California is rolling back a landmark environmental law that has been blamed for the state’s housing crisis—and it could speed up building new homes to address the housing crisis.
Gov. Gavin Newsom on Monday passed major changes to the California Environmental Quality Act. The bill takes effect on Tuesday.
“This isn’t just a budget. This is a budget that builds. It proves what’s possible when we govern with urgency, with clarity, and with a belief in abundance over scarcity,” Newsom said in a press release.
Newsom dubbed the bill a “game-changer, which will be felt for generations to come.”
The new legislation exempts new housing in urban infill areas from the CEQA, which means that groups who oppose housing projects can no longer slow down building progress by suing over possible environmental violations. It also makes changes to speed up infrastructure projects.
“In addition to the legislature, I thank the many housing, labor, and environmental leaders who heeded my call and came together around a common goal—to build more housing, faster and create strong affordable pathways for every Californian,” he said.
California is a state that is notorious for its unaffordable housing, and it scored an F in the Realtor.com State-by-State Report cards for housing and affordability, released earlier this year. It was also the worst in the nation for its permits-to-population ratio. Last year, the state accounted for 6.8% of all residential building permits, despite having 11.7% of the total population.
“In short, California has not figured out how to build enough housing. While the state’s unique physical geography is a factor, state and local housing supply regulations are the driving force behind California’s housing shortage,” says Realtor.com Senior Economist, Jake Krimmel.
“In 2018, California ranked 49th among US states in terms of housing units per capita; and since 1990, the state added almost 10 million residents but built just 3.6 million housing units.
“Again and again, research has shown that complex webs of local regulations and red tape – especially in California – prevent new construction, delay and shrink construction projects, and increase rents and house prices as a result.”
Krimmel adds that CEQA should cut red tape to simplify the development process, and in doing so it will “get cheaper”.
“CEQA reform will not only allow for denser development, but it will also simplify the permit approval process,” he says.
Californians struggle to find affordable housing
Housing affordability has been a major economic, political and social issue facing California over the last few decades.
“Despite boasting one of the highest median household incomes in the country (at nearly $100,000)— not to mention being among the top five economies in the world—California has the second lowest homeownership rate of any state, ahead of only New York,” says Krimmel.
“Renters have long been stressed as well. According to the Public Policy Institute of California, nearly 30% of California renters are severely cost burdened – only Florida and Louisiana perform worse. In 2022, one third of California renters made more than $100,000 a year.”
That puts homeownership far out of reach even for many relatively high earners.
“California is not a state that is known for affordability,” says Jennifer Beeston, executive vice president of national sales at Guaranteed Rate. “There are portions that are affordable such as Lake County and Ukiah. However, major cities in California such as Los Angeles, San Diego, San Francisco, and San Jose show up consistently as some of the least affordable cities in the country.
“For most parts of California, the starting price to get into a home will be over a half-million dollars. There is a lot of movement to create affordable housing, and we are starting to see the beginning of that at a large scale, which is exciting as it could change the narrative.”
Holland & Knight’s new study, “California Environmental Quality Act Lawsuits and California’s Housing Crisis,” found that the majority of litigation filed from 2013 to 2015 dealt with the state’s housing and affordability concerns.
The study, which analyzed statewide CEQA litigation obtained under the California Public Records Act, found that housing projects were the top target of CEQA lawsuits.
Housing projects in the Southern California region—Los Angeles, Orange, Ventura, Riverside, San Bernardino, and Inyo counties—were challenged.
“Given California’s extraordinary housing crisis and the shame inherent in having the nation’s highest poverty rate in one of the world’s most successful economies, our latest research clearly demonstrates the need to update CEQA’s litigation rules to bring enforcement of the law into alignment with the state’s environmental, equity, and economic priorities,” says Jennifer Hernandez, the head of Holland & Knight’s West Coast Land Use and Environmental Group.
“CEQA is one of the well-recognized culprits in California’s housing supply and affordability crisis. The need to update CEQA litigation rules to end nonenvironmental abuse of this important California law is stronger than ever.”
The study emphasized the disproportionate use of CEQA to target housing, specifically apartments and condos, which limits supply across the state. In doing so, it’s become impossible to create higher-density housing that is affordable to workers who are earning lower wages.
The San Francisco Bay Area and Los Angeles region accounted for 58% of all CEQA lawsuits filed, according to the Holland & Knight study.
“The general driver for leaving California is affordability, and this is at all income levels,” says Beeston. “You have people who lived in California their entire life but no longer can afford to stay, and you have business owners and the wealthy who became fed up with current and projected California tax policies and left for less aggressive tax states. You also have people who relocated out of California due to the companies they work at leaving the state.”
Beeston also notes that she hasn’t seen much migration into the state recently.
A faster path to affordable housing
Newsom hopes that the new framework will help speed up housing and infrastructure, push for faster housing permitting and approvals, and find sustainable financing tools to aid new developments.
Several California lawmakers and city leaders have expressed enthusiasm for the new legislation.
“With these historic laws, we finally have the tools we need to move the needle on affordability in California,” said Sen. Scott Wiener. “It isn’t easy to make changes this big, but Californians are demanding an affordable future, and it’s our job to deliver for them no matter what.”
Beeston says it’s too early to tell the impact of the changes, but sees potential for new construction.
In 2025, California ranked as one of the country’s top “greenest states,” according to WalletHub. So it’s no surprise that Californians were quick to note how the reversal of CEQA and speeding up housing construction could actually hurt neighborhood character and the surrounding environment.
“This has been a consistent concern in California. Many communities are very protective of their footprint, which is understandable,” says Beeston. Still, an influx of new housing would be welcome by most California communities.
