California Breaks CEQA Barrier To Reignite Housing Production

California Gov. Gavin Newsom wanted a major legislative solution that would demonstrate the state’s seriousness in addressing its severe housing shortage and homelessness.

He achieved this, but only by applying heavy pressure. He even went so far as to threaten not to sign the state budget. On Monday, Newsom signed two bills that enact a sweeping reform, allowing new housing projects to avoid the rigorous environmental review required under the 1970 California Environmental Quality Act.

This is, and I can humbly say this as someone who’s been a student of this and a practitioner of sorts over the past six-plus years, the most consequential housing reform that we have seen in modern history in the state of California,” Newsom said during a press conference.

California has long been a model for other states in environmental protection. The Bear State may now also serve as a galvanizing model for removing the lengthy and costly regulatory barriers that have hindered housing development.

The latest reform follows a stream of new laws passed over several years as Newsom and state lawmakers attempt to bring California’s housing problem under control.

Tapping into an array of policy "carrots and sticks," recent laws have expanded opportunities for accessory dwelling units, allowed more flexible zoning — such as duplexes and lot splits on single-family lots — and enabled “by right” construction in commercially zoned areas and near transit.

The CEQA Stall

CEQA has proven to be a significant obstacle for every builder, developer, and housing advocate seeking to construct more housing. Environmentalists and not-in-my-backyard groups have used CEQA as a tool to stall or halt developments they oppose.

This hurdle has contributed to California's dubious distinction of becoming the most expensive state for housing, with a median price of $785,000, according to Redfin. Lawmakers wary of changing a law designed to reduce air pollution and protect waterways have long been criticized for California’s persistent affordability issues.

What you saw today is leadership in the Assembly and the Senate and the governor saying enough is enough, we’re ready to take courageous votes, courageous action, to solve one of the most vexing problems in our state,” California Assembly member Buffy Wicks, who sponsored one of the bills, said at the press conference. “The cost of housing is outrageous. It is too damn hard to build housing.”

Assembly Bill 130 and Senate Bill 131, sponsored by Sen. Scott Wiener, were included in the state’s budget, which Newsom signed on Friday, meaning CEQA reform goes into effect immediately.

Cutting Regulatory Hurdles

For decades, the state’s housing crisis has been exacerbated by legal and regulatory hurdles that slow or block the construction of new homes, particularly in urban areas where the ratio of undersupply and unmet demand grows at its most daunting levels.

Under the new law, projects that meet local zoning, density, and objective planning standards—and are located away from environmentally sensitive or hazardous areas—can bypass the lengthy and costly environmental review process for infill projects. This targeted exemption is intended to unlock thousands of new homes in neighborhoods already planned for growth, while still safeguarding critical ecological resources.

The “yes-in-my-backyard” crowd is particularly pleased with this part of the law.

This is probably the most important thing California has done on housing in the present YIMBY moment,” Nolan Gray, senior director of legislation and research with California YIMBY, wrote on social media.

The law also reimagines the approval process for qualifying housing projects by streamlining reviews and reducing the threat of litigation, significantly cutting the time and expense required to bring new homes to market.

Developers and local governments are empowered to move swiftly, accelerating construction in areas where housing is desperately needed. The result is a more responsive and dynamic housing market, better equipped to meet the needs of Californians who are priced out of homeownership or struggle to find affordable rentals.

Recognizing the destabilizing effect of constantly changing regulations, the law freezes new residential building standards through 2031, with exceptions only for emergency, fire, or conservation-related updates.

This regulatory stability is expected to give builders the confidence to invest in new projects, knowing that costly surprises won’t derail their plans midstream. The freeze should help control construction costs and encourage a steady pipeline of new housing.

Time will tell how the new law plays out. Real estate developers have long complained that California’s regulatory environment hinders progress, and all eyes will be on the implementation of these reforms.