You Can’t Sue ‘Neighborhood Character’ Anymore

California is Finally Turning the Corner on Housing

As a subscriber to the Rebuild, you are most likely no stranger to the housing crisis we are currently facing. New data from Harvard’s 2025 State of the Nation’s Housing report, shows that home prices nationwide are up 60% since 2019, with the median home price reaching $412,500—an astonishing five times the median household income, which is much higher than the standard financial advice to only spend three times your income on housing. Only 6 million of America’s 46 million renters can afford the monthly mortgage payment on a median-priced home, effectively locking 87% of renters out of ownership. In many major metro areas, that price-to-income ratio climbs even higher, pushing first-time buyers out of the market entirely.

Image Credit: State of The Nation Housing Report

More than half of all renters are now cost-burdened, meaning they spend over 30% of their income on rent and utilities. One in four renters is severely burdened, spending more than half their income on housing.

In California, the crisis is even more acute. High demand, limited supply, and regulatory hurdles like CEQA (the state’s environmental review law) have made the state ground zero for the country’s affordability crisis. Even modest infill housing projects have been delayed for years, or canceled altogether, because of lawsuits, permitting delays, or local obstruction. As a result, even with a surge in new construction, prices and rents continue to climb, and the path to stability remains out of reach for millions.

But something big just changed.

The Death of CEQA Weaponization

Just last week, you may have received this push notification on your phone from The New York Times. The headline itself obscures the actual impact of the news, but regardless, it may have been the first-ever mainstream notification about YIMBY news!

This was a result of Governor Newsom signing landmark budget trailer bills (AB 130 and SB 131) enacting the largest overhaul of CEQA in decades. Under these laws, most “urban infill” housing projects are now exempt from CEQA review. For example, AB 130 exempts any infill development (all-residential or primarily residential mixed-use) under 20 acres (5 acres for “builder’s remedy” projects) that meets local zoning and density rules, so long as it is in an incorporated city or urban area, has been previously developed or is surrounded by urban uses, and is not on sensitive or hazardous sites.

Qualifying projects must also meet minimum density thresholds (typically 10–15 units/acre) and comply with labor standards on prevailing wages for projects over 85 feet tall. SB 131 creates nine new CEQA exemptions for public-serving projects (health clinics, childcare centers, broadband, parks, advanced manufacturing, clean water works, wildfire prevention, farmworker housing, and food banks) and raises the bar for CEQA lawsuits (limiting “gotcha” tactics and raising relevancy standards). This will do wonders for housing production that have often been delayed or even stopped by CEQA alone for various reasons, outside of direct environmental concern. For example, in 2020, lawsuits under CEQA tried to block about 48,000 approved housing units statewide, which was half of CA’s housing production for the year.

It also exempts rezonings done to implement state-mandated housing plans. Taken together, these changes mean “most new apartment buildings will no longer face the open threat of environmental litigation” in California’s cities. Open threat is a key phrase here, as we have become aware that while the birth of these laws signed into practice by Governor Ronald Reagan in the 60's/70's, were very much needed to combat the over pollution from lack of any regulation when it came to development, has transformed itself over the years and become an obstacle to the progress it once hailed. Anyone can weaponize CEQA and threaten a lawsuit based on subjective threats to the environment, such as "neighborhood character." This has delayed projects in California for decades now, where housing projects remain in limbo for years before permits are even issued to just start construction.

Governor Newsom hailed the reforms as part of the “abundance agenda” tearing down barriers to build more housing. He said the budget was not just a budget but a “budget that builds,” and lauded a “belief in abundance over scarcity”. At the June 30th signing ceremony he proclaimed the new laws “the most consequential housing reform we’ve seen in modern history in California,” thanked pro-housing advocates – “Go YIMBYs! Thank you for your abundant mindset” – and noted that by enacting AB 130/SB 131 through the budget he could overcome legislative deadlock.

Newsom also insisted that local governments’ mandatory rezones under approved housing plans would be exempt from CEQA to speed site readiness. Notably, the new laws make permanent several existing pro-housing measures: they remove the sunset on SB 330 (the Housing Crisis Act) and lock in provisions of the Permit Streamlining Act and Housing Accountability Act. They also freeze new statewide residential building codes through 2031 (except in emergencies) to provide cost certainty.

Labor, Environmentalists, and YIMBYs Unite

These CEQA reforms were supported by a broad coalition of housing advocates, labor and even some environmental groups. Assemblymember Buffy Wicks (author of AB 130) said the bills stop CEQA from being “weaponized against housing” and will allow “desperately-needed homes” to be built faster and fairer. Senator Scott Wiener (author of SB 131) called the bills “a bold step forward” against California’s housing shortage and said they “get red tape and major process hurdles out of the way.

On the other hand, some labor unions and environmental organizations warned that the reforms could sacrifice hard-won protections. Even so, the Carpenters Union ultimately endorsed the package, with its president thanking Newsom for "streamlining housing construction" and providing "the legal foundation to get more homes built." This split within organized labor highlighted the complex tradeoffs inherent in housing reform—balancing the urgent need for more homes alongside concerns about worker exploitation, showing that the YIMBY and labor movement need not be at odds against one another.

Many environmental advocates also recognized that dense infill housing actually serves environmental goals by reducing sprawl and car dependency. Groups like Greenbelt Alliance worked constructively with sponsors to add meaningful safeguards before signaling support for what they characterized as a "narrowly targeted reform" rather than a wholesale dismantling of environmental review.

Not the Only Win!

In addition to CEQA changes, the 2025–26 session has produced or advanced numerous pro-housing bills, this is a sharp turn from early in the year, where we saw few bills that tackled affordability make its way through. A key Senate bill, SB 79 passed the Senate in June 2025 and now awaits action in the Assembly. I recently wrote about this bill, where I detailed how SB 79 would legalize multi-family housing (up to 7 stories) within half a mile of major transit stops and allow public transit agencies to develop housing on their own land at similar or greater densities. A common-sense reform to just let people live near the train we pay billions to fund!

There is a lot of action happening, so here is a table to help with the many bill names mentioned above:

New Challenges: Immigration Enforcement and Trade Disruptions

However, even as California removes regulatory barriers to housing development, new federal policies are creating additional obstacles. Immigration raids across Los Angeles and other California cities are disrupting construction projects that rely heavily on immigrant labor. Developers report that workers are abandoning job sites out of fear, causing project delays and increased costs.

The construction industry, which already faces labor shortages, is being further strained by federal immigration enforcement. Nationwide, the construction industry is short roughly 250,000 workers, a gap Nolan Gray highlights that also stems from immigration clamp-downs from Trump’s first term. that stalled an overdue building boom. Immigrants make up about 30 percent of all U.S. construction labor—and an eye-popping 41 percent in California. Many are undocumented, so federal sweeps risk pulling entire framing crews off the job overnight, sending schedules and budgets spiraling.

Adding to these challenges, federal tariffs on construction materials are driving up development costs. Import disruptions are affecting the supply chains that California builders depend on, potentially making new housing projects more expensive and less viable.

These federal policies work directly against California's housing abundance agenda, creating a concerning dynamic where the state removes barriers to construction while federal actions simultaneously make building more difficult and expensive.

Are we finally Ditching Scarcity?

The path forward won't be without obstacles, particularly as federal immigration enforcement and trade policies create new barriers to construction. However, for the first time in decades, California has the policy framework to build the housing it desperately needs. The question now is whether cities, developers, and communities can seize this opportunity to create a more affordable, sustainable, and equitable future for all Californians—while navigating the headwinds created by federal policies that work against housing abundance.