Pacific Beach Builder
California construction laws 2026 compliance guide - SB 79 transit housing, SB 61 retention cap, CEQA streamlining for Pacific Beach contractors

California Construction Laws 2026: SB 79, SB 61, CEQA Streamlining & Contractor Compliance Guide for Pacific Beach

California's 2026 construction landscape has fundamentally shifted with the implementation of seven major legislative changes that took effect January 1, 2026—with an eighth arriving July 1, 2026. For contractors operating in Pacific Beach, La Jolla, Mission Beach, and Bird Rock, understanding these new laws isn't optional: it's essential for maintaining compliance, maximizing cash flow, and capitalizing on unprecedented transit-oriented development opportunities.

From SB 61's 5% retention cap that immediately improved contractor cash flow to SB 79's transit-oriented housing provisions that will override local zoning near 83 San Diego transit stations starting July 1, these laws represent the most comprehensive regulatory overhaul in a decade. Add CEQA streamlining under AB 130 and SB 131, the 2025 Title 24 Building Energy Efficiency Standards, and the new standalone California Wildland-Urban Interface Code, and you have a regulatory environment that demands immediate attention.

This guide answers the seven most critical questions contractors are asking right now—with specific applications for coastal San Diego construction projects.

What Are the Key California Construction Laws That Changed in 2026?

California's 2026 construction law changes represent an $8.5 billion legislative investment in housing production, contractor protections, and environmental streamlining. Here are the major laws contractors must understand:

January 1, 2026 Effective Date:

  • SB 61: Caps retention at 5% on most private construction contracts (excluding residential-only projects under four stories)
  • AB 130 & SB 131: Expands CEQA exemptions for infill housing up to 20 acres, plus "near-miss" streamlining
  • 2025 Title 24: New energy efficiency standards emphasizing heat pumps, EV-readiness, and electrification
  • California WUI Code: First standalone wildfire building code (Title 24, Part 7)
  • AB 1002: Expands California Attorney General enforcement for unpaid wages
  • AB 1327: Requires email cancellation options for home improvement contracts
  • SB 291: Increases workers' compensation insurance penalties to $10,000-$20,000 minimums

July 1, 2026 Effective Date:

  • SB 79: Transit-oriented housing law overriding local height/density limits near major transit stops in eight counties, including San Diego
  • SB 779: Raises unlicensed work penalties from $200 to $1,500 minimum

For Pacific Beach contractors, the most immediate opportunities lie in SB 79's transit-oriented provisions (52 of 83 qualifying stations are in the City of San Diego) and SB 61's retention cap, which applies to all contracts executed after January 1, 2026.

How Does SB 79 Transit-Oriented Housing Work for San Diego Contractors?

SB 79, the Abundant and Affordable Homes Near Transit Act, takes effect July 1, 2026, and represents the most significant land-use override in California history. Here's what contractors need to know:

Geographic Scope

SB 79 applies to eight "urban transit counties" with 15+ passenger rail stations: Alameda, San Francisco, San Mateo, Santa Clara, Sacramento, Los Angeles, Orange, and San Diego. In San Diego County, approximately 83 major transit stations qualify—including virtually all trolley and Sprinter stations that see at least 48 trains or buses per day.

Project Requirements

To qualify as a "transit-oriented housing development project," projects must:

  • Contain at least 5 dwelling units
  • Achieve minimum density of 30 units per acre
  • Be located on sites zoned for commercial, residential, or mixed uses
  • Sit within the statutory distance of qualifying transit stops

Height and Density Standards

The law's two-tier system allows:

  • Heavy rail stations: 65-75 feet in height
  • Light rail/qualifying bus stops: 55-65 feet in height

For Pacific Beach specifically, this means projects near the Old Town Transit Center (where multiple trolley lines converge) could reach 75 feet—far exceeding current 30-foot coastal height limits in many zones.

Affordability Requirements

Projects over 10 units must dedicate 7%, 10%, or 13% of total units to extremely low income, very low income, or lower income households for 45 years (rentals) or 55 years (owned units).

Labor Standards

Buildings over 85 feet require prevailing wages and additional certifications.

Coastal Zone Considerations

Critical question for Pacific Beach/La Jolla contractors: Does SB 79 override Coastal Commission authority? The law is silent on coastal zone applications, meaning California Coastal Commission certification will likely be required for projects in the coastal overlay—adding 3-6 months to approval timelines.

Action Item for Contractors: Before July 1, 2026, identify parcels within half-mile radius of San Diego trolley stations. SANDAG will issue final station eligibility determinations, but preliminary mapping shows opportunities near Old Town, Morena/Linda Vista, and Tecolote Road stations adjacent to Pacific Beach.

What Does the SB 61 5% Retention Cap Mean for Contractor Cash Flow?

SB 61, effective January 1, 2026, fundamentally changes payment dynamics on private construction projects. California's new retention cap limits both progress payment withholding and total retention to 5% of the contract price.

How the Old System Worked

Before 2026, California had no statutory cap on retention for private work. Typical retention: 10% per progress payment, creating significant cash flow constraints—especially for subcontractors waiting 6-12 months for final payment.

How the New 5% Cap Works

  • Maximum 5% withheld from each progress payment
  • Total retention cannot exceed 5% of contract price
  • Applies to all tiers: owner-to-contractor, contractor-to-subcontractor, subcontractor-to-sub-subcontractor
  • Cannot be waived by contract
  • Courts must award attorney's fees to prevailing party in disputes

Cash Flow Impact Example

For a $500,000 commercial remodel in Pacific Beach:

  • Old system (10% retention): $50,000 withheld until project completion
  • New system (5% retention): $25,000 withheld
  • Cash flow improvement: $25,000 available during construction—a 50% increase in working capital

Critical Exceptions

  1. Residential-only projects under 4 stories: SB 61 does NOT apply (unless mixed-use)
  2. Performance/payment bonds: If contractor requires bond with advance written notice and subcontractor fails to provide it, 5% cap doesn't apply
  3. Public works: SB 61 only applies to private construction

Existing vs. New Contracts

The law is prospective and only applies to contracts executed on or after January 1, 2026. Existing contracts are grandfathered under old retention terms—though task orders issued after January 1, 2026, under master agreements fall under SB 61.

Contract Language Recommendation: Update all 2026 contracts to state: "Retention withheld pursuant to California Civil Code Section 8850, not to exceed 5% of each progress payment and 5% of total contract price."

How Do CEQA Streamlining Laws (AB 130 & SB 131) Accelerate Housing Projects?

AB 130 and SB 131, signed into law as part of the 2025-2026 state budget and effective January 1, 2026, represent the broadest CEQA reform in California history. For contractors, these laws mean faster permitting and reduced project costs.

AB 130's Expanded Infill Housing Exemption

Qualifying infill housing developments are now exempt from CEQA review if they:

  • Are located on up to 20 acres of un- or underutilized land (massive expansion from prior 5-acre limit)
  • Meet local planning and zoning standards
  • Are not on hazardous or environmentally sensitive sites
  • Are within existing development schemes

What This Means for Pacific Beach

Previously, a 15-acre mixed-use project on Garnet Avenue would require full Environmental Impact Report (EIR)—12-18 months, $200,000+ cost. Under AB 130, same project qualifies for categorical exemption—approval in 60-90 days.

SB 131's "Near-Miss" Streamlining

Where a project would qualify for CEQA exemption except for one condition, SB 131 limits environmental review solely to impacts from that single condition. The rest of the project receives no CEQA scrutiny.

Example: An 18-unit infill project in La Jolla meets all exemption criteria except it's located 200 feet from a wetland. Under SB 131, CEQA review addresses only wetland impacts—not traffic, noise, aesthetics, or other typical EIR categories.

Additional Exemptions (Effective January 1, 2026)

  • Rezoning actions by municipalities (if consistent with approved housing element)
  • Childcare facilities
  • Farmworker housing
  • Advanced manufacturing
  • Broadband infrastructure
  • Parks and trails
  • Clean water projects

Coastal Zone Application

Critical limitation for Pacific Beach/La Jolla: CEQA exemptions do NOT eliminate Coastal Development Permit requirements. Projects in the coastal overlay still need Coastal Commission review under the California Coastal Act—a separate regulatory framework.

For ADUs specifically, SB 1077 (signed September 2024) directs the Coastal Commission to develop streamlined ADU guidance by July 1, 2026, harmonizing state ADU law with coastal permit requirements.

Contractor Action Item: When bidding infill housing projects in 2026, verify whether AB 130 exemption applies. If yes, project timeline shrinks by 12-15 months compared to traditional CEQA review—allowing earlier construction starts and payment.

What Do 2025 Title 24 Energy Code Changes Mean for Pacific Beach Construction?

The 2025 Building Energy Efficiency Standards (Title 24, Part 6) took effect January 1, 2026, and apply to all building permits submitted on or after that date. This represents the most significant energy code update since 2022 and the last major residential overhaul until 2031.

Key Changes for Contractors

1. Heat Pump Expansion: The 2025 Code expands heat pump requirements in newly constructed residential buildings. Existing retail buildings, schools, offices, and libraries must replace end-of-life rooftop HVAC units above certain capacity thresholds with high-efficiency systems including heat pumps.

For Pacific Beach remodels: When replacing HVAC in commercial buildings, verify whether project triggers heat pump mandate. Non-compliance = failed inspection.

2. Electric-Readiness Requirements: New construction and major renovations must include electric-ready infrastructure—even if natural gas appliances are initially installed. This includes panel capacity, conduit, and dedicated circuits for future electric appliances.

3. Enhanced Ventilation Standards: The Energy Code strengthens ventilation standards to improve indoor air quality—particularly relevant for Pacific Beach's coastal humidity and salt air corrosion.

4. Photovoltaic and Battery Storage: The 2025 Code extends benefits of photovoltaic and battery storage systems, encouraging combinations with heat pumps for demand flexibility.

5. EV-Ready Infrastructure: All new residential construction must include Level 2 EV charging capability—either installed chargers or complete conduit/panel infrastructure.

Compliance Pathways

Title 24 offers two compliance options:

  • Prescriptive: Use pre-approved methods known to be efficient
  • Performance: Achieve same overall efficiency as equivalent prescriptive building (allows design flexibility)

Expected Impact

The California Energy Commission estimates the 2025 update will:

  • Save $4.8 billion in energy costs
  • Reduce greenhouse gas emissions by 4 million metric tons
  • Make buildings more climate-resilient

Cost Considerations for Pacific Beach Projects

Heat pump systems cost $8,000-$15,000 more than traditional HVAC for single-family homes, but qualify for:

Contractor Action Item: Update estimating software to reflect 2025 Title 24 requirements. Projects permitted before January 1, 2026, follow 2022 standards; projects permitted after follow 2025 standards. Multi-year projects may span both code cycles.

Does the California WUI Code Apply to Coastal Construction in Pacific Beach?

Yes—and this surprises many contractors. The 2025 California Wildland-Urban Interface Code (CWUIC), effective January 1, 2026, applies to all construction in designated Fire Hazard Severity Zones (FHSZ)—including portions of Pacific Beach, La Jolla, and Mission Beach.

What Is the WUI Code?

Title 24, Part 7, represents the first standalone wildfire building code in California history. Previously, wildfire requirements were scattered across multiple code sections. The 2025 CWUIC consolidates everything into one comprehensive framework.

Chapter 5 Requirements

The critical regulations establish minimum standards for:

  • Ignition-resistant exterior materials: Class A roofing, ember-resistant siding
  • Ember-resistant vents: All attic, crawlspace, and under-floor vents must resist ember intrusion
  • Defensible space: Vegetation management within 100 feet (separate from building code)

Does This Apply to Coastal Areas?

Many Pacific Beach contractors assume WUI Code only applies to inland wildfire zones like Alpine or Ramona. Wrong. The Code applies to any property within mapped FHSZ—including coastal areas designated "Moderate" or "High" fire hazard.

Specific Pacific Beach/La Jolla zones with WUI Code applicability:

  • Northern Pacific Beach (adjacent to Rose Canyon)
  • La Jolla hillsides above Torrey Pines
  • Mount Soledad areas
  • Coastal bluff properties with vegetation

Material Requirements

Class A roofing includes:

  • Asphalt composition shingles
  • Clay/concrete tiles
  • Metal roofing
  • Slate

Does NOT include:

  • Wood shake (banned in FHSZ since 2008)
  • Untreated wood shingles
  • Non-rated roofing materials

Compliance Costs

For typical Pacific Beach remodel:

  • Ember-resistant vents: +$500-$1,200
  • Ignition-resistant siding (if replacing): +$3,000-$8,000
  • Fire-rated windows (if in FHSZ High): +$5,000-$15,000

Contractor Action Item: Verify FHSZ designation for every project using the California Department of Forestry and Fire Protection FHSZ Viewer. Don't assume coastal = no WUI Code compliance. San Diego Building Official will red-tag non-compliant projects.

What Are the Critical Compliance Deadlines for Contractors in 2026?

California's 2026 construction law rollout spans two dates, with the most significant change arriving mid-year. Here's your compliance calendar:

ALREADY IN EFFECT (January 1, 2026)

✅ SB 61 (5% Retention Cap)

  • Applies to: All private construction contracts executed on/after January 1, 2026
  • Action required: Update contract templates, review payment applications
  • Non-compliance risk: Contractor/subcontractor can sue for attorney's fees

✅ AB 130 & SB 131 (CEQA Streamlining)

  • Applies to: All projects subject to CEQA review
  • Action required: Verify exemption eligibility during preconstruction
  • Benefit: 12-15 month faster permitting for qualifying projects

✅ 2025 Title 24 (Energy Code)

  • Applies to: All building permits submitted on/after January 1, 2026
  • Action required: Update HVAC, electrical, and envelope specs
  • Non-compliance risk: Failed plan check/inspection

✅ California WUI Code

  • Applies to: All construction in mapped Fire Hazard Severity Zones
  • Action required: Verify FHSZ designation, specify compliant materials
  • Non-compliance risk: Red-tagged inspection, costly rework

✅ AB 1002 (Wage Enforcement)

  • Applies to: All licensed contractors
  • Action required: Ensure timely wage payments (CA Attorney General can now sue)
  • Non-compliance risk: Civil penalties, license suspension

✅ AB 1327 (Email Cancellation)

  • Applies to: Home improvement contracts
  • Action required: Add email cancellation language to contracts
  • Non-compliance risk: Unenforceable contracts, consumer complaints

✅ SB 291 (Workers' Comp Penalties)

  • Applies to: All contractors
  • Action required: Maintain active workers' comp insurance
  • Non-compliance risk: $10,000-$20,000 minimum penalties (up from $1,500)

UPCOMING (July 1, 2026)

⏰ SB 79 (Transit-Oriented Housing)

  • Applies to: Housing projects near 83+ San Diego transit stations
  • Action required: Identify transit-adjacent parcels NOW (before law takes effect)
  • Opportunity: Projects meeting SB 79 criteria get ministerial approval, bypassing discretionary review
  • Coastal zone caveat: Coastal Development Permit still required

⏰ SB 779 (Licensing Penalty Increase)

  • Applies to: Unlicensed contractors
  • Action required: Verify all subcontractors have active CSLB licenses
  • Non-compliance risk: Minimum $1,500 fine (up from $200)

⏰ SB 1077 Guidance (ADU Coastal Zone)

  • Applies to: ADUs in coastal zone
  • Action required: Wait for Coastal Commission guidance document
  • Expected: Harmonized ADU permitting procedures for coastal zone

Contractor Action Plan Timeline

February-March 2026:

  • Audit all active contracts for SB 61 compliance
  • Update contract templates for 5% retention cap
  • Verify workers' comp insurance meets new penalty thresholds

April-May 2026:

  • Train estimators on 2025 Title 24 requirements
  • Identify transit-adjacent properties for SB 79 opportunities
  • Review CEQA exemption eligibility for pipeline projects

June 2026:

  • Meet with development clients to discuss SB 79 transit-oriented opportunities
  • Finalize SB 79 project concepts before July 1 effective date
  • Confirm all subcontractors have active licenses (SB 779 penalty increase)

July 1, 2026 and Beyond:

  • Submit SB 79 qualifying projects for ministerial approval
  • Monitor SANDAG station eligibility determinations
  • Track Coastal Commission ADU guidance release

Related Resources

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