Newsom Pressures Lawmakers To Gut Landmark Environmental Law, Sparking Rift With Labor

Gov. Gavin Newsom on Monday signed a suite of new bills aimed at jumpstarting housing production in California, where a dire housing shortage has fueled the state’s homelessness crisis.

In a rare move, Newsom pushed to overhaul the California Environmental Quality Act (CEQA), a landmark environmental law enacted in the 1970s. CEQA requires a stringent examination of any new construction for its effects on the environment.

The news comes as the nearly term-limited governor has faced increasing scrutiny for stalled housing construction, despite his previous promises to fix the housing shortage.

The governor had refused to sign the 2025-2026 state budget unless legislators modernized and pared back CEQA. Newsom says by limiting decades-old environmental requirements, the state will be able to pursue an "infrastructure reform."

"Today’s bill is a game changer, which will be felt for generations to come," Newsom said Monday.

Democratic lawmakers ultimately agreed to Newsom’s demands, a dynamic that was criticized by Lorena Gonzalez, leader of the California Labor Federation.

“We’ve seen multiple situations now where it’s clear that the Legislature is in one place and the governor is in another, whether that’s bills that have passed overwhelmingly and been vetoed, or it’s dragging the Legislature along on budget bills,” Gonzalez told the Los Angeles Times. “At some point, the Legislature needs to legislate.”

Despite the politics at play behind the scenes, mutual praise was on display Monday night as Newsom and the legislature shook hands in front of television news cameras, where the governor called the bills “most consequential housing reform that we’ve seen in modern history in the state of California."

Housing scarcity has become a growing factor in California’s worsening homelessness crisis. Housing advocates and some state lawmakers maintain that CEQA, while well-intentioned, has created roadblocks that have made it increasingly difficult to keep up with housing production over time.

“This is what we’ve all been waiting for — a long-overdue step to stop CEQA from being weaponized against housing," Assemblymember Buffy Wicks wrote in a statement.

However, deciding to scale back CEQA was a much more complicated process than was apparent at Monday night's press conference.

Labor groups have long opposed reforming or repealing CEQA, arguing that its reviews force developers to improve project design in ways that often enhance worker safety and public welfare.

For years, labor groups have argued that relief from CEQA offered to developers should come with wage and other benefits for workers. But the new budget bills ignore concerns from labor and environmental groups.

“This was too urgent, too important, to allow the process to unfold as it has for the last generation,” Newsom said Monday.

Officials say two new budget trailer bills — AB 130 and SB 131 — will bring the most change to California's housing and environmental review laws.

Here are the main goals the two bills will attempt to accomplish, Newsom's office says:

Accelerate housing and infrastructure

Permit and approve housing faster

Create sustainable financing tools

Create more accountability in homeless shelters

Double the Renters' Tax Credit to provide greater support for renters

AB 130, introduced by Wicks, will strip most urban housing projects from adhering to CEQA. It will require only developers of high-rise buildings and low-income buildings to pay union-level wages for construction workers.

Meanwhile, Sen. Scott Wiener's SB 131 minimizes CEQA mandates for housing construction and does away with environmental restrictions for residential rezoning in some areas. The bill also strips CEQA requirements from child-care and health clinics, manufacturing facilities, food banks and more.

“With these historic laws, we finally have the tools we need to move the needle on affordability in California,”said Wiener (D-San Francisco). “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."