This article summarizes changes in California construction law taking effect in 2026.

California’s Housing and Infrastructure Reform Legislation

AB 130 and SB 131 - Comprehensive Reforms to California Environmental Quality Act (“CEQA”)

Effective January 1, 2026, CEQA undergoes significant statutory streamlining under 2025 legislation, primarily AB 130 and SB 131. Key changes include expanded CEQA exemptions for qualifying infill and housing projects, health centers, childcare facilities, farmworker housing, advanced manufacturing, broadband, parks, trails, and certain clean water projects; exemptions for rezoning that implement certified housing elements, and procedural reforms such as capped public hearings, shortened agency review timelines, clearer project completion rules, and limits on administrative record scope in litigation. AB 130 also introduces a statewide Vehicle Miles Traveled (VMT) mitigation bank to simplify transportation impact compliance. SB 131 establishes a “near miss” environmental review process that narrows the CEQA analysis to specific factors preventing exemptions due to a single disqualifying condition.

These bills further freeze all updates to residential building standards until 2031, with only exceptions for emergency, fire, and conservation updates. Together, these reforms reduce discretionary delays and litigation risk for projects meeting statutory criteria while maintaining exclusions for environmentally sensitive areas, with the stated goal of accelerating housing and public serving project approvals.

See Hanson Bridgett’s other client alerts for a comprehensive analysis of CEQA.

SB 79 – Transit-Oriented Housing Development

Set to take effect on July 1, 2026, SB 79, the Abundant and Affordable Homes Near Transit Act, overrides local height and density limits to allow mid- or high-density housing projects near major public transit stops in eight counties: San Francisco, Alameda, San Mateo, Santa Clara, Sacramento, Los Angeles, Orange County, and San Diego. As defined in this Act, “major transit stops” include stations for heavy rail, such as Caltrain, LA Metro rail, and BART, and major bus stops for light transit, like SF MUNI, Santa Clara VTA, Sacramento Regional Transit.

SB 79 adds Government Code Sections 65912.155 through 65912.162 and sets forth two tiers of allowable densities. In tier one, within one-quarter to one-half mile of heavy rail stations, the Act overrides any local zoning to allow a maximum residential development height of 65 to 75 feet, depending on the distance to the station. In tier two, within one-quarter to one-half mile of any qualifying light transit stops, the maximum allowable height is 55 to 65 feet.

SB 79 also makes qualifying projects eligible for streamlined, ministerial approval under existing state law if they satisfy environmental, labor, and affordability requirements, and authorizes local transit agencies to develop housing on land they own at equal or greater densities. While local jurisdictions may adopt alternative Transit-Oriented Development plans subject to state oversight, the law curtails local zoning barriers that have historically constrained housing supply near transit.

Developers and contractors in these markets should anticipate increased project volume and familiarize themselves with the statutory eligibility criteria that allow projects to bypass local zoning hurdles.

The Last Triennial Title 24 Update until 2031

The 2025 California Building Standards Code (Title 24)

Effective January 1, 2026, the 2025 California Building Standards Code, codified in Title 24 of the California Code of Regulations, becomes effective and applies to all permit applications submitted on or after that date. The 2025 update incorporates amendments to the model codes and introduces structural changes that directly affect construction scope, sequencing, cost, and risk. Several of these changes are particularly consequential for contractors, subcontractors, and developers. AB 130 freezes updates on all residential building codes, meaning this Title 24 Building Standards update is the last update until at least 2031.

Wildland-Urban Interface Code

One major change in the 2025 Building Standards update is the creation of a standalone California Wildland-Urban Interface (“WUI”) Code, codified as Title 24, Part 7. Previously, wildfire-resistant construction standards were dispersed across the California Building Code (Part 2, Chapter 7A), the California Residential Code (Part 2.5, Section R337), and portions of the California Fire Code (Part 9). These provisions have now been consolidated, reorganized, and cross-referenced into a single enforceable code.

For contractors working in designated WUI areas, Part 7 governs requirements for ignition-resistant construction, including exterior walls, roofing assemblies, vents, decks, eaves, fences, and other vulnerable building components. The consolidation of these requirements is expected to reduce ambiguity and increase consistency in enforcement, and may result in stricter scrutiny of materials, listed products, and installation details during plan check and inspection.

Energy Code

The California Energy Code (Part 6) continues to move toward higher performance and lower-carbon buildings, with direct implications for construction means and methods. Changes to Part 6 significantly increase coordination among framing, mechanical, and electrical trades and heightens the importance of proper installation and testing. Compliance now depends not only on design intent, but also on field verification, commissioning, and documentation, including home energy rating system (“HERS”) testing and system performance reports.

New Electrification Laws

Electrification policies embedded throughout Title 24, including in the California Building Code (Part 2), the California Residential Code (Part 2.5), the Energy Code (Part 6), and the California Green Building Standards Code (Part 11), are materially expanding the electrical scope of work. These changes include increased service sizing, load calculation constraints, and EV-ready and EV-capable infrastructure requirements.

Existing Building Code

The California Existing Building Code (Part 10) has been amended to more closely align alteration and retrofit projects with Chapter 11B accessibility standards in the California Building Code (Part 2). References to older accessibility frameworks have been reduced or eliminated, increasing the likelihood that even limited-scope tenant improvements or renovations will trigger additional accessibility upgrades.

New Fire and Life Safety Requirements

The 2025 updates also affect fire and life safety systems regulated under the California Building Code (Part 2), California Mechanical Code (Part 4), and California Fire Code (Part 9). Amendments clarify requirements for fire and smoke dampers, essential electrical power for life-safety systems, and integrated system performance, particularly in larger reconstruction or alteration projects.

Green Building Standards Code

The California Green Building Standards Code (Part 11) continues to increase baseline expectations for construction practices. Requirements related to construction waste management, water efficiency, and indoor air quality now demand more rigorous documentation and on-site controls.

Important Construction Contracting Changes

SB 61 - Private Construction Retention Cap

Effective January 1, 2026, SB 61 adds California Civil Code section 8811 and establishes a mandatory 5 percent cap on retention for most private construction contracts entered into on or after January 1, 2026. The statute limits both progress-payment retention and total retention to 5 percent of the contract price and requires that retention percentages flow down consistently through all tiers of subcontracting.

The law includes limited exceptions, such as certain low-rise residential projects and situations where a subcontractor fails to provide required bonds after notice. Importantly, the retention cap cannot be waived by contract, and the statute includes an attorneys fee provision for enforcement.

This change represents a significant shift in private-sector payment practices and is intended to improve cash flow for contractors and subcontractors across the industry.

SB 440 - Private Works Change Order Fair Payment Act

Effective January 1, 2026, SB 440, the Private Works Change Order Fair Payment Act, establishes a standardized statutory process for submitting and resolving claims and change-order disputes on most large, private construction projects. The law sets defined procedures and timelines for claims involving additional compensation, time extensions, and delay impacts, unless the parties expressly agree to an alternative process in writing.

For contractors and subcontractors, SB 440 underscores the importance of strict claim documentation and timely notice. Companies should review and update their internal change-order and claims procedures to ensure compliance with the statute. SB 440 is currently scheduled to sunset on January 1, 2030, unless extended.

For more information about SB 61 and 440, see Hanson Bridgett’s client alert “California to Implement Retention Cap and Change-Order Dispute Requirements for Private Works in 2026”.

SB 517 – Subcontractor Disclosure in Home-Improvement Contracts

Effective January 1, 2026, SB 517 requires disclosure from a general contractor of a home improvement project on whether subcontractors will be used. If a subcontractor performs more than 50% of estimated project cost, the contract must include the subcontractors’ name and contact information. This bill further requires a disclaimer from the prime contractor that “[o]ne or more subcontractors will be used on this project, and the contractor is aware that a list of subcontractors is required to be provided, upon request, along with the names, contact information, license number, and classification of those subcontractors.” Home Improvement contractors should amend their contract documents to include this language accordingly.

AB 1327 – Modernized Home Improvement Cancellation and Contract Requirements

Effective January 1, 2026, AB 1327 allows buyers or homeowners of home improvement contracts to cancel within three days of execution via email. This bill mandates that the contractor provide an email address and a telephone number to assist the homeowner with locating and filing out the cancellation forms. Failure to follow these updated provisions allows the homeowner to file a complaint with CSLB and is cause for discipline. All contractors should update their disclaimers and notices with the appropriate email and contact information.