The big news this week is the signing of the California budget, which includes an important reform of CEQA as it applies to infill housing projects. In recent years, the California legislature has been slowly chipping away at CEQA by creating a variety of streamlining programs that make certain types of housing approvals ministerial and therefore exempt from environmental review (ex: SB 423 / SB 2243 / AB 2162 / SB 684). While these new laws were a great starting point in removing the CEQA barriers that have stymied housing production for decades (and provide useful project streamlining and other benefits), they are complex and limited to specific project types or locations, leaving out many urban infill sites.
AB 130, signed into law by the Governor on Monday, reaches directly into CEQA and creates a broad new statutory exemption that applies to urban infill housing development projects. However, it is important to understand that AB 130 is not a project streamlining program.
The new law adds section 21080.66 to the Public Resources Code. To qualify for this exemption, the project site must:
- Not be more than 20 acres in size (for Builder’s Remedy or certain emergency shelter projects, 5 acres);
- Be located within the boundaries of an incorporated municipality, or an urban area as defined by the US Census Bureau;
- Has been previously developed with an urban use; have at least 75% of the perimeter of the site adjoining with urban uses; or have 75% of the area within a quarter-mile radius of the site be developed with urban uses;
Once the site qualifies, the project will qualify for this exemption if it meets the following criteria:
- The project is consistent with the applicable general plan and zoning ordinance, including applicable local coastal programs. Use of the state density bonus cannot be asserted as grounds for inconsistency. Importantly, this consistency determination is not left to technical details and the city planners. “If there is substantial evidence that would allow a reasonable person to conclude that the housing development project is consistent” with local zoning and planning laws, it will be considered consistent;
- It must be dense enough; at least 1/2 of the applicable density set for in Government Code 65583.2(c)(3)(B) must be provided – this is typically 30 du/acre for metropolitan jurisdictions;
- The site meets environmental screening criteria provided under SB 35/423, including generally that it not be located on a site that is in certain environmentally-sensitive areas of the Coastal Zone; prime farmland; wetlands; a high fire hazard severity zone; a hazardous waste site (unless cleaned); a delineated earthquake fault zone; a special flood hazard area; a regulatory floodway; subject to a community conservation plan or conservation easement; or contain a habitat for protected species;
- Cannot require demolition of an historic resource listed on a national, state, or local historical register before the date that an SB 330 preliminary application was submitted;
- If located within 500 feet of a freeway, certain design and air filtration requirements apply; and
- No portion of the project can be designated for use as a hotel, motel, bed-and-breakfast Inn, or other transient lodging.
AB 130 does require tribal consultation. This has been an issue in the implementation of SB 423 (formally SB 35). The weakness of SB 423 was that the tribal consultation process was not structured enough to provide a clear ending to that process or guideposts for required mitigating conditions. AB 130 attempts to solve that problem by including clear, statutory deadlines that are either met within a specific reasonable time frame or default mitigation measures would be imposed allowing the development to qualify for exemption.
Certain labor standards apply. 100% affordable projects must pay construction workers prevailing wages. Projects greater than 85 feet in height must pay prevailing wages and utilize a skilled and trained (union) workforce. And in San Francisco specifically, projects with 50 units or more are generally required to pay construction workers prevailing wages, even if they are less than 85 feet in height.
The new legislation allows for CEQA exemption only. On its own, it would not provide for a streamlined design review process, increase in allowable density or reduction of applicable development standards as is the case with some other recent state-law housing programs. However, it can be combined with state density bonus and the Housing Accountability Act to increase density and reduce local discretion.
For decades, CEQA has been a major, and in many cases fatal, barrier to the construction of needed housing. AB 130 may finally break through and free infill projects from this burden.
AB 130 was signed into law on June 30, 2025 as part of the state budget legislation and is currently in effect. Also signed into law on Monday were other helpful CEQA changes that we will be reporting on in the coming weeks.
Authored by Reuben, Junius & Rose, LLP Partners, Andrew J. Junius and Melinda Sarjapur.
The issues discussed in this update are not intended to be legal advice and no attorney-client relationship is established with the recipient. Readers should consult with legal counsel before relying on any of the information contained herein. Reuben, Junius & Rose, LLP is a full service real estate law firm. We specialize in land use, development and entitlement law. We also provide a wide range of transactional services, including leasing, acquisitions and sales, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work.