INSIGHT

California’s CEQA reforms: What real estate developers need to know 

July 11, 2025

Industries: Real Estate

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If you’re a real estate developer in California, you’ve likely felt the frustration of navigating the California Environmental Quality Act (CEQA) requirements. The lengthy environmental reviews, potential litigation threats, and unpredictable timelines have been significant hurdles in bringing housing and infrastructure projects to fruition. However, recent legislative changes are reshaping this landscape in ways that could dramatically impact your development strategy. 

On June 30, 2025, Governor Newsom signed Assembly Bill 130 and Senate Bill 131 into law, implementing what he called “the most consequential housing and infrastructure reform in recent state history.” These budget trailer bills, now in effect, introduce sweeping changes to CEQA that could accelerate project timelines and reduce regulatory uncertainty for qualifying developments. 

Understanding the new CEQA exemptions 

The legislation creates several new categorical exemptions that bypass traditional CEQA review requirements. These changes represent a fundamental shift from the previous regulatory approach, where environmental impact studies could extend project timelines by 18 months or more. 

Urban infill housing developments get streamlined path 

The most significant change for housing developers involves the new urban infill exemption. Unlike the existing Class 32 categorical exemption, which is limited to five acres and requires extensive environmental analysis, this statutory exemption allows qualifying projects up to 20 acres with minimal environmental review. 

To qualify for this exemption, your housing development project must meet specific criteria: 

• At least two-thirds of square footage must be dedicated to residential use 
• Minimum density requirements of 15 dwelling units per acre in metropolitan counties or 10 units per acre in suburban jurisdictions 
• Sites must be previously developed urban infill locations with specific adjacency requirements 
• Projects must comply with existing general plans and zoning ordinances 
• All SB 35 environmental siting criteria must be met 

The approval timeline is equally compelling. Once tribal consultation is complete, local agencies have just 30 days to approve or disapprove qualifying projects—a dramatic reduction from traditional CEQA timelines. 

Manufacturing and infrastructure projects see relief 

Advanced manufacturing projects on industrially zoned sites now enjoy CEQA exemptions, particularly benefiting semiconductor, microelectronics, and nanotechnology developments. High-speed rail projects, broadband infrastructure, and various public benefit projects also receive streamlined treatment under the new framework. 

Key compliance considerations for developers 

While these exemptions offer significant advantages, they come with specific requirements that demand careful attention during project planning. 

Labor and environmental requirements remain 

Don’t assume that CEQA exemptions eliminate all regulatory obligations. Projects must still meet specified labor requirements for certain developments, conduct Phase I Environmental Site Assessments, and address any recognized environmental conditions. For housing near freeways, additional air quality mitigation measures are mandatory. 

Historic preservation and tribal consultation 

The legislation maintains protections for historic structures and requires consultation with culturally affiliated California Native American tribes. While this consultation process is expedited compared to traditional CEQA review, it remains a critical compliance step that can influence project approval timelines. 

Geographic and use restrictions 

Several exemptions exclude projects on “natural and protected lands” and impose specific use restrictions. Warehouse distribution centers over 50,000 square feet and oil and gas infrastructure cannot benefit from housing-related exemptions, regardless of project size or location. 

Strategic implications for development planning 

These changes create new opportunities for strategic project positioning and site selection. The expanded urban infill exemption allows for larger projects while reducing the technical studies traditionally required under Class 32 exemptions. This shift could make previously marginal sites economically viable and accelerate development timelines significantly. 

Site selection becomes more critical 

With specific density, adjacency, and environmental siting requirements, careful site selection becomes even more important. Properties that meet the urban infill criteria while avoiding environmental restrictions will likely see increased value and development interest. 

Financing and risk considerations 

Reduced environmental review timelines and litigation exposure could positively impact project financing and risk assessment. However, developers should still budget for Phase I environmental assessments and potential remediation costs for sites with recognized environmental conditions. 

Navigating the transition period 

As these changes take effect immediately, developers with projects already in the pipeline should evaluate whether modifications to their approach could provide advantages under the new framework. The legislation’s limited CEQA review provisions may benefit projects that nearly qualify for exemptions but face single compliance issues. 

Documentation and compliance strategies 

Success under the new regime requires meticulous documentation of exemption qualifications and compliance with all statutory requirements. Given the expedited approval timelines, having comprehensive application materials ready becomes crucial for capturing the benefits of these reforms. 

Looking ahead: Long-term market impacts 

The Governor’s Office of Land Use and Climate Innovation will map eligible urban infill sites by July 2027, potentially expanding exemption availability. This mapping process could influence land values and development patterns across California’s metropolitan areas. 

Additionally, required updates to CEQA Guidelines every two years will likely continue refining the regulatory framework, creating ongoing opportunities for developers who stay informed about evolving requirements. 

Moving forward with confidence 

California’s CEQA reforms represent a significant shift toward streamlined development processes while maintaining environmental protections. For developers, understanding these changes and positioning projects to take advantage of new exemptions could provide substantial competitive advantages in terms of timeline, cost, and regulatory certainty. 

The key to success lies in thorough planning, careful site selection, and comprehensive compliance with the new statutory requirements. As these changes reshape California’s development landscape, staying informed and strategically positioned will be crucial for capitalizing on new opportunities. 

Ready to navigate California’s new CEQA landscape? Our real estate and regulatory teams can help you evaluate how these changes impact your development projects and identify opportunities under the new exemptions. Contact BPM today to discuss your specific situation and develop a strategic approach for your next California development project.