During my tenure as a professor at Pepperdine University in Malibu, California, any conversation about campus expansion revolved around the complexities of California’s regulatory maze. These laws are known for being so cumbersome that the University’s former president, Andrew K. Benton, was elected, in large part, because of his ability to navigate the web of state environmental laws and development restrictions. The Board of Regents no doubt reasoned, if he could overcome the roadblocks set by agencies like the California Coastal Commission and the California Environmental Quality Act (CEQA), surely, he could tackle anything. Little did I know, Pepperdine’s success in maneuvering the regulatory labyrinth was just a glimpse of a much bigger problem.
The CEQA and a myriad of other regulations have become major obstacles to growth in California. The housing shortage, as of July 2025, is the second highest in the nation. California is estimated to be 1.8 million housing units short, which represents 12.2% of the state’s total housing stock. Rent in California is 33% above the national average with renters paying, on average, $2,800/month. Rent hikes in Los Angeles are double the national average. California’s homeownership rate is 56%, 10% lower than the national average. And these challenges have only been exacerbated in the aftermath of the January 2025 Los Angeles wildfires. As of July 10, 2025, of the over 800 homeowners who submitted applications to rebuild after their homes were destroyed in the Altadena and Palisades fires in January 2025, only 145 of them have received approval for reconstruction.
The state also has a long history of NIMBY (Not In My Backyard) syndrome, where the California legislature repeatedly suppresses efforts to increase the housing supply and alleviate development barriers. Each year, many housing bills are introduced, but a significant number fail to become law. One of the most notable attempts was Senate Bill 827, which aimed to boost building density near public transit by permitting structures up to 8 stories tall within a block of a major transit hub. Unfortunately, the bill was defeated in 2018, but a revised version, SB 79, is currently making another attempt and is pending in committee as of July 2025. The California Senate blocked SB 607, which aimed to ease housing development for low-income families by exempting certain projects from CEQA. The bill was gutted in committee after strong opposition from environmental groups and labor unions, leaving its future uncertain.
The housing and development crisis has escalated to the point where the state, once a steadfast champion of environmental protection, is rethinking its commitment to prioritizing the environment at all costs. Democratic Governor Gavin Newsom acknowledged that the lack of housing supply was, in part, exacerbated by environmental regulations. On June 30, 2025, the Governor signed Assembly Bill 130 and Senate Bill 131 into law, marking a significant legislative move to address the permitting and approval delays under the CEQA. While AB 130 focuses on streamlining housing development and local permitting processes, SB 131 targets changes to infrastructure, public facilities, and procedural aspects of CEQA. These new bills introduce exemptions and faster timelines to expedite environmental reviews, signaling a shift towards balancing environmental goals with the urgent need for development.
It is crucial to understand that Newsom’s rollback isn’t just a housing issue—it’s a reflection of frustration Californians have of the broader regulatory state that has become a hindrance to innovation and growth. The complexity of California’s regulations has created a climate where businesses are hesitant to invest, where developers are unable to meet the state’s demand for new housing, and where the public suffers from skyrocketing housing costs and difficulty rebuilding after fires.
The California Environmental Quality Act (CEQA), signed into law by Ronald Reagan in 1970, marked the start of modern environmental law in California. CEQA paved the way for a wave of subsequent environmental laws, establishing California as a leader and pioneer in environmental regulation across the United States. However, the environmental goals set by the CEQA, as well as the subsequent layers of laws and regulations, have far outstripped the original scope of the legislation. For example, in 1976, California’s Coastal Commission introduced the nation’s most comprehensive regulations for coastal planning. And by 2006, the state passed the Global Warming Solutions Act, which aimed for ambitious reductions in greenhouse gas emissions. What started as an effort to protect California’s natural resources has evolved into one of the largest barriers to housing and infrastructure development in the nation.
Strict land-use regulations, environmental reviews, and building codes in California have made doing business increasingly expensive and less competitive. In addition to CEQA’s restrictions, California has over 400,000 regulations, making it the most expensive state to start a business. Compliance with the California Environmental Quality Act (CEQA) can be particularly burdensome, with Environmental Impact Reports (EIRs) taking over a year to complete and costing hundreds of thousands, or even up to $1 million. The state’s construction timelines often extends from 10 to 18 months, far surpassing the national average of seven months, due to stringent permitting processes and environmental considerations.
High compliance costs create barriers to entry that disproportionately affect small and medium-sized businesses, making it more difficult for them to access the market. Even when projects are approved, the financial and administrative burdens are much greater for smaller developers, making it harder for them to compete and thrive in the state. These complex and costly regulations are driving businesses out of California. Between 2005 and 2024, over 237 companies, including eleven Fortune 1000 firms such as McKesson, have relocated. The pace of these departures has intensified, with the number of businesses exiting nearly doubling from 2012 to 2019, highlighting the growing impact of the regulatory burdens on the state’s economy.
While California’s environmental laws have successfully reduced pollution, their unintended consequences have come at a significant cost. One of the most significant issues with the current regulatory regime is its impact on new housing construction, which is further exacerbating California’s housing affordability crisis. The median home price in California is nearly 2.5 times higher than the national median, driven, in large part, by the high costs of development and building due to numerous regulations and restrictions. Homelessness in the state reached record levels in 2024, with over 187,000 individuals, 24% of the nation’s homeless population, residing in California. Two-thirds of these individuals were unsheltered, representing nearly half of the country’s unsheltered population. Environmental programs like cap-and-trade have been criticized for transferring pollution burdens to disadvantaged communities, sparking significant concerns that these policies are harming the very groups the government aims to protect.
The legislative landscape itself is riddled with contradictions. The CEQA has been manipulated to block projects with little regard to their environmental impact. For example, a net-zero energy project proposed by Tejon Centennial, which included building more than 3,500 affordable homes and 30,000 electric vehicle charging stations, was blocked using CEQA, despite its environmental benefits. There are numerous examples where CEQA exempts projects with significant environmental impacts, such as single-family homes, while imposing more scrutiny on larger developments. This leads to a paradox where single-family homes, which use more land, water, and resources, are approved without review, while more sustainable apartment projects face delays.
Newsom’s rollback of CEQA presents a rare opportunity to rethink this tangled web of regulations and dismantle the parts that no longer serve the public interest. This reexamination could include not only more CEQA reform but also a rethinking of city and local permitting processes and zoning laws. Even when the city is under immense pressure to expedite building permits, the city of L.A. took an average of 55 days to approve a wildfire rebuild permit and is only approving homes at an average pace of 11 homes per week. To further place these staggering numbers into context, over 16,000 structures were destroyed in these recent L.A. fires. Without public pressure post-wildfire, the city of L.A. takes, on average, 2-6 months to approve permits for home construction. Permits not only take a long time to approve, but few are granted overall. In April 2024, the Dallas-Fort Worth metro area, home to less than a quarter of California’s population, approved more building permits than the entire state of California.
Many local zoning laws in California, ranging from floor area ratios (FARs) to height restrictions, are among the most significant barriers to new development. These regulations can make land nearly impossible to develop, especially in urban areas where the demand for housing is highest. Even with recent CEQA reforms, restrictive zoning laws continue to limit the ability to build affordable housing. For example, parking space rules and setback requirements use up valuable land space, discouraging density and contributing to urban sprawl. In some cases, these regulations have even driven people to relocate to fire-prone areas rather than concentrate development in city centers. Relaxing these zoning restrictions will enable more efficient land use and growth in areas with the greatest housing demand.
Governor Newsom’s rollback of CEQA is a necessary, and well overdue, first step in addressing California’s regulatory crisis. However, it is just the beginning. If California is serious about solving its housing crisis and reviving its economy, it must dismantle the maze of permits, local zoning laws, and environmental regulations that hinder growth. On the backs of this deregulatory enthusiasm, this is the moment to rethink the regulatory state. Only by doing so can California reclaim its status as the Golden State of opportunity.
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