DID THE CALIFORNIA LEGISLATURE FINALLY PASS CEQA REFORM?

For decades developers and supporters of economic development have been trying to reform the California Environmental Quality Act (CEQA) which was initially enacted decades ago when Ronald Reagan was Governor.

CEQA was designed to analyze environmental impacts of all development projects, including government public works projects and provide that information to the decision makers such as City Councilmembers and Members of a County Board of Supervisors. CEQA did not require a denial of a project if there were environmental issues and provided a mechanism for approval with a Statement of Overriding Considerations if the impacts could not be mitigated.

Unfortunately, this information and transparency goal of CEQA became over the years a mechanism to block all forms of development projects not just based on environmental issues but in actions by competitors, labor unions and other entities who brought legal actions not because of environmental damage, but for issues having do to with impact on their business or to seek wage and other exactions from a project. The bottom line is that competitors, environmental organizations and labor unions weaponized CEQA to try and achieve their goals.

While subsequent California Governors and some legislators have raised concerns about their belief that CEQA was being abused not for environmental protection, the only significant changes made were on some large specific projects, especially sports arena projects.

However, the continuing critical shortage of housing in California has led to increasing bi partisan calls for CEQA reform. While the State Legislature has enacted during the past 6 years numerous pieces of legislation restricting how local government can deny housing projects, these efforts have not so far appreciably increased the housing stock, including affordable housing.

This year Governor Newsom decided that the CEQA issue needed to be addressed. He supported two bills, Assembly Bill 130 and Senate Bill 131 to significantly make changes to CEQA. Most importantly Governor Newsom required that these two bills pass for him to sign this year’s state budget. This was despite strong opposition from environmental groups and some unions including the construction trades.

AB 130 will exempt most urban infill housing from CEQA. This could result in most housing projects proposed in already-developed areas no longer being subject to CEQA analysis. This includes no labor or wage standard requirements for projects up to 85 feet. It also imposes a new 30-day deadline for agencies to act to approve or disapprove qualifying projects, which is a significant change from current law.

This bill broadens the existing “Class 32” categorical exemption under CEQA, which is what housing developments currently try to use if a project can not meet the costs of prevailing wages or the requirements imposed by previous state laws such as SB 35 and AB 2011. AB 130 creates a statutory CEQA exemption that should be a more defensible bar from CEQA not subject to disqualifying the current “Class 32” regulatory exceptions.

Some of the specific provisions of AB 130 are:

• The project site is no more than 20 acres.
• The project site was previously developed with "urban uses" or is substantially surrounded by sites developed with urban uses.
• The project complies with local zoning standards, applicable general plan standards and any applicable local coastal program, subject to deviations allowed by the State Density Bonus Law.
• The project's density must be at least 50 percent of the jurisdiction's "Mullin density," which ranges from 10 units to 30 units per acre, depending on the jurisdiction

SB 131 exempts CEQA from larger projects, including some segments of high speed rail projects and dealing with wildfire mitigation, water infrastructure and electric vehicle protection. Regarding housing, SB 131 constrains CEQA review for housing projects that narrowly fail to qualify for a CEQA exemption. CEQA review is now limited for projects that narrowly fail to qualify for a CEQA exemption, including AB 130. If a housing project would qualify for a CEQA exemption "but for a single condition" of that exemption, CEQA review for the housing project is limited to environmental effects caused by that single condition. The CEQA analysis for these projects is only required to examine environmental effects that are caused "solely" by the presence of the single condition that precluded qualification. Further, environmental impact reports for these "near-miss" housing projects are not required to include any discussion of alternatives to the project or of the growth-inducing impacts of the project.

These new laws could have a significant impact on housing development and all those with current projects, and those contemplating projects, should closely review these provisions and start engaging with local planning departments to determine their applicability.

While new legislation usually does not go into effect until January 1^st of the following year, AB 130 and SB 131 became law immediately upon the Governor’s signature. As a result, we may immediately see some changes in local development projects, and their review.