How California is addressing the housing shortage: CEQA Reform Explained
The housing crisis in Los Angeles has reached a critical point as rent hikes, limited inventory, and homelessness has put pressure on policymakers to act. This coupled up with the tragedy of the California Wildfires in January of 2025, policymakers are spearheading initiatives in response to California’s housing needs. This said, California has passed a wave of housing-related laws in 2025 that are now in effect which aim to streamline development, protect tenants, and create more affordable housing opportunities.
If you're a renter, buyer, investor, or developer, here's what you need to know about how new California legislation is addressing the housing shortage in Los Angeles.
As of June 30th, 2025, CEQA Reform is now in effect.
The California Environmental Quality Act, commonly referred to as CEQA, was enacted in 1970 to ensure that new development projects would not harm the environment. It required developers to study and disclose potential environmental impacts such as air pollution, traffic, or noise before moving forward. While it helped protect natural resources, over time it began being used to delay or block housing projects, even in areas that were already developed, which made California’s housing shortage worse.
The California Environmental Quality Act (CEQA), although well-intentioned, has become a significant barrier to urgently needed housing development, particularly in high-demand urban areas such as Los Angeles and the Bay Area. On June 30th, 2025, CEQA Reform (AB 130 & SB 131)was signed into law as part of the state budget. Here’s how CEQA Reform will impact the real estate market…
CEQA Reform Impact:
Buyers & Builders: Most urban infill housing (e.g., multi‑unit, ADUs, mid‑rise apartments) is now exempt from CEQA review, significantly reducing delays and legal costs, accelerating housing production in high-demand areas.
Renters: More housing supply expected in coming years (2028+), which should help moderate rent growth over time.
Breaking AB 130 & SB 131 down…
AB 130 provides a complete CEQA exemption for certain types of urban infill housing projects — including multi-family apartments, supportive housing, and mixed-use developments.
Here’s what qualifies for CEQA Reform:
Projects under 85 feet tall
Located in urbanized areas or previously developed land
Sites under 20 acres
Near existing infrastructure like public transit
If a project meets these criteria, no environmental review is required under CEQA. It’s automatically eligible for ministerial (streamlined) approval. This is a game-changer for California cities where developers have struggled to move forward with housing due to CEQA-related delays.
SB 131 focuses on those who almost qualify, or are related to other public needs. SB 131 provides flexibility if a housing project fails to meet only one exemption requirement. This does not automatically mandate CEQA, but CEQA Reform is still plausible should the developer analyze that single environmental issue, thus saving time in the development process and speeding up new build while reducing costs.
SB 131 also expands CEQA exemptions to:
Projects tied to Housing Element rezoning
Farmworker housing
Fire mitigation projects
Health clinics, daycares, and food banks
What are the concerns behind CEQA Reform? How are these concerns addressed?
Environmental justice advocates worry that removing CEQA reviews could lead to unintended consequences in vulnerable communities. However, in cities like Los Angeles, tenant protection ordinances such as the Replacement and Occupant Protection Ordinance (RPO) are being used to balance new development with renter protections.
Los Angeles: Housing Crisis Act & RPO
What it does:
Requires developers to replace demolished housing units unit-for-unit.
Strengthens tenant relocation assistance and occupant protections for renters affected by redevelopment
Impact:
🔄 Renters: Greater security—minimal displacement, better notices, and relocation support.
🏗 Developers & Buyers: Allows new units to be built without displacing existing residents; smoother approvals under state law.
In summary, displacement is prohibited by ensuring tenants who are impacted by CEQA Reform are provided relocation support through advanced 90-day notices and relocation Assistance. The amount granted can range from $9,500 - $30,000, depending on a number of factors such as...
Length of tenancy (more or less than 3 years)
Income level (low-income households qualify for higher amounts)
Tenant status (senior, disabled, or family with children = enhanced benefits)
These amounts are adjusted annually by the City of Los Angeles Housing Department (LAHD). If you’re looking for more information on these new laws, click here.
If you’re a Los Angeles Landlord or Renter looking to relocate to the Los Angeles area, I provide tenant placement services. To learn more about my services, click here.
