What’s Going on with CEQA—and Why It Matters for Commercial Real Estate

In California commercial real estate, few acronyms spark as much eye-rolling, or panic as CEQA. The California Environmental Quality Act, passed in 1970, was supposed to protect the environment by requiring environmental reviews for new developments. But over the years, CEQA has evolved, or some might say mutated, into a powerful tool that can slow down, reshape, or flat-out kill real estate projects.

If you’re in CRE you need to know what’s happening with CEQA and how the game is changing.

CEQA 101 (and Why It’s a Legal Minefield)

CEQA was originally designed to ensure environmental protections during the planning stages of any project that could have an environmental impact. It’s a noble idea. But in reality, CEQA is often used not just for legitimate environmental concerns, but also as a delay tactic by groups with unrelated agendas. Competitors and NIMBY groups regularly exploit it to file lawsuits that bog down development.

You can read more about CEQA’s origin and implementation on California's Office of Planning and Research site.

Newsom’s CEQA Reform Push

Recognizing that CEQA has become a massive obstacle to addressing the state’s housing and infrastructure needs, Governor Gavin Newsom proposed a major CEQA reform package in 2023. The plan aims to streamline infrastructure permitting and environmental reviews, reduce time spent in litigation, and get shovel-ready projects actually… well, shoveling.

According to the Governor’s press release, the reforms focus on accelerating clean energy, transportation, and water projects, all while putting timelines on court decisions for CEQA lawsuits. The goal? Less delay, more development.

CRE’s Tangled Relationship with CEQA

For commercial real estate professionals, CEQA has become the unpredictable wildcard in an already risky game. Here's how it's affecting your world:

Delays Are the New Norm

CEQA lawsuits can add years to project timelines. Projects that should take 12 to 18 months can get dragged into 3- to 5-year legal sagas. In commercial real estate this can completely unravel deals and much needed time sensitive housing projects.

No One Is Safe, Not Even Housing

The most notorious recent CEQA case? A UC Berkeley student housing project that got hit with a lawsuit claiming that people's noise (yes, the sound of students living their lives) was a harmful environmental impact. Although the California Supreme Court overturned the ruling, it sent shockwaves through the development community.

Risk Is Now a Budget Line Item

Developers in California have started treating CEQA lawsuits as inevitable. Many are factoring legal expenses and multi-year delays into their underwriting models. Others are actively seeking CEQA exemptions, especially through Senate Bill 35 or by building 100% affordable housing, which can sidestep CEQA entirely under certain conditions.

Green Building Isn’t Just About ESG Anymore

Environmental design strategies like installing solar panels, water-efficient landscaping, and transit-friendly infrastructure can help a project clear CEQA reviews faster by showing proactive mitigation. It’s good for ESG (Environmental, Social, and Governance) reporting, but now it’s also an insurance policy against lawsuits.

Changes After the 2025 Los Angeles Wildfires

Following the devastating fires in Los Angeles and Ventura Counties in early 2025, several major changes to CEQA were enacted to accelerate rebuilding and improve wildfire resilience. This includes a legislative overhaul that was passed as part of the $321 billion budget bill that passed in June 2025.

• Executive Order N-4-25 (January 12, 2025) suspended CEQA and Coastal Act permitting for rebuilding projects in fire-affected areas.

• Properties rebuilt in the same location and within 110% of the original footprint and height qualify.

• Reconstruction of homes, utilities, and infrastructure like water, sewer, and telecommunications have been streamlined.

• Urban infill housing projects are now exempt from CEQA review, removing barriers to development.

• Nine project types, including wildfire prevention, health clinics, and public parks are also CEQA exempt.

What CRE Pros Should Do Now

If you’re building in California, you need to outsmart the process, not just follow it.

• Involve a CEQA-savvy land use attorney before you purchase land, not after.
  Take advantage of fast-track programs like SB 35, which allow qualifying projects to bypass CEQA review.

• Engage early with the community and local stakeholders to reduce the chances of CEQA-based objections.

• Consider adaptive reuse or renovations of existing structures, which often have fewer CEQA hurdles than ground-up developments.
  
  

A Shift in Political Winds?

There’s growing bipartisan agreement in Sacramento that CEQA reform is overdue. With a crushing housing shortage, climate goals on the clock, and a public tired of empty promises, California’s leadership is finally starting to cut through the red tape. The question is: will it be enough? And will these reforms come in time to revive investor confidence in one of the most complex and high-stakes real estate markets in the country?