaping how environmental review is conducted for a wide range of projects across the state. [www.smwlaw.com]

Key Highlights of the CEQA Reforms

🏘️ Urban Infill Housing Exemption (AB 130)

AB 130 introduces a new statutory CEQA exemption for qualifying urban infill housing development projects up to 20 acres in size (or 5 acres for Builder’s Remedy projects). To qualify, projects must:

• Be located in incorporated cities or urban areas.

• Be previously developed or surrounded by urban uses.

• Meet minimum residential density thresholds (e.g., 15 units/acre in metropolitan areas).

• Avoid sensitive lands, such as wetlands, prime farmland, or historic structures.

• Comply with labor standards, including prevailing wage and skilled workforce requirements for certain projects.

• Include tribal consultation and mitigation for cultural resources.

• Meet air quality and hazard mitigation standards if near freeways. [bbklaw.com]

⚖️ Single-Condition Exemption (SB 131)

SB 131 creates a “single-condition” exemption for housing projects that narrowly miss qualifying for an existing CEQA exemption. Under this provision:

• Environmental review is limited only to the single disqualifying condition.

• No need to analyze alternatives or growth-inducing impacts.

• Applies to projects that would qualify under statutory or specific categorical exemptions (e.g., Class 1–5, 12, 15, 32).

• Excludes projects on natural and protected lands, or those involving oil/gas infrastructure or distribution centers. [www.smwlaw.com]

🚧 Expanded CEQA Exemptions for Non-Housing Projects

SB 131 also introduces CEQA exemptions for a variety of non-housing projects, including:

• Childcare centers

• Health clinics and rural medical facilities

• Food banks

• Clean water infrastructure

• Broadband and parks

• Advanced manufacturing facilities

These exemptions aim to streamline permitting for essential services and infrastructure, especially in underserved communities. [www.hklaw.com]

🚗 Vehicle Miles Traveled (VMT) Mitigation Bank

AB 130 establishes a statewide VMT mitigation bank, allowing developers to offset transportation impacts by funding affordable housing and infrastructure projects. Starting July 1, 2026, developers can contribute to a state-managed fund in lieu of on-site mitigation. [bbklaw.com]

⏱️ 60-Day Ministerial Approval Clock

For qualifying infill housing projects, AB 130 mandates a 60-day ministerial review period. If a local agency fails to act within this window, the project may be automatically approved under state law. [esassoc.com]

Implications for Developers and Local Governments

These reforms are designed to:

• Accelerate housing production by removing procedural delays.

• Reduce litigation risks associated with CEQA.

• Empower local governments with clearer standards and timelines.

• Support climate-resilient infrastructure and community services.

However, implementation will require careful coordination with local planning departments, legal counsel, and community stakeholders to ensure compliance and maximize the benefits of these new exemptions.