Critical habitat is a habitat area essential to the conservation of a listed species, though the area need not actually be occupied by the species at the time it is designated. This is a specific term and designation within the U.S. Endangered Species Act-ESA. Contrary to common belief, designating an area as critical habitat does not preclude that area from development. Rather, a critical habitat designation affects only federal agency actions. Such actions include federally funded activities or activities requiring a federal permit.