Is This the Year California's Development-Killing Environmental Review Law Sees Serious Reform?

Yet another court decision stopping a U.C. Berkeley housing project is getting California's policy makers to think bigger about reforming the infamous California Environmental Quality Act.

In February, a California appeals court ruled that the University of California, Berkeley would have to halt its plans to build a much-needed student housing project on the site of Berkeley's famed People's Park until it studied the excess noise the future student occupants would cause.

The lawsuit was brought by a coalition of neighborhood activists under the California Environmental Quality Act (CEQA), which requires government bodies to study and mitigate the environmental impacts of projects they undertake or have a discretionary role in approving.

The decision sparked outrage across both California and the nation. A law meant to stop highway projects paving over wetlands was being hijacked by NIMBY (not in my backyard) activists to deny college students housing.

"California cannot afford to be held hostage by NIMBYs who weaponize CEQA to block student and affordable housing," thundered Gov. Gavin Newsom, a Democrat, in a statement. "This selfish mindset is driving up housing prices, and making our state less affordable. The law needs to change."

Legislators echoed these sentiments, introducing immediate fixes while vowing more comprehensive action to come. Blogs and editorials pointed to the appeals court decision as just more evidence that California, and America generally, had lost its ability to build the things it needs.

If this sounds familiar, it should.

A nearly identical set of facts played out last February when a California appeals court ruled in response to another CEQA lawsuit brought by neighborhood activists that U.C. Berkeley had failed to properly study the impact of its growing student body on the surrounding city.

The decision required the university to slash its enrollment by several thousand students until those studies could be done. Given the timing of the ruling, it would mean that some would-be freshmen who had already been accepted to the school would have to find somewhere else to pursue their education.

Newsom issued a statement criticizing that ruling. His administration filed an amicus brief in support of the university's (ultimately unsuccessful) appeal to the California Supreme Court. Legislators passed new laws to reverse the decision and exempt future student housing projects from CEQA. Essays in The New York Times and The Atlantic treated it as the epitome of America's staid Boomerocracy.

Despite all the outrage and even the successful passage of reforms intended to exempt student housing projects from CEQA, the state has wound up in a near-identical position one year later where neighborhood activists are using the law to stop a U.C. Berkeley student housing project.

The problems with CEQA aren't new. They've been talked about for years. The law's ability to stop or delay a wide variety of projects—including new housing, new hospitals, new bike lanes, new burger joints, new solar plants, and new marijuana dispensaries, to name a few—has produced a diverse set of critics eager for reform.

"It's the law that swallowed California. This state is addicted to CEQA," says state Sen. Scott Wiener (D–San Francisco). "Anyone with the resources to hire a lawyer can delay a project for years and years."

The same features of CEQA that make it so controversial also make it so hard to reform. Almost every interest group in the state sees some merit in using CEQA to stop projects they don't like or to wring concessions out of project sponsors.

"If you want to start to open up the law itself, you instantly get into these very complex coalitional negotiations with an ever-shrinking piece of what you set out to do in the first place," says Matt Lewis, communications director for the housing advocacy group California YIMBY.

Reforms that can pass the Legislature are, therefore, exceedingly marginal. Even when reformers leverage serious outrage at CEQA abuse to sweep whole categories of projects out of the law's purview, the caveats and conditions they include often defang their reforms. Whatever marginal improvements do make it out of the political sausage grinder are also easily erased by courts who see it as their duty to broadly interpret CEQA.

The CEQA deja vu over U.C. Berkeley is a great example.

Last year, Wiener capitalized on the negative reaction to the U.C. Berkeley enrollment decision to pass S.B. 886. It exempts student housing projects on or near public university campuses from having to go through CEQA, provided "they adopt stringent energy and environmental design standards, aren't replacing existing housing, aren't in flood zones and historic districts, and contain fewer than 2,000 units or 4,000 beds. The university would also have to hold a public hearing on the project."

Weiner tells Reason that the law didn't go into effect until this year, meaning it arrived much too late to save U.C. Berkeley's People's Park project, which has been in the pipeline for years.

It's doubtful S.B. 886 would have spared the project from CEQA litigation even if had been in effect.

The law's CEQA exclusion doesn't apply to projects that would demolish a historic structure listed on a national, state, or local historic register. The appeals court decision halting the People's Park project notes that the park was designated a historic landmark in the 1980s and building housing on it would require demolishing on-site structures.

That seemingly would have forced it back into the CEQA gauntlet, S.B. 886 notwithstanding.

"The Legislature came back and did a very surgical fix and it didn't actually work," says Jennifer Hernandez, a land use attorney with the firm Holland & Knight. "The idea that CEQA wasn't going to be a problem for housing" was obviously wrong.

Forthcoming research from Holland & Knight that Hernandez shared with Reason shows that between 2019 and 2021, 198 CEQA lawsuits were filed against housing projects, as well as local government plans and agency regulations allowing for more housing.

Of those, 9 percent of CEQA lawsuits were filed against campus student housing projects. During those three years, lawsuits also targeted plans that would have allowed for one million homes. In 2020 alone, CEQA lawsuits targeting individual projects held up a total of 50,000 units (or half the state's housing production).

By revealing the limits of recent surgical CEQA reform, the appeals court decision in the U.C. Berkeley case raises the possibility that this is the year that more comprehensive structural reform might happen.

"The court is almost daring the state Legislature to use Berkeley as an example of why it has to reform CEQA," says Lewis. "This is the second ruling that has kind of found that CEQA allows anti-housing activists to categorize human beings as pollution."

A few more modest CEQA reform bills have already been introduced.

A.B. 1700, introduced by Assemblyman Josh Hoover (R–Folsom), would declare that noise impacts from housing projects aren't an environmental effect that has to be studied or mitigated for the purposes of CEQA.

While CEQA is often used to stop housing projects, the appeals court decision in the People's Park case was conspicuous because it required study and mitigation of already illegal noise impacts from a housing project based on the type of people who would occupy it.

That opens up a range of unsavory avenues for future CEQA litigation.

"Family housing, which may mean a colicky infant crying for the first three months of her life, is that a CEQA impact? How about crime rates for different kinds of housing?" says Hernandez.

A.B. 1700 is intended to stop those kinds of cases from popping up.

There's also A.B. 1633, introduced by Assemblyman Phil Ting (D–San Francisco), which would stop cities from effectively, but not officially, denying projects by keeping them in perpetual CEQA review.

State housing law requires cities to approve certain projects and gives developers the ability to sue to compel approval if their project is denied. Some cities skirt this law by keeping projects in endless environmental review, such that they're never officially approved or denied.

Ting's bill would treat some higher-density projects as denied if they spend a certain amount of time in environmental review without being approved. This law would be particularly helpful for getting "builder's remedy" projects popping up across the state approved.

More structural CEQA reform appears to be in the offing too.

Newsom's 2022 statement on the U.C. Berkeley decision criticized the result of the court's decision without calling for wider reform. His 2023 statement demanded more serious change to the law. The governor is not known as a policy wonk, however, and his statement seemed to put the onus on the Legislature to come up with the details for any CEQA fix.

Wiener, a longtime critic of what CEQA has become, says that his office has been working on a more comprehensive reform bill since a draft appeals court decision in the People's Park case was released in December 2022. He says he plans on introducing that bill in the coming weeks.

"I'm interested in fixing [CEQA] so that it's focused on the really problematic projects from an environmental perspective while not delaying or killing projects that we really need while not undermining climate action," he says, while cautioning that "we're not going to solve every problem."

Hernandez says that efforts to exempt urban apartments and bus lines from CEQA while still preserving the law as a climate action tool will mean the law still blocks a lot of housing, often in ways that undermine other state laws related to housing production and fair housing.

As an example, she cites the treatment of vehicle miles traveled (VMT) as a CEQA impact that needs to be studied and mitigated. Currently, developments that don't reduce per capita vehicle miles traveled by more than 15 percent below county averages are deemed to have significant travel transportation impacts that need to be mitigated.

Because wealthy suburban and exurban areas already have higher-than-average VMT, builders of new housing in those areas have to pay mitigation fees of as much as $700,000 per unit. Those fees make building new housing in those areas economically infeasible. 

But reforming CEQA to make suburban greenfield development easier is something that would be opposed by lots of environmentalists, NIMBYs, and even the state's supply-side housing reformers who see more dense urban housing as good for both affordability and climate change but are critical of more suburban sprawl. 

So, even within the universe of people eager to see more home construction, there is tension over CEQA. It's just another example of what a difficult task reform will be.

Lewis says that he doesn't think that there will be a single "aha" moment on CEQA, where policy makers decide to fix everything wrong with the law in one fell swoop.

Instead, he predicts reform will look more like time-lapse videos of snails eating a watermelon. After a million little nibbles, the fruit is gone. Likewise, it'll take continual work reforming CEQA on the margins until the law is put back into a more appropriate box.