San Diego Pursues CEQA Exemption for $4B Midway Rising: Breaking January 27 Update and What It Means for Pacific Beach Coastal Development

Breaking: January 27, 2026 - San Diego Pursues CEQA Exemption for Midway Rising

According to KPBS reporting on January 27, 2026, San Diego officials are in active discussions with California state lawmakers about passing legislation that would specifically exempt Midway Rising from California Environmental Quality Act requirements. This strategic pivot comes as the project faces mounting legal obstacles following environmental compliance challenges.

In his State of the City address on January 15, 2026, Mayor Todd Gloria made the city's commitment unambiguous: "Legal challenges have caused some to doubt the future of the project known as Midway Rising, so let me be crystal clear: The redevelopment of the Sports Arena will move forward!" He announced plans to bring the project to City Council for public hearings and a vote this spring 2026.

The timeline is aggressive. If the CEQA exemption is granted and the City Council approves the project this spring, groundbreaking could occur in late 2026, launching what would be California's largest affordable housing development.

Why the CEQA Exemption Strategy?

The exemption strategy became necessary after Save Our Access successfully challenged the city's environmental review process. On December 30, 2025, the California Supreme Court denied San Diego's petition for review, exhausting the city's legal options to defend Measure C—the 2022 voter-approved ballot measure that removed the 30-foot height limit from the Midway District.

The appellate court found that San Diego illegally presented the ordinance to voters without adequately informing them about environmental impacts, identifying deficiencies in the analysis of noise, air quality, biological resources (including impacts on Peregrine falcon nesting), and geological conditions.

With traditional pathways blocked, city officials are now pursuing the same legislative solution that enabled one of California's most expensive stadium projects.

Understanding the Midway Rising Project: 4,254 Units and 16,000-Seat Arena

Midway Rising represents an unprecedented transformation of the 48-acre Sports Arena site in the Midway District, located immediately adjacent to Pacific Beach and bordered by the communities of Mission Bay Park, Ocean Beach, and Point Loma.

Project Scope

The development includes:

• 4,254 residential units in buildings reaching 105 feet in height
• 16,000-seat sports and entertainment arena standing 165 feet tall, replacing the aging Pechanga Arena
• 2,000 affordable housing units dedicated to households earning 80% of area median income or below—making this the largest affordable housing development in California history
• Multi-acre central urban park providing public open space
• 130,000 square feet of commercial space for retail and dining
• Mixed-use entertainment district designed to activate the Midway neighborhood

The Development Team

The project brings together an elite coalition of developers with deep pockets and political connections. According to official project documentation, the Midway Rising team comprises:

• Chelsea Investment Corporation: Affordable housing developer with extensive California experience
• Legends: Sports venue developer and operator with a track record of major arena projects
• Zephyr: Market-rate housing developer
• The Kroenke Group: Real estate investment partner led by billionaire Stan Kroenke

Kroenke's involvement is particularly noteworthy. His special purpose entity, ESK Midway Rising Investor LLC, holds a 90% ownership interest in the project, increasing to 95% once construction begins. As the same developer who built SoFi Stadium with a CEQA exemption, Kroenke brings unique expertise in navigating California's environmental laws—or circumventing them.

Economic Impact

The San Diego Regional Economic Development Corporation analysis projects substantial economic benefits:

• $285 million in annual economic impact, with $178 million representing new spending across the county
• $3 billion in gross regional economic impact during the construction period
• 1,100 new permanent jobs paying 12% higher average wages than current site uses
• 21,900 construction job-years over the 14-year development span
• $1.4 million annual tax revenue for the City of San Diego
• $3.9 million annual tax revenue for San Diego County

For context, the EDC notes this is "equivalent to having another Comic-Con in San Diego each and every year."

What is CEQA and Why Exemptions Are Rare

The California Environmental Quality Act, enacted in 1970, stands as one of the nation's most comprehensive environmental protection laws. Understanding CEQA is critical for Pacific Beach builders because virtually every discretionary project in California's coastal zone must navigate its requirements.

CEQA Fundamentals

CEQA requires government agencies to:

1. Identify environmental impacts of proposed projects
2. Disclose those impacts to decision-makers and the public
3. Avoid or mitigate significant impacts where feasible
4. Consider alternatives that would reduce environmental harm
5. Document the analysis in Initial Studies, Negative Declarations, or Environmental Impact Reports (EIRs)

For large-scale developments like Midway Rising, a full Environmental Impact Report is typically required—a process that can take 12-18 months and cost hundreds of thousands of dollars.

Why CEQA Matters for Builders

CEQA compliance creates several challenges for coastal developers:

• Extended timelines: Environmental review adds months or years to project schedules
• Litigation risk: CEQA lawsuits can halt construction and force expensive mitigation measures
• Uncertainty: Court interpretations of environmental impacts continue to evolve
• Cumulative costs: Beyond the EIR itself, mitigation measures can significantly increase project expenses

According to recent legislative analysis, CEQA has become a tool for project opponents to delay or kill developments, particularly in housing-scarce coastal communities.

When Are CEQA Exemptions Granted?

CEQA exemptions fall into three categories:

1. Statutory exemptions: Specific project types exempt by law (certain affordable housing, infill development on sites up to 20 acres)
2. Categorical exemptions: Classes of projects with minimal environmental impact
3. Legislative exemptions: Rare, project-specific exemptions passed by the California Legislature

Midway Rising is pursuing the third path—a legislative exemption requiring passage of a bill in Sacramento and the Governor's signature. These are exceptional because they require political capital and statewide justification.

Recent CEQA Reforms (2025-2026)

On June 30, 2025, Governor Newsom signed AB 130 and SB 131, implementing major CEQA reforms effective immediately. These budget trailer bills created new exemptions for:

• Urban infill housing on sites up to 20 acres
• Rezoning actions implementing approved housing elements
• Advanced manufacturing on industrial-zoned sites
• High-speed rail projects
• Wildfire mitigation efforts

Notably, however, these new categorical exemptions do not cover projects the size and scope of Midway Rising. The development still requires a project-specific legislative exemption—exactly what SoFi Stadium received a decade ago.

The SoFi Stadium Precedent: How Stan Kroenke Got a CEQA Exemption

The path San Diego is now pursuing was blazed by the same billionaire investor now backing Midway Rising. Stan Kroenke's successful circumvention of CEQA for SoFi Stadium provides the blueprint—and raises questions about equity in California's development process.

How SoFi Dodged CEQA: The Ballot Initiative Loophole

According to environmental law analysis, SoFi Stadium exploited a little-known provision in California law: proposals enacted through the ballot initiative process are exempt from CEQA, even though the exact same proposal would face extensive environmental review if passed legislatively.

The process worked like this:

1. Kroenke spent $1.7 million to fund a ballot initiative in Inglewood
2. The initiative proposed allowing a massive stadium on the former Hollywood Park site
3. The Inglewood City Council approved the initiative directly without holding an election
4. Because it was an "initiative," CEQA didn't apply
5. Construction proceeded without the environmental review required for competing stadium proposals

USC Annenberg Media documented how this strategy allowed Kroenke to sidestep analysis of traffic impacts, air quality degradation, and noise pollution that would normally trigger extensive mitigation requirements.

Why the Initiative Exemption Exists

When CEQA was passed in the 1970s, voter initiatives were typically small, grassroots efforts. Lawmakers included an exemption because applying CEQA to citizen-led initiatives seemed burdensome. No one anticipated billionaire developers would weaponize this loophole to bypass environmental laws.

Other Stadium Precedents

SoFi wasn't the only sports venue to receive favorable CEQA treatment:

• 2009: California Legislature granted Majestic Realty's proposed 75,000-seat stadium a legislative CEQA exemption
• 2016: Golden 1 Center in Sacramento utilized targeted legislation to streamline CEQA requirements
• Multiple projects: Professional sports facilities have repeatedly secured special environmental treatment unavailable to housing developers

Why This Matters for Midway Rising

San Diego cannot use the ballot initiative strategy because Measure C—the 2022 ballot measure removing height limits—was already struck down for CEQA violations. Instead, city officials are pursuing a direct legislative exemption similar to the 2009 Majestic Realty precedent.

The political calculation is clear: if Sacramento granted CEQA relief for a football stadium, surely it can do the same for California's largest affordable housing project.

The 30-Foot Coastal Height Limit Battle

Midway Rising's CEQA challenges are inseparable from a 52-year-old height restriction that shapes development throughout San Diego's coastal communities—including Pacific Beach, La Jolla, and Mission Beach.

Proposition D: The 1972 Voter Mandate

In 1972, San Diego voters passed Proposition D by 64%, establishing a 30-foot height limit for all structures west of Interstate 5. This created the Coastal Height Limit Overlay Zone, covering approximately 1,324 acres in the Midway District and thousands more acres in beach communities.

The restriction emerged from 1970s-era concerns about:

• Blocking ocean views with high-rise development
• Preserving neighborhood character in beach communities
• Preventing overdevelopment along the coast
• Maintaining sunlight and air circulation at street level

The Court Battle: Save Our Access Prevails

The legal saga that necessitated the CEQA exemption strategy began when advocacy group Save Our Access challenged Measure C—the 2022 ballot measure that would have removed Midway District from the 30-foot height limit.

The California Court of Appeal ruled in October 2025 that the city's Supplemental Environmental Impact Report violated CEQA by:

1. Failing to analyze noise impacts from increased traffic and construction
2. Omitting air quality analysis of emissions from taller buildings and vehicle trips
3. Ignoring biological resource impacts, specifically effects on Peregrine falcon nesting sites
4. Inadequately assessing geological conditions and seismic risks
5. Improperly deferring analysis to future site-specific project reviews

On December 30, 2025, the California Supreme Court denied review, exhausting the city's legal options. A trial court must now issue a writ of mandate rescinding Measure C and restoring the 30-foot height limit.

Constitutional Tension: Judicial Ruling vs. Legislative Exemption

Here's where the situation becomes constitutionally complex: if the California Legislature grants a CEQA exemption to Midway Rising, it would effectively override a judicial ruling based on environmental law violations.

Legal scholars note this creates precedent questions:

• Can the Legislature nullify court decisions by exempting specific projects from the laws courts enforced?
• Does this undermine judicial review of environmental compliance?
• What message does it send about the rule of law in development disputes?

For Pacific Beach builders, this tension matters because it suggests political solutions may trump legal requirements—if you have sufficient political capital.

What CEQA Exemption Means for Pacific Beach Builders

While Midway Rising is a unique mega-project, its regulatory strategy carries profound implications for coastal development throughout San Diego, particularly in Pacific Beach, La Jolla, and Mission Beach.

Potential Impact on Height Restrictions

If the Legislature grants a CEQA exemption allowing Midway Rising to exceed the 30-foot coastal height limit, it establishes several precedents:

1. Height limits can be legislatively overridden

The 1972 Proposition D height limit, long considered sacrosanct, becomes negotiable through Sacramento rather than local process. Builders with projects blocked by the 30-foot restriction could pursue similar exemptions.

2. Affordable housing may justify exemptions

With 2,000 affordable units, Midway Rising's housing production argument is politically potent. Builders incorporating substantial affordable housing components could make similar cases for regulatory relief.

3. Geographic precedent matters

Midway District directly borders Pacific Beach. If exemptions are granted for one Coastal Height Limit Overlay Zone area, what principle prevents exemptions for others?

Streamlined Environmental Review Possibilities

Beyond height limits, the CEQA exemption model could revolutionize how coastal projects navigate environmental review:

Legislative advocacy becomes viable: Rather than spending 12-18 months on Environmental Impact Reports, developers with politically popular projects might seek legislative exemptions, particularly for housing-rich developments.

State preemption accelerates: California's 2025-2026 CEQA reforms already exempted certain infill housing from environmental review. The Midway precedent could expand this to larger coastal projects.

"Near-miss" review processes expand: AB 130's new provision for projects meeting all but one CEQA exemption criterion could become more widely utilized for coastal developments.

Implications for ADU and Infill Development

Pacific Beach builders focusing on accessory dwelling units and small-scale infill projects should note:

The 30-foot limit remains in effect for smaller projects: Legislative exemptions require political will that only mega-projects can generate. Standard ADUs and small residential projects will continue facing the coastal height limit.

However, state density bonus law already allows height limit overrides: As demonstrated by the controversial 239-foot Turquoise Street project in Pacific Beach, developers can already exceed height limits by providing affordable housing under state density bonus provisions.

Recent legislation (SB 92, effective January 1, 2026) closed some density bonus loopholes but still allows height limit overrides for projects with sufficient affordable housing percentages.

Regulatory Precedent for Future Projects

The most significant builder implication is psychological and political:

Environmental regulations are negotiable: If a $4 billion project can circumvent CEQA through political channels, environmental review becomes less a legal requirement than a political obstacle to be managed.

Scale matters: Mega-projects with major economic impacts and political support can play by different rules than small-scale developments.

Affordable housing is political currency: Projects positioning themselves as housing production vehicles gain access to regulatory relief unavailable to market-rate developments.

Kroenke's involvement signals confidence: The same billionaire who successfully navigated CEQA exemptions for SoFi Stadium is betting he can do it again in San Diego.

Practical Considerations for Pacific Beach Builders

Near-term (2026):

• Monitor the spring 2026 City Council vote closely
• Track legislative efforts in Sacramento for the CEQA exemption bill
• Assess whether your projects could benefit from similar affordable housing arguments
• Consider how Midway precedent might support variance or exception requests

Medium-term (2026-2028):

• If Midway Rising breaks ground in late 2026, the regulatory pathway is validated
• Construction activity in adjacent Midway District could create opportunities for Pacific Beach projects serving workers and residents
• Height limit challenges in other coastal areas may emerge following the precedent

Long-term implications:

• The 30-foot coastal height limit's legal standing weakens with each legislative override
• CEQA becomes less of an absolute requirement and more of a hurdle requiring political strategy
• Builders with access to legislative relationships gain competitive advantages

Spring 2026 City Council Vote: Timeline and Political Dynamics

Mayor Gloria's commitment to bring Midway Rising forward for a City Council vote "this spring" sets up a high-stakes political showdown in the coming months.

Expected Timeline

February-March 2026: City staff finalizes lease terms and prepares Council materials despite the restored 30-foot height limit.

March-April 2026: Simultaneous track—San Diego's legislative delegation (Assembly members and Senators) introduce a CEQA exemption bill in Sacramento. Given the 2025-2026 legislative calendar, bills must be introduced by mid-February to move through committee processes by summer.

April-May 2026: City Council public hearings on the Midway Rising lease agreement and project approvals. These hearings will be contentious, with Save Our Access and height limit advocates opposing, and housing advocates and labor unions supporting.

Late Spring 2026: City Council vote. The Council majority has historically supported Mayor Gloria's housing agenda, but the height limit restoration complicates the political calculus.

Summer 2026: If the City Council approves the lease and project, and the Legislature passes the CEQA exemption, Governor Newsom's signature becomes the final hurdle.

Late 2026: Groundbreaking possible if all approvals are secured.

Political Considerations

Several factors influence the project's political trajectory:

Housing crisis urgency: San Diego faces a severe housing shortage. Mayor Gloria announced the city permitted 7,500 new homes in 2025—nearly twice the long-term average—but 4,254 units from Midway Rising would represent a massive acceleration.

Affordable housing component: With 2,000 affordable units, Midway Rising can position itself as addressing equity and affordability, not just market-rate luxury development. This political framing is crucial for legislative support.

Labor union backing: Construction of this scale means union jobs. Expect strong support from building trades who want 21,900 construction job-years over 14 years.

Environmental opposition: Save Our Access has proven effective in court. They'll argue that granting a CEQA exemption after courts found CEQA violations undermines environmental protection and the rule of law.

Community divisions: Many Peninsula residents support the 30-foot height limit and view the exemption strategy as circumventing voter will.

Kroenke's track record: While SoFi Stadium's success demonstrates political savvy, it also drew criticism as corporate influence over environmental policy. Opponents will highlight billionaire developers getting special treatment.

Legislative Dynamics in Sacramento

For the CEQA exemption to succeed, San Diego's legislative delegation must build a coalition:

Pro-housing legislators: Assemblymembers like Buffy Wicks and Senators like Scott Wiener have championed CEQA reform for housing production. They're natural allies.

Environmental caucus concerns: Legislators focused on climate and environmental justice may resist weakening CEQA, even for affordable housing.

Regional interests: Southern California legislators may support the project as regional economic development, while Northern California members may be indifferent unless it sets broader precedent.

Governor Newsom's position: Newsom has supported CEQA reform for housing and signed AB 130/SB 131 in 2025. However, he must balance housing goals against environmental constituency concerns.

The political calculus favors approval given California's housing crisis and the affordability component, but victory is not guaranteed.

What Failure Would Mean

If the CEQA exemption fails or the City Council rejects the project:

• The Sports Arena site remains underutilized
• San Diego loses 4,254 housing units, including 2,000 affordable homes
• The 30-foot height limit precedent strengthens
• Future large-scale coastal developments face similar obstacles
• Pacific Beach builders see height restrictions as more durable

Conversely, approval validates the legislative exemption pathway as viable for overcoming local environmental and height restrictions.

Conclusion: A Precedent-Setting Moment for Coastal Development

The January 27, 2026 announcement of San Diego's CEQA exemption pursuit for Midway Rising marks a pivotal moment in California coastal development policy. For Pacific Beach builders navigating increasingly complex environmental regulations and height restrictions, the coming months will determine whether legislative solutions can override local land use controls and environmental review requirements.

The spring 2026 City Council vote and Sacramento legislative process will be closely watched by developers, environmental advocates, housing proponents, and coastal communities throughout California. If successful, Midway Rising validates a new pathway for mega-projects to circumvent traditional regulatory obstacles through political channels and affordable housing justifications.

For builders in Pacific Beach, La Jolla, and Mission Beach, the implications extend beyond one project. The precedent could gradually erode the 30-foot coastal height limit's political durability, demonstrate that environmental regulations are negotiable with sufficient political support, and establish affordable housing production as powerful currency for regulatory relief.

Stay informed as this breaking story develops. The decisions made in spring 2026 will shape coastal development possibilities for the next generation.