CEQA finally brought to its knees by California’s severe housing crisis

Originally enacted in 1970, the objective of the California Environmental Quality Act (CEQA) was to review projects to assess potential impacts on the environment, disclose those impacts to the public, and mitigate those impacts to the extent possible. However, over the years, CEQA has become the gatekeeper for the final approval of every significant development project in California. After a rigorous review of a development project by the local planning commission and the local city council, which both had the input of an environmental assessment, CEQA has taken on a life of its own. In many cases, lawsuits were filed to block approved projects, but those lawsuits were procedurally or legally flawed, or the plaintiffs had a personal or political agenda to pursue, but in any event, they could delay projects by an additional three years after their initial approval. No wonder that housing has become so expensive in California, and no wonder that major corporations have picked up stakes and moved to friendlier environments such as Texas or Florida.

While there have been limited workarounds to CEQA for those who had political clout to get the legislature to exempt their projects from CEQA, such as major sports facilities, or even the renovation of the state capitol building itself, CEQA has remained the single largest hurdle for developers in the Golden State. However, this past week, the legislature finally passed two major reforms to CEQA. Assembly Bill 130 exempts all residential, infill construction, except projects over 85 feet tall, from CEQA, exempts those projects from so-called prevailing wage requirements, exempts those projects from affordability requirements and mandates a 30-day deadline for local agencies to approve or disapprove qualifying projects.

Senate Bill 131 states that housing projects that fail to meet the CEQA requirements to qualify for the AB130 “but for a single condition,” the CEQA review of the housing project is limited to the environmental effects of that single condition. On the commercial side, the exemptions of SB 131 are even broader, and exempt such projects as the high-speed rail project, projects geared towards wildfire mitigation, water infrastructure, and electric vehicle production.

Signaling the importance of both measures, the two bills immediately took effect on July 1, and they were both tied to the passage of the state budget. The effects of the changes in CEQA on housing production in the state of California will be visible almost immediately, although the effects of the commercial aspects of SB131 will take more time to materialize.

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