California Issues Final Guidance for AB 130’s Statewide VMT Mitigation Program

By Sean Sherlock and Sara Ajeti

On June 30, 2026, the Governor’s Office of Land Use and Climate Innovation (LCI) released final guidance implementing California’s Statewide Vehicle Miles Traveled (VMT) Mitigation Program under the California Environmental Quality Act (CEQA). VMT is used in CEQA environmental reviews to assess whether a project will have a significant impact on transportation concerns. When a project’s VMT analysis indicates that the project will have a significant impact, the project applicant has few options to mitigate that impact. These new guidelines provide an option – pay a mitigation fee that the State will use to finance affordable housing.

VMT is intended to model the total number of miles driven by vehicles to and from a project within a given area over a specific time period. The Mitigation Program allows a permitting agency to mitigate significant VMT impacts by making monetary contributions to the Transit-Oriented Development Implementation Fund (TDIF). The California Department of Housing and Community Development (HCD) will use the fund to help finance VMT-efficient affordable housing and related infrastructure projects (“Mitigating Projects”).

The final guidance confirms that the Mitigation Program applies to “any CEQA project (e.g., land use, transportation, utility) with a significant VMT impact.” Nevertheless, out of concern for its limited administrative capacity, HCD expects to limit the Mitigation Program’s initial phase to publicly funded projects.

Mitigation Program Steps

To use the Mitigation Program, a lead agency first determines whether a proposed project will have a significant VMT impact. If so, the lead agency may elect to mitigate the Impacting Project by participating in the Mitigation Program and contributing to the TDIF. However, the lead agency may also rely on traditional measures such as transportation demand management, transit improvements, active transportation infrastructure, road diets, or local and regional mitigation banks and exchanges in addition to, or instead of, participating in the Mitigation Program. The required TDIF contribution for the Impacting Project is calculated using an LCI-developed methodology. Once the TDIF funds are deposited, HCD allocates those funds to qualifying affordable housing and infrastructure projects, subject to ongoing monitoring and periodic reporting.

Program Cost

The cost of participating in the VMT Mitigation Program is based on the VMT Mitigation Credit, which is “the cost to reduce one mile of vehicular travel” within a given region. The VMT Mitigation Credit value varies by region and is calculated using a three-step methodology.

First, VMT reduction compares how many fewer daily vehicle miles a typical affordable housing unit generates with a market-rate unit in the same region. To calculate VMT reduction, the Guidance multiplies each unit type’s average daily trip rate by its average trip length per region (as identified in the Guidance) and compares the two results. A market-rate unit is assumed to generate 6.21 daily trips, and an affordable unit is assumed to generate 4.81 daily trips. VMT reduction is then calculated as the difference between the market-rate unit’s total VMT (6.21 daily trip rate multiplied by average trip length) and the affordable unit’s total VMT (4.81 daily trip rate multiplied by average trip length).

Second, the Guidance estimates the amount of gap funding needed for a Mitigating Project. The gap funding is set at 15% of the average total development cost per affordable dwelling unit in each region, as identified in the Guidance.

Third, the VMT Mitigation Credit is calculated by taking the gap funding needed (the second step) and dividing it by the total daily VMT reduced (the first step). A 3% surcharge is added to cover administration costs of the Mitigation Program. This total figure is the amount an Impacting Project must contribute to the TDIF for each mile of VMT it elects to mitigate.

The VMT Mitigation Credit values and calculations will be posted on the Mitigation Program’s website, and initial values are included in the Guidance. For example, the Guidance calculates a $7,267 per daily VMT mile credit value reduction in the Metro SCAG region, which is derived from the $102,300 per affordable housing unit gap funding need divided by a 14.5 daily VMT reduction, plus a 3% administrative surcharge. If, for example, the lead agency elects to mitigate 100 daily VMT miles of a project’s significant VMT impact, the required one-time TDIF contribution would be $726,700. Because these values are adjusted annually for construction-cost inflation, project applicants should confirm the current regional credit value on the Mitigation Program’s website before budgeting a contribution amount.

Conclusion

Although this program offers an option to reduce significant VMT impacts, participation might not be optional for long. Because CEQA requires a lead agency to adopt all feasible measures needed to mitigate a significant environmental impact, once this program is open to privately funded projects developers will be required to either pay the fee or demonstrate that it is economically infeasible. Steep cost increases may be on the way.