California has undertaken reforms to its cornerstone environmental legislation, the California Environmental Quality Act (CEQA). The initiative, spearheaded by Governor Gavin Newsom and Democratic lawmakers, is a direct response to the state’s escalating housing crisis and the increasing cost of living.
Revising this law has implications that extend beyond California. Experts predict that other states will experience a ripple effect.
What is CEQA?
Enacted in 1970, the California Environmental Quality Act is a foundational environmental protection law that ensures state and local agencies identify and address the potential significant environmental impacts of proposed projects.
Key aspects of CEQA include:
- Informing decision-makers and the public: CEQA requires agencies to disclose and evaluate the environmental effects of proposed activities, ensuring transparency for both government decision-makers and the public.
- Mitigation and avoidance: The law requires agencies to explore ways to avoid or significantly reduce environmental damage. If feasible, projects must incorporate alternatives or mitigation measures to prevent significant, avoidable impacts.
- Environmental review process: Most development proposals in the state, whether public or private, are subject to CEQA review if they require discretionary approval from a government agency and have the potential to physically alter or affect the environment.
- Public participation: CEQA emphasizes public involvement, providing opportunities for the public to review and comment on environmental documents throughout the process.
- Substantive mandate: Unlike its counterpart, the National Environmental Policy Act, CEQA has a substantive mandate, which means public agencies are generally prohibited from approving projects with significant environmental impacts if feasible mitigation measures or environmentally superior alternatives could eliminate or substantially reduce those impacts.
Unintended consequences of CEQA
While CEQA was designed to protect the environment, critics argue that it has been frequently “weaponized” to obstruct or significantly delay new housing projects in California.
Opponents of a housing project, often “NIMBY” (not in my backyard) community members, can file CEQA lawsuits alleging the inadequacy of an environmental review or that the project will result in unmitigated environmental impacts. Even if these lawsuits are found without merit, the snarl projects in court for years, incurring significant legal costs and delays for developers. This uncertainty can make lenders and investors hesitant to fund projects.
Opponents can exploit CEQA’s highly detailed procedural requirements, challenging projects based on minor procedural flaws in the environmental review. This strategy forces developers to redo studies or documents, which adds time and cost to the project. The focus on “procedural perfection” can undermine the law’s environmental goals.
Critics argue that CEQA is often used as a proxy for other objections to development that have little to do with genuine environmental concerns, like:
- Preserving neighborhood character
- Worries about increased traffic (even if the development is near public transit)
- Maintaining property values
- A general resistance to change and increased population density
Ironically, CEQA lawsuits frequently target infill housing projects and those near public transit — exactly the types of projects considered environmentally beneficial as they reduce sprawl and vehicle miles traveled. Studies have shown that a significant percentage of CEQA lawsuits are brought against housing projects proposed within existing communities, often close to transit.
The extensive environmental review process required by CEQA, particularly for larger projects, can add substantial costs and extend a project’s timeline by years. This burden can make some housing projects financially unfeasible, especially when the goal is to create affordable housing developments, which tend to operate with tighter margins.
Why reform CEQA now?
Governor Newsom reportedly exerted pressure on legislators, indicating he would veto the state budget unless they could reach consensus on alterations to CEQA. His rationale centered on the imperative to rebuild public trust and safeguard the state’s standing. The state’s “bureaucratic hurdles had made it almost impossible to build enough housing for nearly 40 million residents, resulting in soaring costs and persistent homelessness.”
While talks about reforming the environmental law had occurred in the past, local governments and environmentalists had successfully opposed any changes. Concern remains that these changes will jeopardize delicate ecosystems and upset environmental balances, “but CEQA has been described even by some environmentalists as a good law that produced unintended consequences.”
- A proposed San Francisco bike path was delayed.
- A Berkeley neighborhood group unsuccessfully attempted to block the construction of new student housing for the University of California.
- A different Berkeley neighborhood group unsuccessfully attempted to block the university from expanding its student population.
Reforms include exempting high-density projects not planned for hazardous or environmentally sensitive sites from CEQA. The other legislation will expedite the legal review process and provide exemptions for development initiatives, such as new farmworker housing and additional childcare facilities. The bill also simplifies the rezoning process in some municipalities, which should facilitate an increase in housing availability.
How might these changes benefit new projects? It could reduce government hurdles, making it easier for developers to convert vacant shopping centers or office buildings into affordable apartments or condos.
Key takeaways and implications for other states
Supporters of these changes believe the updates will help address California’s housing shortage. One expert noted that CEQA exacerbates sprawl because “people complain more about building in cities and towns,” thereby pushing development into more ecologically sensitive environments.
Environmentalists worry that:
- Advanced manufacturing facilities will spring up near homes and schools with few limits, potentially introducing health hazards into the communities
- Endangered species will see significant habitat loss
- Building standards designed to reduce planet-warming pollution will be paused
The changes to CEQA could have implications for other states. California has a history of acting as a policy innovator, and other states closely watch its legislative actions, particularly regarding environmental and housing policies. If California’s CEQA reforms prove effective in addressing the housing crisis or accelerating critical infrastructure projects without significant adverse environmental consequences, other states facing similar challenges might consider adopting comparable measures.
Many states are grappling with their own housing affordability and supply crises. California’s experience with CEQA, where some perceived its associated environmental review as a major impediment to housing construction, resonates nationwide. Other states may look to California’s approach to reducing procedural hurdles and expanding exemptions.
The CEQA reforms underscore a broader national debate about striking a balance between environmental protection and the need for housing, renewable energy, and transportation development. Other states may draw lessons from California’s attempts to navigate these competing priorities and find ways to streamline approvals while still addressing environmental and ecological concerns.
While CEQA is a state-specific law, the legal arguments and outcomes associated with its reform could indirectly influence legal interpretations or legislative debates in other states with their own environmental review processes (often modeled after NEPA).
Developers and industries operating nationwide are closely monitoring California’s reforms. If changes lead to a more predictable and efficient development in the state, these industries may advocate for similar reforms in the states where they operate.
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