CEQA Carve-Outs To Start Expediting Projects After Historic Reform

California housing developers could begin to see the impacts of the state legislature's reforms to the California Environmental Quality Act as soon as next week as plans in the pipeline are freed from restrictions that may have slowed them.

The reforms, initially sponsored by Oakland Assemblymember Buffy Wicks and San Francisco state Sen. Scott Wiener, are designed to speed up housing construction by exempting certain projects from the environmental review process. 

Infill housing projects that meet local zoning, density and objective planning standards are among those that qualify for exemption after Gov. Gavin Newsom signed the new laws Monday.

Senate Bill 131 creates nine exemptions for other types of development. The exemptions are limited to projects under 20 acres and less than 85 feet in height, making most urban housing developments eligible. 

“The clearest benefit is going to be one of timing,” said Ben Metcalf, managing director of UC Berkeley’s Terner Center for Housing Innovation. 

Jennifer Hernandez, who leads Holland & Knight's West Coast land use and environmental group, expects to see the impacts as soon as next week. 

“We have 50 projects in various stages of application. To the extent that they’re now exempt, we should be able to put pending projects on a fast track. A lot more projects will pencil, and that's going to speed up a surge of new applications,” she said. 

Critics of CEQA, enacted in 1970, have argued it has long complicated efforts to address the state’s housing crisis with a time-consuming environmental review process and the risk of legal exposure. CEQA has more than 30 “categories of impact,” and each has its own subparts. It has become a tool for opponents to block development projects for any number of reasons. 

“Even if it's relatively clean and relatively straightforward, you still have to prepare that report. You have to take it through a public planning commission hearing, sometimes to counsel as part of your entitlement package,” Metcalf said. 

Though streamlining and regulatory exemptions have existed for years, projects have always needed evidence of eligibility. That could necessitate thousands of pages of technical studies that must be prepared to withstand a potential lawsuit. With statutory exemption, there’s no need for additional studies. 

“The single most high-risk part of the entitlement process is CEQA litigation. By removing that component, it is just going to be a lot less risky to entitle and then build an apartment project,” Hernandez said.

The bill doesn’t include a labor standard, the requirement that developers pay union wages, which can make projects prohibitively expensive. That, in turn, will make the conversion of commercial structures and parking lots much less expensive.

Infrastructure remains a concern for new development going forward.

An influx of new residential construction will put enormous pressure on sewer, water and electricity systems. It is unclear whether those projects would be subject to the same CEQA exemptions or how quickly approvals could be secured. 

Fee structures will also be impacted. CEQA provided cities with income through fees imposed as mitigation during the entitlement process. Cities will need to implement new fees to close the gap.

They can’t be so high as to make projects infeasible and obstruct housing mandates, which would violate state law. And fees can further compound the affordability problem, increasing the cost of buying or renting.

Those costs add up and contribute to property tax, mortgage payments and the cost of insurance premiums, all of which also contribute to the cost of new buildings. 

“I see a real surge in entitlements, and then we'll have to confront the fact that our housing still costs too much to build. And nobody wants to address that,” Hernandez said.