Note: This is the fifth update in our series covering AB 130 and SB 131, two bills that work substantive changes to the California Environmental Quality Act (CEQA) and California housing law. Click here to learn more about other recent updates in these bills
As part of AB 130, the California State Legislature created a new means for mitigating significant transportation-related impacts through the Transit-Oriented Development (“TOD”) Implementation Fund, which will endow the TOD Implementation Program.
Under newly added Public Resources Code section 21080.44, if a lead agency determines that a project will have a vehicle miles traveled (“VMT”) impact, the project applicant can mitigate that impact by contributing funds or otherwise facilitating the development of VMT-efficient affordable housing or related infrastructure projects. The Office of Land Use and Climate Innovation (LCI) is charged with issuing guidance by July 1, 2026, on calculating these VMT mitigation payments and commencing a formal rulemaking process by Jan. 1, 2028. However, use of this new mitigation measure can begin before that time.
Under Section 21080.44, funds may be distributed by the Department of Housing and Community Development (1) for grants to cities, counties, eligible tribal applicants or transit agencies for the provision of infrastructure necessary for the development of higher density VMT-efficient affordable housing or related infrastructure projects; or (2) to make repayable loans or forgivable loans for the development and construction of VMT-efficient affordable housing.
This portion of the bill was controversial among the development community as it may lead to increased development costs—either through imposition of a significant fee for VMT impacts, or by tacking on additional mitigation requirements to the fee. Greenfield and masterplan developers were particularly vocal about the negative implications of this policy and will likely attempt to influence the rulemaking process through LCI, or even seek cleanup legislation in this or subsequent legislative sessions. A key priority will be placing limits on the amount of the fee; without such a limit developers fear that it could be used to surreptitiously halt projects by making them infeasible. However, the upside is that there will be an increased number of feasible mitigation options, especially for more rural developments, to reduce VMT impacts to a less than significant level and thereby potentially avoid a heightened level of environmental review.
For lead agencies, on the other hand, the TOD Mitigation Implementation Fund and forthcoming LCI guidance and rulemaking may solve legal challenges with how to evaluate transportation impacts caused by VMT.1 In short, the jury is still out—will this new VMT mitigation measure permit abundant development or just be another bagel topping for developers to stomach?
1 For example, the Fourth Appellate District recently invalidated San Diego County’s thresholds of significance for VMT-related transportation impacts for infill development and small projects in Cleveland Nat’l Forest Found. v. San Diego County (2025) 110 Cal.App.5th 948. In its decision, the court noted that San Diego County had relied in part on guidance from the Office of Planning and Research (now LCI) to implement SB 743, which requires CEQA lead agencies to evaluate transportation impacts according to VMT. The court found that guidance did not qualify as substantial evidence sufficient to support the county’s significance thresholds.
