On June 30, 2025, California Governor Gavin Newsom signed into law significant reforms to the California Environmental Quality Act (CEQA), seeking to promote housing projects in a state that desperately needs them. Much of the initial reaction was very positive, praising the move as streamlining the approval process and eliminating a key source of risk for housing developers, with respect to project costs and delays. However, while these reforms are welcome and will benefit some projects, details in the legislation threaten to reduce its potential streamlining and risk-mitigation value. In particular, the legislation requires compliance with a tribal consultation process, as well as the cleanup of sites impacted by hazardous substance contamination.
Further, motivated project opponents will still likely find ways to slow or block projects, particularly through litigation challenging the application of the new CEQA exemption or raising non-CEQA claims. An understanding of these potential pitfalls can allow developers to select sites and projects that reduce risks and provide a greater opportunity to take advantage of these valuable, but limited, CEQA reforms.
New Statutory Reforms Bypass or Streamline CEQA Review for Infill Housing Projects
The recent CEQA reforms are contained in two new laws – Assembly Bill (AB) 130 and Senate Bill (SB) 131 – both of which seek to promote urban residential development in California by allowing projects to either avoid CEQA review or at least streamline it. As discussed further below, AB 130 exempts qualifying urban housing projects from CEQA review, while SB 131 streamlines the CEQA review process for housing projects that narrowly fail to qualify for a CEQA exemption.
Assembly Bill (AB) 130
AB 130 creates a new CEQA statutory exemption for urban “infill” housing projects. It joins one of many statutory exemptions enacted to allow certain projects or types of projects to avoid environmental review under CEQA even if they may have significant impacts on the environment. Other examples of statutory exemptions range from family day care homes to certain mass transit projects. Notably, such exemptions are absolute: unlike “categorical exemptions” established by regulation, statutory exemptions are not subject to a range of exclusions that often preclude application of the exemption, or result in litigation regarding the use of the exemption. For example, categorical exemptions cannot be used where there is a “reasonable possibility” that the project will have a significant effect on the environment “due to unusual circumstances.” There is no such bar on the use of statutory exemptions.
To qualify for AB 130’s statutory exemption, a housing project must meet certain requirements to show it will constitute infill development. For example, the project must be within the boundaries of either a municipality or an urban area, as defined by the U.S. Census, and located on a site previously developed for or near properties developed for an urban use. The statute also includes limitations on the maximum size of the project and requires substantial evidence that the project is consistent with the applicable general plan and zoning ordinance, as well as any applicable local coastal program. The project must also meet certain density standards. Proponents of the bill generally expect that urban, multi-family housing projects will satisfy these requirements without significant difficulty.
Senate Bill (SB) 131
SB 131 seeks to encourage housing projects that narrowly miss qualifying for a statutory exemption, such as the AB 130 exemption, or a categorical exemption, by limiting the scope of CEQA review for those projects to the condition that disqualified the project. SB 131 is limited to projects that fail to qualify for a CEQA exemption based on “a single condition,” and when it applies, it significantly limits CEQA review to the environmental effects caused “solely” by the presence of that single condition. The lead agency will then determine whether a Negative Declaration or Mitigated Negative Declaration, or Environmental Impact Report (EIR), is necessary to evaluate that single condition. And if CEQA compliance requires preparing an EIR for the project, SB 131 streamlines that process by excusing projects from discussing alternatives to the project or the growth-inducing impacts of the project, which typically require significant analysis in an EIR and are often key areas of attack in CEQA litigation by project opponents.
SB 131 contains several exceptions, and its “near-miss” streamlined review does not apply if a housing project:
- is “not similar in kind” to projects that typically qualify for the exemption;
- fails to satisfy a CEQA exemption due to the presence of two or more conditions;
- includes a warehouse distribution center or any oil or gas infrastructure; or
- is located on “natural and protected lands.”
But Potential Roadblocks to Infill Housing Development Remain
Although the reforms enacted through AB 130 and SB 131 represent a significant step forward in responding to calls for CEQA reform and incentivizing urban residential development, two major requirements in AB 130 will, in some circumstances, reduce the potential for streamlining approvals and avoiding litigation risk.
Tribal Consultation Requirements
The first potential roadblock for residential projects that are exempt from CEQA under AB 130 affects projects on lands associated with tribal cultural resources. AB 130 streamlines the tribal consultation process that exists under CEQA but still requires that such consultation be offered. Specifically, AB 130 requires local governments to offer to consult with each California Native American tribe that is traditionally and culturally affiliated with the project site. This invitation must occur within fourteen days of a “complete” application. The consultation period concludes if no tribe requests consultation within 60 days. If a tribe requests a consultation, that consultation must conclude within 60 days (an initial 45-day period, plus a potential one-time 15-day extension upon the tribe’s request).
While this timeline will encourage projects to move through the consultation process, this is an important element of traditional CEQA review that is preserved under AB 130 for CEQA-exempt housing projects. The consultation process could result in measures to avoid significant impacts to tribal cultural resources that require changes to the project, including modifications to the project footprint and design. Such changes may impact project costs and timing and ultimately, a developer’s ability to proceed with the project. Moreover, if the parties cannot reach an agreement on mitigation measures acceptable to both the tribe and the developer, there is a significant risk that the tribe will oppose the project moving forward and have an incentive to explore litigation options for stopping or delaying the project.
While the risk of impacting tribal cultural resources may be lower in previously developed urban areas, it is still an important factor for a developer to consider in selecting a project site. For example, just last year, the City of Berkeley reached a $27 million deal with a developer to transfer land developed as a parking lot to the Sogorea Te’ Land Trust for preservation. The site is sacred to the Ohlone tribe and part of historic burial and ceremonial grounds dating back more than 5,700 years. The deal came after years of community opposition to a proposed housing project on the site, including litigation up to the California Supreme Court.
Hazardous Substances Study and Cleanup Requirements
The second potential roadblock concerns projects on lands impacted by environmental contamination, as AB 130 precludes the use of the exemption at a large number of known contaminated sites and reduces streamlining benefits for sites where contamination is discovered during environmental due diligence associated with the project.
First, AB 130’s statutory exemption does not apply to sites listed on DTSC’s Hazardous Waste and Substances Sites (Cortese) List, which identifies sites with known releases of hazardous substances or ongoing cleanup or remedial action orders. The Cortese List currently identifies over 470 sites across California. Many of these are located in the same urban areas targeted by AB 130 for infill housing development, due to the correlation between urban uses and hazardous substances and the increased regulatory attention on urban areas.
Second, even for non-excluded sites, AB 130 requires a developer to complete a Phase I environmental assessment, and if necessary, a Phase II environmental assessment to further evaluate potential contamination at a site. Such assessments evaluate the current and historical uses of a property and the surrounding areas to identify “recognized environmental conditions” (Phase I), and, where such conditions are found, implement environmental testing to assess the scope and severity of those conditions. While such assessments are commonly performed when property is acquired (often to facilitate financing or obtain certain legal protections), AB 130 adds another layer of mandatory requirements. The statute requires not only that such assessments be performed, but where any “recognized environmental conditions” are present, the developer must complete a preliminary endangerment assessment and mitigate any release of hazardous substances found on the site to meet current federal and state statutory and regulatory standards. This may require a developer to engage with agencies such as the federal Environmental Protection Agency, the California Department of Toxic Substances Control, one of the California Regional Water Quality Control Boards, or a city or county environmental health agency, to develop a response plan. And the process of developing such a plan and obtaining agency approval may result in significant costs and delays.
Since a residential developer seeking to take advantage of the CEQA exemption in AB 130 will inherently be focused on urban sites, the risk of running into contamination issues triggering these requirements is significant. Indeed, to qualify for the exemption, the project site must either have previously been developed with an urban use or meet certain adjacency requirements to parcels developed with urban uses. Urban uses such as dry cleaners, gas stations and auto repair shops, and industrial facilities often currently use, or historically used, hazardous substances, increasing the likelihood that environmental due diligence will identify contamination issues.
If contamination is discovered, it can also result in opposition to the project, particularly if there are existing single-family or multifamily residences nearby, and those residents have concerns about whether the response plan is adequate to mitigate risks to their health and properties.
And Significant Potential Litigation Risk Still Exists
Although invocation of a CEQA statutory exemption or streamlining provision, limits the nature and scope of litigation claims that a project opponent may assert to challenge a project, it does not completely insulate the exempt project from litigation risk. First, a project opponent may still challenge the lead agency’s decision to rely on the statutory exemption in AB 130 by arguing that the project does not satisfy the conditions necessary for the exemption. Similarly, a project opponent may also challenge the basis for a lead agency to rely on the streamlining provisions of SB 131.
Second, the elimination or narrowing of available claims under CEQA will only encourage project opponents to identify and file non-CEQA claims, particularly if a site has contamination issues or a tribe cannot reach agreement with the developer on measures to protect tribal cultural resources. For example, contamination issues can give rise to claims under California tort law (e.g., negligence, nuisance, trespass) as well as under federal statutory law (e.g., a citizen suit alleging an “imminent and substantial endangerment” under the Resource Conservation and Recovery Act (RCRA)). And even in the absence of claims based on well-established existing law, plaintiffs are likely to get creative and develop new and untested theories to support a legal challenge. Ultimately, the ability of well-motivated (and well-funded) project opponents to file suit will only be bound by the willingness of their legal counsel to take novel positions and assert claims based on a good-faith, nonfrivolous argument for extension, modification, or reversal of existing law.
For example, in a recent case defended by one of this article’s authors, a local community organization opposed a CEQA-exempt affordable housing development and filed a novel breach-of-contract action, in an effort to derail the project. The plaintiff organization alleged that a governmental resolution authorizing a loan for the project was a binding contract between the government entity and the developer, that the organization’s members were third-party beneficiaries of that contract, and that the developer had violated that alleged contract by failing to engage in a “transparent community process.” The developer prevailed on a preliminary injunction, three motions to dismiss the claims (the last one resulting in dismissal of the entire action), and an appeal by the plaintiff of those decisions. However, successfully shutting down this attempted litigation end-run around a CEQA exemption took over two full years.
As a result, developers need to account for continued litigation risk in proposing a residential project under AB 130 or SB 131. Developers should work closely with the lead agency, to the extent feasible, to bolster the administrative record to support the agency’s reliance on the statutory exemption or streamlining provision relied upon, and they should be prepared to bear the cost and delay associated with litigation, even where the developer is likely to ultimately prevail because of the weakness of the opponent’s legal claims.
Conclusion
While the recent CEQA reforms in AB 130 and SB 131 reflect the most significant effort to date to address one of the key factors hindering development of urban infill housing projects, potential developers should remain focused on the limitations of these exemption/streamlining provisions, which could still generate significant delays and costs for proposed residential projects. In particular, early and thorough evaluation of the potential tribal cultural resources and environmental contamination risks associated with sites under consideration for development will help developers avoid delays or opposition during the tribal consultation and environmental review processes. Avoiding opposition at those stages can also help reduce the litigation risk that still exists for projects that qualify for the statutory exemption or streamlining provisions established by the new CEQA legislation. But ultimately, developers will still need to factor in the potential for litigation by project opponents, given their ability to file challenges to the application of the exemption/streamlining provisions and to assert non-CEQA claims. Even if such challenges and claims are very likely to be unsuccessful, such litigation will still be costly and time-consuming.
