Newsom Signs CEQA Reform to Speed Up Housing in California. Will It Lower Costs?


California Passes Historic Housing Reform Laws, Exempting Most Urban Development from Environmental Review

Landmark legislation aims to accelerate housing production amid state's affordability crisis

July 17, 2025

California Governor Gavin Newsom signed the most significant housing reform legislation in the state's modern history on June 30, 2025, enacting sweeping changes to environmental law that could dramatically accelerate urban housing development across the Golden State.

The two bills—Assembly Bill 130 and Senate Bill 131—represent a major overhaul of the California Environmental Quality Act (CEQA), the 55-year-old environmental protection law that has long been a flashpoint in debates over housing production and development delays.

Major Changes to Environmental Law

AB 130 creates a broad exemption from CEQA requirements for most "infill" housing developments in already built-up urban areas, marking the end of decades of environmental litigation that has slowed housing production. The legislation imposes a new 30-day deadline for agencies to approve or disapprove qualifying projects, representing a significant acceleration from current timelines.

SB 131 introduces a streamlined CEQA review process for housing projects that narrowly fail to qualify for exemptions, limiting environmental analysis to only the specific condition that disqualified the project.

The reforms took effect immediately upon Newsom's signature, bypassing the traditional legislative process by being incorporated into the state budget as "trailer bills."

Breaking Years of Political Deadlock

For nearly a decade, California has been locked in a recurring battle between legislators pushing for faster housing construction and defenders of the state's environmental protection laws. Newsom threatened to veto the entire state budget unless lawmakers included the housing reform measures, calling them "the most consequential housing reform we've seen in modern history".

The legislation passed with overwhelming support—AB 130 received a 67-0 vote in the Assembly and 28-5 in the Senate, while SB 131 passed 50-3 in the Assembly and 33-1 in the Senate.

Assembly Member Buffy Wicks of Oakland, who authored the original housing exemption proposal, described the significance of the change: "If we're able to get it to the governor's desk, I think it's probably one of the most significant changes to CEQA we will have seen since the law's inception".

Addressing California's Housing Crisis

The legislative push comes as California grapples with a severe housing affordability crisis. According to the Legislative Analyst's Office, the annual household income needed to qualify for a mortgage on a mid-tier California home in March 2025 was approximately $234,000—more than double the state's median household income of $96,500.

Current data shows the median home price in California reached $865,800 in June 2025, with forecasts projecting prices could reach $909,400 by the end of 2025. Monthly payments for a mid-tier home have increased 82% since January 2020, reaching nearly $5,900 per month.

Industry and Labor Union Perspectives

The interview transcript reveals tensions that have historically surrounded CEQA reform. Developer Jim Brickhammer, a former mayor of Costa Mesa, described how environmental review had been weaponized by various groups: "Labor unions were basically saying, 'We're gonna sue you and kill your project unless you make this project a union project with higher wages'".

However, the final legislation received support from construction unions. Douglas J. McCarron, President of the United Brotherhood of Carpenters, stated: "By streamlining housing construction, this budget will provide the legal foundation to get more homes built, bring housing costs down and add stronger enforcement of wage laws".

What the Laws Cover

AB 130's CEQA exemption applies to infill housing projects that meet specific criteria: sites must be no more than 20 acres, located within urban areas with existing infrastructure, and comply with local zoning and planning standards. The exemption covers a broad range of housing types, including single-family homes, multifamily developments, mixed-use projects, and transitional housing.

Notably, unlike previous CEQA exemptions, the new law does not require affordable housing set-asides or prevailing wage requirements for most projects under 85 feet in height.

SB 131 creates additional CEQA exemptions for infrastructure projects including health centers, rural clinics, and community-serving facilities.

Implementation and Next Steps

The legislation includes a moratorium on new residential building standards from October 1, 2025, through June 1, 2031, with exceptions for emergency, fire safety, or conservation measures.

AB 130 also establishes a statewide Vehicle Miles Traveled (VMT) mitigation bank, allowing developers to fund affordable housing projects in lieu of on-site transportation mitigation measures.

Local governments must now revise their permitting processes to accommodate the new timelines and exemptions, while developers are already assessing which current and planned projects may qualify for streamlined approval.

Future Outlook

Housing advocates are optimistic the reforms will unlock significant new development. The California Association of Realtors projects existing single-family home sales will increase 10.5% in 2025 to reach 304,400 units, while the median home price is forecast to rise 4.6% to $909,400.

However, critics worry about potential environmental impacts and infrastructure strain from accelerated development in urban areas without corresponding improvements to transportation and utility systems.

The legislation represents a significant victory for the "YIMBY" (Yes In My Backyard) movement and Governor Newsom's "Abundance Agenda," aimed at addressing California's housing shortage through increased production rather than demand-side interventions.

Whether these reforms will meaningfully improve housing affordability remains to be seen, but they mark the most significant change to California's development landscape in decades.

Sources

  1. Governor Newsom Signs Into Law Groundbreaking Reforms to Build More Housing, Boost Affordability. Governor of California. June 30, 2025. https://www.gov.ca.gov/2025/06/30/governor-newsom-signs-into-law-groundbreaking-reforms-to-build-more-housing-affordability/
  2. Chabria, A. No More CEQA for Most Urban Housing Development in California. CalMatters. June 26, 2025. https://calmatters.org/housing/2025/06/ceqa-urban-development-infill-budget/
  3. California Legislature Enacts Major CEQA Reforms for Housing-Rich "Infill" Projects. Holland & Knight. July 2025. https://www.hklaw.com/en/insights/publications/2025/07/california-legislature-enacts-major-ceqa-reforms-for-housing-rich
  4. Key Takeaways from California's New CEQA Housing Development Reform Laws. Alston & Bird. July 8, 2025. https://www.alston.com/en/insights/publications/2025/07/california-ceqa-housing-development-reform-laws
  5. Chabria, A. Will California End Environmental Lawsuits Against Urban Housing? CalMatters. March 27, 2025. https://calmatters.org/housing/2025/03/ceqa-infill-housing-wicks/
  6. Baldassare, M. California Lawmakers Approve Major Overhaul of Landmark Environmental Law. KQED. July 1, 2025. https://www.kqed.org/news/12046558/california-lawmakers-approve-major-overhaul-of-landmark-environmental-law
  7. Major Pro-Housing CEQA Reform Legislation Signed Into California Law. DLA Piper. July 2025. https://www.dlapiper.com/en-us/insights/publications/2025/07/california-housing-reform
  8. Goodchild, K. California Housing to Change Under New Law: What to Know. Newsweek. July 3, 2025. https://www.newsweek.com/california-housing-change-under-new-law-what-know-2092859
  9. Governor Newsom Signs Broadest CEQA Reform Ever To Boost Affordability & Cut Red Tape. Senator Scott Wiener. June 30, 2025. https://sd11.senate.ca.gov/news/governor-newsom-signs-broadest-ceqa-reform-ever-boost-affordability-cut-red-tape
  10. California Enacts Landmark CEQA Reforms to Accelerate Housing and Infrastructure Development. Pillsbury Law. July 2025. https://www.pillsburylaw.com/en/news-and-insights/california-ceqa-reforms-housing-infrastructure-development.html
  11. California Housing Market: House Prices & Trends. Redfin. July 2025. https://www.redfin.com/state/California/housing-market
  12. California Housing Market: Forecast and Trends 2025-2026. Norada Real Estate. June 2025. https://www.noradarealestate.com/blog/california-housing-market/
  13. California Housing Affordability Tracker (1st Quarter 2025). Legislative Analyst's Office. 2025. https://lao.ca.gov/LAOEconTax/Article/Detail/793
  14. C.A.R. Releases Its 2025 California Housing Market Forecast. California Association of Realtors. September 25, 2024. https://www.car.org/aboutus/mediacenter/newsreleases/2024-News-Releases/2025forecast

Newsom Signs CEQA Reform to Speed Up Housing in California. Will It Lower Costs? | Jim Righeimer - YouTube

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