This week, Gov. Gavin Newsom touched one of the third rails of California politics. He hopes the result sends a shock through the state’s homebuilding industry.
Newsom strong armed the state Legislature into passing what experts believe are the most significant reforms to the California Environmental Quality Act, or CEQA, since the law was signed in 1970.
The changes waive CEQA for just about any proposed low- or mid-rise development in urban neighborhoods zoned for multifamily housing. No more thousand-page studies of soils, the shadows the buildings may cast and traffic they may bring. No more risk of CEQA lawsuits from angry neighbors.
Wiping away these rules shows that no matter how challenging the politics, the state will remove the barriers it has built over decades that have ended up stifling housing construction and suffocating Californians’ ability to live affordably, the governor said when signing the legislation Monday evening.
“The world we invented has been competing against us,” Newsom said. “We have got to perform.”
Californians won’t have to wait long for the effects of the reforms. They took effect with the stroke of the governor’s pen.
At least in the short term, the result may be less of an immediate impact on construction and more of a revolution in how development in California cities gets done. Numerous hurdles both within and outside of the control of local and state governments — interest rates, availability of labor, zoning, material prices and tariffs among them — still will determine if housing is built. What’s changed is that the key point of leverage outside groups have wielded, for good and for ill, over housing construction in California communities is gone.
It can be hard to understand how CEQA became, in the words of one critic, “the law that swallowed California.”
At base, all CEQA says is that proponents of a project must disclose and, if possible, lessen its environmental effects before being approved. Yet the process CEQA kicks off can take years as developers and local governments complete reams of studies, opponents sue them as inadequate and judges send everyone back to start all over again.
Time is money, and project opponents soon realized that they could use this uncertainty to their advantage. Sometimes, if their complaints fell on deaf ears at City Hall, threatening a CEQA challenge was the only way to get themselves heard and avoid harmful outcomes. But in other circumstances, the law became a powerful cudgel wielded to influence concerns that at best had a tangential relationship to the environment.
Examples are legion. The owner of a gas station in San Jose sued a nearby rival gas station that wanted to add a few more pumps. Pro-life advocates sued a proposed Planned Parenthood clinic in South San Francisco. Homeowners in Berkeley sued the University of California over its plans to increase enrollment at the state’s flagship university and the traffic and noise that might result.
Over time, CEQA negotiations became embedded in California’s development regime, known and used by all the major players. Los Angeles Mayor Karen Bass once recalled that as a community organizer in South L.A. in the 1990s she used CEQA to try to stop liquor stores from opening. A company owned by billionaire developer Rick Caruso, Bass’ opponent in the most recent mayoral election and normally a CEQA critic, this year filed a CEQA lawsuit challenging a major redevelopment of a television studio near a Caruso shopping mall.
For housing, the primary interest group invested in CEQA at the state level has been labor organizations representing construction workers. Their leaders have argued that if legislators grant CEQA relief to developers, which boosts their bottom lines, then workers should share in the spoils through better pay and benefits.
This union opposition was enough in 2016 to prevent a proposal from then-Gov. Jerry Brown to limit CEQA challenges to urban housing development from even getting a vote in a legislative committee. A year later, a version of Brown’s bill passed but only because developers who wanted to take advantage were required to pay union-level wages to workers.
Just about every year since, lawmakers have engaged in this dance with labor groups. In 2022, the California Conference of Carpenters defected from the State Building and Construction Trades Council and supported a less-strict version of labor standards, which lawmakers ushered into multiple bills.
But housing construction hasn’t followed. The number of projects that have been issued permits are millions less than what Newsom promised to build on the campaign trail in 2017. Californians continue to pay record prices to house themselves, and those fleeing the state often cite the cost of living as the reason. Newsom and legislators decided they needed to do more.
“We don’t want to sit here and ram our head against the wall on the politics and then have nothing to show for it,” said Assemblymember Buffy Wicks (D-Oakland) at Monday’s signing ceremony.
Wicks authored legislation this year that waived CEQA rules for urban housing development without any labor requirements and was working it through the regular process. In May, Newsom grabbed Wicks’ bill and additional CEQA reform legislation and said he wanted them to pass as part of the budget. Doing so would fast-track the bills into law without the normal whittling down that happens in committee hearings.
As budget negotiations heated up, Newsom doubled down. In a rare move, he insisted on tying the approval of the state’s entire spending plan for this year to the passage of CEQA reforms. That meant legislators who otherwise would be opposed could only vote no if they were willing to torpedo the budget.
What emerged was a clean CEQA exemption for homebuilders in urban multifamily areas. Union-level wages for construction workers only are required for high-rise or low-income buildings, both of which often are paid now because of specialized labor required for taller buildings and other state and local rules for affordable construction.
CEQA doesn’t affect single-family home construction.
How much this is going to matter immediately for homebuilding isn’t clear. Studies are mixed on CEQA’s effects. One by UC Berkeley law professors found that fewer than 3% of housing projects in many big cities across the state over a three-year period faced any CEQA litigation. Another found tens of thousands of housing units challenged under CEQA in just one year. Still, more advocates of reform argue that it’s impossible to quantify the chilling effect that the threat of CEQA lawsuits have on development in California and how much the law has dominated the debate.
“This signals a seismic shift in Democratic politics in California from NIMBYism to abundance,” said Mott Smith, board chair of the Council of Infill Builders, a real estate trade group that advocates for urban housing. “You can touch this mythical third rail and live to see another day.”
Those who live across the street from a proposed five-story apartment building and oppose the housing will have to find a way other than a 55-year-old environmental law to stop it.
(Except for the headline, this story has not been edited by PostX News and is published from a syndicated feed.)
