Will California’s Weaker Environmental Rules Spur Housing Production?

It’s been a big year for housing policy in state legislatures. But few proposals have been met with more enthusiasm and trepidation than the changes to California’s 50-year-old environmental review law that were included in the annual budget last month at the behest of Gov. Gavin Newsom.

The law, called the California Environmental Quality Act or CEQA, has required developers and cities to study the environmental impact of most projects they seek to approve. It’s been credited with preventing irreversible damage to cultural resources and natural habitat. It’s also been blamed for dragging out the permitting process, giving resistant neighbors and officials a tool to block new development for any reason — environmental or otherwise — and contributing to the shortage of housing that has made California one of the most expensive places to live in the country.

Under the changes to the law, certain projects, including “infill housing” development in urban areas, will be exempted from CEQA review. Proponents say that will remove costly delays and uncertainty from the development process and result in more multifamily housing being built in cities. For Newsom, it’s also part of a broader “abundance agenda” that some Democrats are calling for the party to embrace.

“This is a budget that builds,” Newsom said in a statement following the bill’s passage. “It proves what’s possible when we govern with urgency, with clarity, and with a belief in abundance over scarcity.”

For developers, CEQA has been “the law no one can comply with,” says Alex DeGood, a Los Angeles-based land use attorney. The law is meant to require documentation and in some cases mitigation of potential environmental harms from development projects. In addition to approving zoning and construction permits, public agencies need to process CEQA reviews for many projects. In practice, there was no deadline for review, and local officials could drag their feet on projects they didn’t like, DeGood says.

“There was nothing you could do to force the agency to actually complete the CEQA review,” he says. “A city that didn’t really like your project could basically run out the clock on you.”

But builders also sometimes found that no level of review or disclosure was enough. Neighbors who were opposed to projects could sue under CEQA for a variety of reasons. Even if they ultimately lost their lawsuits on the merits, the delays could kill housing projects. And not just housing projects: One recent CEQA lawsuit resulted in a yearlong delay for a daycare center that was proposed within the footprint of an existing building in San Francisco. California state Sen. Scott Wiener, a San Francisco Democrat who has spent years fighting for looser housing regulations, has often argued that CEQA invites excessive litigation. He sponsored a version of the bill that was incorporated into the state budget this year, alongside Assemblymember Buffy Wicks, another Bay Area Democrat. They say regulations like those in CEQA have actually harmed the environment by promoting sprawl.

“I view our housing and transit policy as our environmental policy,” Wicks said in a recent interview on the podcast Volts. “From an environmental point of view, we need infill housing. We should be incentivizing housing and we should be incentivizing taking public transportation, not making it harder to do those things.”

Many environmental groups were alarmed by the changes, even as they’ve noticed the Legislature gradually coalescing for years around the idea that environmental over-regulation is hampering housing production.

“Developers have won the day on this narrative that the reason we have such unsustainable housing prices in California is because of CEQA, and that’s just simply not true,” says Mike Lynes, public policy director for Audubon California, who signed a letter alongside more than 100 other advocacy groups opposing the changes. “That is an industry looking for ways to maximize its profits.”

Lynes says he agrees with Wiener and Wicks that cities should promote infill housing to prevent urban sprawl, which has destroyed natural habitat and led to the decline of species like the western burrowing owl. His group has not opposed previous bills that exempted infill housing from some environmental regulations. But the changes included in the budget are too broad, Lynes says. A version of the changes introduced in the state Assembly included clear indications that projects affecting habitat for protected species would still be subject to CEQA — but that provision didn’t make it into the final version. Lynes says it’s also concerning that the law exempts “advanced manufacturing” facilities from CEQA review.

Lynes and other environmental advocates say CEQA’s role in the state’s housing crisis is overstated, noting that only 2 percent of projects subject to CEQA review, around 200 projects a year, end up in litigation. But the number of lawsuits doesn’t capture the significance of the law’s impact, others say. Some projects that are otherwise feasible never get proposed if developers believe that neighbors or officials are likely to sue under CEQA.

“It really distorts the entire system even for projects that never end up in court,” Wiener said in a recent interview.

Wiener has backed lots of YIMBY policies in the California Legislature over the last decade, pushing for looser regulations on housing development around transit stations and in other dense urban areas. But the state’s affordability crisis has continued to worsen. Wiener and other backers of the latest CEQA reform say it’s likely to be the most impactful policy change in recent years.

“It’s hard to overstate how major this is if you’ve paid attention to the last 10 years of fights in Sacramento,” DeGood says. “I think that over the next couple years, we’re going to get a lot more units than we otherwise would have had, because it’s certainty and it’s speed. In lots of cases, the danger was the CEQA risk.”