California Legislature Passes Sweeping CEQA Reform Bills

On June 30, 2025, Governor Newsom signed two bills that will significantly streamline the California Environmental Quality Act (“CEQA”) review process for housing projects. 

The first bill, AB 130, expands existing exemptions for infill housing projects in urban areas. Under the revised law, housing projects on infill sites of up to 20 acres will be exempt from CEQA review if certain conditions are met. “Infill sites” are those that were previously developed with a qualified urban use or are surrounded by sites developed with qualified urban uses. “Qualified urban use” is broadly defined under CEQA as including any residential, commercial, public institutional, transit, or retail use, or a combination of those uses. To be eligible for the expanded exemption under AB 130, an infill housing project must comply with zoning rules, must not be located in a sensitive habitat area, must not require the demolition of any structure on a historic register, and must not be used for temporary lodging (e.g., as a hotel). 

The second bill, AB 131, establishes a simplified CEQA review process for infill housing projects that would otherwise not qualify for a CEQA exemption because of a failure to meet a single condition. Under the revised law, these projects will only need to analyze that single failed condition under CEQA instead of conducting a complete environmental review. For example, if an infill housing project will require the demolition of a structure on a historic register but otherwise would qualify for the expanded exemption established under AB 130, the developer will only need to evaluate the demolition of the historical structure under CEQA. 

Among additional changes aimed at streamlining the CEQA process for housing projects, AB 131 also (1) exempts from CEQA review any rezonings consistent with the housing element of a local government’s general plan, and (2) requires the Governor’s Office of Land Use and Climate Innovation to develop, by July 2027, a map of underutilized land within existing urban areas where new infill developments could be built.

These CEQA reform bills received strong support from pro-housing organizations in California, and they were generally opposed by environmental groups, which voiced concerns about the impacts that exempt infill housing projects could have on sensitive ecosystems. AB 131 attempts to address these concerns by creating a list of “natural and protected areas” for which the bill’s exemptions generally do not apply. The list includes national parks and monuments, conservation easements, state parks, ecological reserves, and wildlife refuges, but environmental groups argued that it should have included broader protections for endangered species habitats and migration areas. The laws are part of a broader effort by California Governor Newsom’s administration to address the State’s housing shortage. Other initiatives include efforts to increase the availability of financing for affordable housing development and to speed up other permitting requirements, such as approvals from the California Coastal Commission.

This memorandum is a summary for general information and discussion only and may be considered an advertisement for certain purposes. It is not a full analysis of the matters presented, may not be relied upon as legal advice, and does not purport to represent the views of our clients or the Firm. Eric Rothenberg, an O'Melveny of counsel licensed to practice law in New York and Missouri; John D. Renneisen, an O’Melveny senior counsel licensed to practice law in the District of Columbia; and Chris Bowman, an O’Melveny associate licensed to practice law in California, contributed to the content of this newsletter. The views expressed in this newsletter are the views of the authors except as otherwise noted.

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