In a legislative battle a decade in the making, lawmakers just exempted infill urban development from the California Environmental Quality Act. That’s a big deal
by Ben Christopher
CalMatters
A decade-spanning political battle between housing developers and defenders of California’s preeminent environmental law likely came to an end this afternoon with only a smattering of “no” votes.
The forces of housing won.
With the passage of a state budget-related housing bill, the California Environmental Quality Act will be a non-issue for a decisive swath of urban residential development in California.
In practice, that means most new apartment buildings will no longer face the open threat of environmental litigation.
It also means most urban developers will no longer have to study, predict and mitigate the ways that new housing might affect local traffic, air pollution, flora and fauna, noise levels, groundwater quality and objects of historic or archeological significance.
And it means that when housing advocates argue that the state isn’t doing enough to build more homes amid crippling rents and stratospheric prices, they won’t — with a few exceptions — have CEQA to blame anymore.
“Saying ‘no’ to housing in my community will no longer be state sanctioned,” said Assemblymember Buffy Wicks, an Oakland Democrat who introduced the CEQA law as a separate bill in March. “This isn’t going to solve all of our housing problems in the state, but it is going to remove the single biggest impediment to building environmentally friendly housing.”
Unlike most environmental laws, which explicitly mandate, monitor or ban certain environmental behavior, CEQA is just a public disclosure requirement. The 54-year-old statute requires state and local governments to study and publicize the likely environmental impact of any decisions they make. That includes the permitting of new housing.
But for years, the building industry and “Yes in my backyard” activists have identified the law as a key culprit behind California’s housing shortage. That’s because the law allows any individual or group to sue if they argue that a required environmental study isn’t accurate, expansive or detailed enough. Such lawsuits — and even the mere threat of them —add a degree of delay, cost and uncertainty that make it impossible for the state to build its way to affordability, CEQA’s critics argue.
With today’s vote, the Legislature is putting that argument to the test. Gov. Gavin Newsom, who spent much of last week cajoling the Legislature to pass the bill as part of his budget package, signed it on Monday evening.
Now the question is whether this monumental political and policy shift will actually result in more homes getting built in California’s cities.
Many of the bill’s backers are optimistic.
“I think when we look back on what hopefully is California finally beginning to confront this housing crisis, this year — 2025 — and this bill will be viewed as a turning point,” said Matt Haney, a Democrat who represents San Francisco in the Assembly where he chairs the housing committee.
On paper, the new law, unlike most that deal with housing approvals and environmental regulation, is actually pretty straightforward.
Urban “infill” housing developments — housing built in and around existing development — are no longer subject to CEQA.
There are some exceptions and qualifiers, but development boosters say they are relatively minor.
The exemption is “the most significant change to the California Environmental Quality Act’s effect on housing production since CEQA was passed,” said Louis Mirante, a lobbyist for the Bay Area Council, a business coalition that regularly pushes for legislation that makes it easier to build.
The bill is limited to projects under 20 acres, but that cap is only relevant to the biggest multi-block-spanning mega developments.
A certain level of density is required, but it really only precludes using the policy for single-family home construction.
Before any project can move forward, any affiliated tribal government will have to be notified first, but the consultation is put on a short timeline.
In order to qualify for the exemption, a proposed project must also be consistent with local zoning, the regulations that determine what types of buildings can be constructed where. But thanks to another CEQA-chopping bill authored by San Francisco Democratic Sen. Scott Wiener that exempts many changes to zoning rules from CEQA and which is also packed into the budget, that appears less likely to be a real constraint.
To buy off the ferocious opposition of the State Building and Construction Trades Council of California, a construction union umbrella group, the bill also includes some higher wage requirements.
But those rules are not likely to apply to most potential residential development projects. “The lion’s share of housing being built” in California will no longer be governed by CEQA, said Mark Rhoades, a planning and development consultant in Berkeley.
Take a massive five-story apartment building spanning a full city block, said Bill Fulton, a longtime urban planner and professor at UC San Diego.
“You don’t have to worry about labor and you don’t have to worry about CEQA? That’s a big deal,” he said.
CEQA seachange
What a difference nine years make.
Consider how things went back in 2016 when then-Gov. Jerry Brown tried to ram a CEQA fix for California’s rising housing costs through the state budget process. Brown’s big idea was to “streamline” the housing approval process, allowing developers to make an end-run around the California Environmental Quality Act, so long as they set aside a certain share of units for lower-income residents.
A coalition of construction labor unions, environmental interests and local government groups torched the idea. The proposal didn’t even get a vote.
Nearly a decade later, once again a Democratic governor opted to stuff a CEQA-trimming policy package through the budget process in the name of cheaper housing.
The measure passed overwhelmingly in both the Senate and Assembly — and this time it didn’t even include an affordability requirement.
Wicks’ proposal is somewhat narrower than the 2016 version, exempting only infill. New suburban-style subdivisions carved from farmland or undeveloped sagebrush will not qualify.
That infill focus has made it easier for the Democratic-controlled Legislature to swallow such a significant scaling back of California’s signature environmental law. Promoting denser urban development generally means using less land, constructing new housing that uses less energy and setting up new residents to do a lot less driving.
“When you are building housing in an existing community, that is environmentally beneficial, it is climate friendly, that is not something that should be subjected to potentially endless CEQA challenges and lawsuits,” Wiener said on the Senate floor on Monday just prior to the vote, when the measure passed 28 to 5.
Even so, Wicks’ proposal always looked like a long shot.
Since Brown’s failed gambit, lawmakers have managed to pass a raft of bills giving housing developers an escape route around CEQA. But those laws have always contained a trade-off. Developers get to skip CEQA, but in exchange they have to pay state-set “prevailing wages” (which typically work out to union-level pay), hire union workers outright, set aside a certain share of units for lower income residents, or some combination of the three.
These conditions were born of political necessity. A CEQA lawsuit — or even the suggestion of one — makes for a powerful negotiating tool. Organized labor groups, most especially the building trades council, have not been keen to give up that leverage without getting something in return.
As housing developers proved less willing to use the new streamlining laws than those bills’ sponsors and supporters had hoped, many pro-building advocates, academics and commentators began calling for environmental streamlining with no strings attached.
Wicks answered that call earlier this year. Under her proposal, infill developers would be allowed to ignore CEQA, full stop. That marked a major break from recent legislative precedent, and one that seemed a stretch, even with so many Democratic lawmakers carting around copies of Abundance.
The deal that almost wasn’t
Just last week, Wicks’ proposal seemed on the verge of collapse.
A version of the bill introduced last week included what amounted to a minor wage hike for the lowest paid construction workers, who are virtually all non-union. While the state’s carpenters’ union supported it, the trades council emphatically did not — with one of the groups’ associated lobbyists likening it to Jim Crow. The trades objected so strenuously — arguing that it set dangerous precedent and undercut apprenticeship programs — that lawmakers removed the proposed wage change.
Instead, developers working on projects that are entirely designated to be affordable would now be required to pay prevailing wages in order to take advantage of the new law.
Developers of any projects over 85 feet tall would be required to hire a certain share of union workers. There are added restrictions for construction in San Francisco specifically.
By the standards of prior housing streamlining bills, those are relatively modest concessions. Most developments over 85 feet use concrete and steel frame construction, which require a higher skilled labor force that is often unionized anyway.
Most entirely income-restricted housing projects make use of public subsidies that require paying union-level wages.
“Affordable housing is forced to play by different rules because the state has decided that if you are receiving public funds a certain wage should be attached to it,” said Ray Pearl, executive director of the California Housing Consortium, which advocates for affordable housing construction. The addition of a prevailing wage requirement for affordable housing “is a head scratcher,” he said. “But it really is reaffirming existing policy.”
That leaves every other type of housing project: Market rate and mixed-income apartment buildings under seven-or-so stories. For that type of construction, which defines the bulk of urban development in California, CEQA is soon to be entirely optional — no strings attached.
That this is the new trades-endorsed deal has been met with a perplexed kind of glee from some corners of the “yes in my backyard” movement. The new version of the bill “is now *even better,*” UC Davis law professor Chris Elmendorf marveled on Twitter.
Will it matter?
What will urban housing construction look like in California without CEQA?
There are no shortage of reasons not to build housing in California. Labor costs, even without regulatory requirements, are high. So are interest rates. Tariffs and aggressive immigration enforcement are more recent sources of uncertainty. Developers are always happy to complain about slow permitting, high local fees and inflexible building codes.
“It’s not the CEQA costs that are holding up housing,” said Rhoades, the Berkeley consultant.
“I don’t think this is going to make more development happen,” he said of the budget bill. “It’s going to make development that is already happening a little easier.”
Critics of the half-century-old environmental law can and do point to specific projects — housing for students, housing near public transit, affordable housing built upon city-owned parking lots — that have been sued in the name of the environment as examples of “CEQA abuse.”
Under the new laws, such litigation will largely go away in California’s cities.
“The one thing we do know is that CEQA is a time suck,” said Ben Metcalf, managing director of UC Berkeley’s Terner Center for Housing Innovation and the former head of the state’s housing agency under Brown. “If you can just get out of that six months, nine months, twelve months of delay, that takes a whole cohort of projects and gets them in the ground sooner. In a state that’s facing a housing crisis, that’s not for nothing.”
But the more important consequence of CEQA, many of its critics regularly argue, has been its chilling effect.
How many new units of housing would have been built, but for concerns that they might become ensnared in environmental litigation? How many developers, anticipating a possible legal challenge, have preemptively pared back their plans? How many financiers of housing projects pulled out or demanded higher interest rates over such concerns?
California may soon find out.
