California carries out important reforms into the process of environmental assessment and the construction of codes

By Jack Hargrove

For decades, California has built up a reputation as one of the most difficult states for developers to build in. High costs, long -term timelines and a hard regulatory environment have stopped many projects before they can even start. Earlier this summer, however, the state legislator of California passed on important reforms to one of the laws that are most responsible for limiting development: the California Environmental Quality Act of CEQA.

CEQA is a law on the environmental assessment that was adopted in 1970 shortly after the congress adopted the comparable National Environmental Policy Act (NEPA) at the federal level. Like many other laws for assessing the environment, CEQA was intended to ensure that the environmental effects of a project are limited before the start of construction. Unfortunately, the broad interpretation of CEQA has impeded the required commercial and residential development throughout the state. Although NEPA only applies to projects that receive federal financing or require a federal permit, each project in California must undergo a complete CEQA assessment that requires approval of a government level. The CEQA assessment process has enabled each party that opposes a certain development to considerably delay or even prevent construction via CEQA-based lawsuits.

In the following decades, many reforms for CEQA have been presented, but a major change has never been taken. Momentum for required reforms that have been built up over time due to the serious housing shortage of California. In June, the Californian legislative power worked on a state budget for FY 2026 from 1 July Unless the legislative power AB 130 and SB 131 adopted. These budget trailers include the language for important CEQA reform from Assembly -member Buffy Wicks and Senator Scott Wiener. Newsom succeeded and the budget law was signed in the law.

So, what specific changes have been made that will make development in the state easier? Because the primary goal of the reform was to illuminate the home crisis in California, it is aimed at projects that are oriented. Specifically, projects for housing development are now fully exempt from CEQA assessment, provided that they meet certain requirements, but are not limited to:

• Two -thirds of square meters must be devoted to housing, or half of square meters if there are more than 500 residential units
• The project must use less than 20 hectares of land
• The structure must be less than 85 feet high
• The project must meet the density requirements for the area
• The project must meet other requirements, including historical conservation and tribal consultation

Furthermore, if the project does not meet one of these conditions, the CEQA assessment will only relate to that specific aspect of the project. Qualifying developments are also held for a 30 -day timeline. Moreover, the re -use from commercial to residential will no longer require a CEQA assessment, making adaptive reuse projects easier. Although the legislation is aimed at the property for residential real estate, many developments will be eligible for multiple families and mixed use.

The budget legislation reforms more than just CEQA; It also offers a much needed change in the way California Building Code Updates work. The construction code for residential projects is frozen to receive important updates for six years. In addition, the construction code updates for commercial projects have been extended to a three-year cycle, which means that the previous timeline of 18 months is doubled. These changes to the construction of code updates make it easier for developers to plan, reduce the costs and to speed up approval processes.

Although these changes will hopefully make it easier for the commercial real estate sector to build in California, there is a large piece of bad news: warehouse developments are carved and excluded from all reforms related to CEQA. This is on the heels of the AB 98 of California, an important piece of anti-warehouse legislation that was adopted in 2024. On the positive side, the reforms of the construction code apply to warehouse developments.

AB 130 and SB 131 are the most important changes in CEQA, because the law was introduced more than half a century ago. Nevertheless, commercial real estate developers in California have reason to be staring. CEQA is just one of the factors that stop development in California, and it is possible that these reforms do not go far enough. The limitations of California on development have also created a shortage of commercial and industrial properties, and further reform of the regulations on these types of properties is also desperately needed. However, this legislation is an important step in the right direction, and hopefully a signal that California and other states with comparable attitudes heat up for development.