In a groundbreaking legislative move designed to help ease California’s housing and economic challenges, Governor Gavin Newsom signed Assembly Bill 130 (AB 130) and Senate Bill 131 (SB 131) into law on June 30, 2025, which went into immediate effect. These budget trailer bills enacted the most sweeping reforms to the California Environmental Quality Act (CEQA) in decades. They fundamentally altered the landscape for developers of both multifamily housing and industrial properties, including advanced manufacturing uses.
Signed into law in 1970 by then-Governor Ronald Reagan, CEQA requires developers to consider environmental issues (traffic, air pollution, noise, etc.) when proposing a new building project. It also grants individuals and groups the right to challenge a project if they believe it violates the law. While the intent was to protect the environment from irresponsible development, critics said it also served as a way for opponents of high-density housing projects (often termed NIMBYs for “Not In My Back Yard”) to block approval of projects in their communities.
The new laws aim to strike a balance between a streamlined approval process for projects that align with the state’s goals of increasing housing supply and preserving environmental safeguards for more sensitive areas.
What CEQA Reforms Mean for Multifamily Developers
The Urban Land Institute (ULI), which focuses much of its work on affordable housing solutions and highlighting the economic benefits to communities through responsible real estate development, outlined the impact it will have on multifamily developers in this recent article.
First, it makes housing cheaper to build. Environmental review and litigation costs on CEQA-susceptible projects often cost millions of dollars. Due to perceived litigation threat, this risk causes many projects to be canceled or never even attempted. Avoiding this impediment not only preserves capital but also allows teams to reallocate dollars toward design, quality, or affordability.
Second, it makes housing faster to entitle. Based on internal analysis, we estimate that this reform reduces the entitlement timeline by 12 to 18 months. The ability to cut a year or more from the development timeline is a powerful lever, particularly in capital markets where time-based risk premiums often make or break a deal’s feasibility.
Third, it makes housing development less risky. Prior to the reforms, even by-right developments could be stalled by frivolous lawsuits or last-minute community appeals. AB 130’s statutory exemption offers a level of legal protection that was previously unknown for infill development in California, giving developers and their capital partners far greater predictability.
Together, these shifts create a clearer path for infill housing, enabling developers to focus on execution and giving capital providers more confidence to invest in a state with a recent history of combativeness toward potential investors.
The Changes Impacting Multifamily Development
The ULI article notes that not every site will qualify under AB 130’s CEQA exemption, so developers should carefully assess eligibility early in the entitlement process. To qualify, a project must meet all of the following:
- Sites must be located on urban infill land (to be mapped by the Office of Land Use and Climate Innovation with a publication deadline of July 1, 2026).
- Sites must be 20 acres or less.
- Generally, there has to be at least two-thirds residential by floor area.
- Buildings must have a height of 85 feet or less (or comply with additional labor standards if they are taller).
- Be consistent with objective zoning and design standards (with the ability to deviate using permitted State Density Bonus Law density bonuses, incentives/concessions/waivers of development standards).
- Avoid designated sensitive areas, such as wetlands, flood zones, earthquake zones, wildfire zones, or the demolition of designated historic buildings.
Projects that don’t check every box may still benefit from SB 131’s partial exemption, which limits CEQA review only to the element that disqualifies the project (for instance, a site that meets all the required criteria except for its location in a protected wetland).
Also worth noting is that although CEQA reform significantly cuts entitlement friction, it does not override local zoning or discretionary reviews. Cities retain the authority to approve or deny on the basis of zoning, setbacks, and other local land-use controls.
THE VOIT VIEW
Supporters view the rollback as the most significant pro-housing measure in decades, arguing that CEQA’s previous rules were abused to block or delay vital housing projects, aggravating the state’s chronic shortage. Here’s what Voit multifamily brokers had to say about the CEQA reforms:
Robert Vallera, CCIM, Senior Vice President in the San Diego office
“Long-term, the CEQA reforms are significant, especially for larger development projects that were previously held up by the self-interests of various parties. For major projects, they could cut years off the entitlement process. In the short term, we’re not going to see an increase in deliveries in 2026 because of these changes, but deliveries that may have previously taken six or seven years might now take only three or four years.”
Joe Leon, Senior Vice President in the Irvine office
“It will absolutely have a positive effect. The California legislative process, by state and by local city — depending on where you’re located, as some are much worse than others — has been a nightmare and huge impediment to new supply. It’s why we have this dramatic affordability issue in California with the lack of housing. If we had more supply, it would moderate rent growth. The state and the cities have not been able to get out of the way to let developers build.”
Changes Impacting Industrial and Advanced Manufacturing Development
The CEQA exemption for advanced manufacturing and certain industrial projects allows qualifying developers to bypass one of California’s most significant regulatory hurdles, dramatically shortening timelines and costs. However, it’s not a free pass. Only projects meeting strict criteria are eligible, and compliance with all other applicable regulations remains mandatory. Some of the most significant changes are listed below:
No CEQA Environmental Review Required: Projects classified as “advanced manufacturing” and proposed on land zoned exclusively for industrial use are no longer subject to CEQA environmental review, provided they do not impact “natural and protected lands” (such as parks, wetlands, hazardous sites, preserved agricultural land, etc.).
Definition of Advanced Manufacturing: Advanced manufacturing is broadly defined under California law to include sectors such as microelectronics, nanotechnology, semiconductors, advanced materials, integrated computational materials engineering, additive manufacturing, and industrial biotech. This targets sectors like life sciences, high-tech, clean-tech, and smart manufacturing processes.
Streamlined Approvals and Reduced Litigation: The exemption streamlines the approval process for eligible projects, bypassing the time-consuming and costly Environmental Impact Report (EIR) phase. Developers can thus anticipate reduced bureaucratic hurdles, faster project timelines, and lower risk of costly litigation over environmental review issues.
Competitive Edge: For industries qualifying as “advanced manufacturing,” California becomes a more attractive location for development, which could spur growth and investment in these sectors.
Restrictions Still Apply: Not all industrial projects qualify. The exemption does NOT apply to developments on sensitive or protected lands and excludes oil and gas infrastructure and distribution centers, among other categories. Developers still must comply with other state and local environmental, air quality, and safety regulations.
THE VOIT VIEW
Juan Gutierrez, SIOR, Executive Vice President in the Ontario office
Some of the reforms may have unintended consequences, particularly for industrial users who are not in advanced manufacturing.
“I was having a conversation with a client who’s an industrial developer, and he had an interesting observation. He said, ‘Developers who are trying to develop industrial sites are going to have a tough time in infill locations competing with (advanced manufacturing) owner-users.’ If there’s a site for sale and one bidder is a developer and the other bidder is an advanced manufacturing user, the seller is more than likely not going to want to wait two years for a developer. So, I think what that’s going to do is make it more difficult for developers to develop in infill locations.”
The CEQA reforms aim to dramatically streamline the development of multifamily housing and advanced manufacturing projects by reducing costs, shortening timelines, and mitigating legal risks. In theory, the legislation will spur much-needed development in California and balance economic growth with environmental considerations. While we’re optimistic, only time will tell if those goals will be achieved.