A tale of two policies: California's expanding regulatory reach and the selective deregulation of infill housing

California's approach to land use and environmental policy is quickly evolving, not through a single bill that imposes sweeping reform but through a pattern of steadily expanding state intervention in this historically local arena. The recently concluded and current legislative sessions exemplify this trend. The legislature is imposing new regulations on certain industries, while simultaneously lowering barriers to favored uses, especially infill housing. The policy shift is unmistakable: Sacramento is redrawing the rules of development with a firmer hand, favoring projects that align with its climate, equity, and housing agendas, while tightening the reins on others.

Nowhere is this clearer than in two recent bills: AB 98, signed by the governor in September of 2024 which regulates warehouse development, and AB 609, which just passed the State Assembly and now will be heard by the Senate and would exempt many infill housing projects from the California Environmental Quality Act (CEQA).

AB 98 marks a substantial shift in the regulatory framework for logistics facilities. Prompted in large part by controversy over certain projects in the Inland Empire, AB 98 creates detailed design, operational, and siting requirements for new and expanded warehouses and other logistics uses, with stricter mandates for facilities that are larger than 250,000 square feet, are near sensitive receptors like homes or schools, require certain rezoning actions, or are within designated "warehouse concentration regions." These requirements include minimum setbacks, mandatory use of electric vehicles and zero-emission equipment, microgrid readiness, and extensive buffering and landscaping protocols.

The bill also codifies several practices previously advocated by the Attorney General's office and environmental organizations, including truck routing plans and anti-idling signage, and introduces new provisions such as affordable housing replacement mandates. These are no longer mere recommendations, rather they're now enforceable minimums. AB 98 also mandates that cities update their general plan circulation elements to address policy issues associated with logistics uses, with fines against local jurisdictions who fail to satisfy this mandate that are enforceable by the Attorney General.

Even with pending clean-up legislation (SB 415/AB 735) seeking to clarify ambiguities around definitions and feasibility thresholds, the overarching signal remains: The state is imposing industry-specific requirements on one of the state's most important sectors, creating a baseline level of regulation that could affect how projects negotiate through the entitlement process with local government officials, environmental organizations, and other community stakeholders.

In contrast, AB 609, recently passed in the Assembly 67-0, reflects a deregulatory impulse, at least for projects that advance the state's pro-housing goals. The bill provides a broad CEQA exemption for infill housing developments up to 20 acres in size, located within or adjacent to existing urban uses.

The exemption would apply to single-family or multifamily projects, whether market-rate or affordable, provided they meet minimum density requirements and avoid certain environmental, public safety, and historic resource exclusions. Unlike previous CEQA reform bills like AB 2011 and SB 6, AB 609 as currently drafted contains far fewer labor, affordability, and location-specific conditions.

AB 609 thus presents a notable expansion of the existing Class 32 Infill CEQA Categorical Exemption. This existing exemption is limited to development sites of no greater than five acres within city limits and requires technical analysis to confirm that there will be no significant effects to traffic, noise, air quality, water quality, or public services. Moreover, because AB 609 would create a new statutorily codified exemption, projects using AB 609 would not be subject to the uncertainty and risk of legal challenges that flow from the often litigated exceptions to CEQA's existing categorical exemptions (these prevent the use of categorical exemptions where there is a risk that a project could have a significant impact due to unusual circumstances, cumulative effects, or other factors).

At the same time, in contrast to some high-profile pro-housing legislation in prior legislative sessions, AB 609 requires a proposed project to be consistent with either the applicable general plan or zoning designation, as well as any applicable local coastal program. This preserves a degree of local control over land use policy while eliminating CEQA review as an impediment to housing development for qualifying projects.

The juxtaposition of AB 98 and AB 609 are two sides of the state legislature's increasing willingness to address what Sacramento perceives as policy gaps in the historically local purview of land use decision making. Together, they reflect a deeper realignment of the state's land use priorities, executed not through sweeping omnibus bills or comprehensive CEQA overhaul, but through surgical legislative intervention.

Rather than attempt the politically infeasible, California is choosing to create more nuanced, incremental shifts in the legal landscape governing development projects. One path, streamlined and favored, is paved for housing. The other, increasingly narrow and scrutinized, is reserved for many other sectors even when they serve vital roles in the state's economy, supply chains and employment landscape.

This model represents an increasingly centralized form of land use planning, using state law to determine which uses are favored and where, and replacing the ground-up decision-making that has historically defined land use practice. For practitioners, the state's increased role in land use planning demands a dual focus on not only the local land use rules that have historically governed entitlement decisions, but also on the complex and ever-evolving interplay between state law and local control.

Benjamin Saltsman is a partner at Gibson Dunn.