Thursday, April 15, 2021
News + Politics The developers are wrong: CEQA doesn't stop housing

The developers are wrong: CEQA doesn’t stop housing

A major new study, mostly ignored by local news media, shows that the state's key environmental law is not an impediment to housing or affordable housing

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Developers see the California Environmental Quality Act as some sort of Great Satan, the source of pretty much everything that’s wrong with the state. CEQA halts progress. CEQA means huge delays and added expense in housing construction, which is why rents are so high. CEQA is crippling the state’s economy.

The governor isn’t much better: He once said that there’s no such thing as CEQA reform that he didn’t like.

CEQA doesn't add much to the cost of development -- and provides critical environmental justice
CEQA doesn’t add much to the cost of development — and provides critical environmental justice

But a new study shows that much of the demonization of CEQA is based on nonsense. The law hasn’t damaged the state’s economy. It hasn’t hampered development. It hasn’t added big costs to housing.

In fact, the study uses San Francisco as a case study and shows that CEQA is hardly ever an impediment to development.

The study, commissioned by the Rose Foundation and prepared by BAE Economics, concludes that

— There aren’t that many CEQA lawsuits. In the entire state of California, the number of cases filed under the law is fewer than 200 a year – and that hasn’t increased at all since 2002, while the state’s population has grown dramatically. The actual rate of lawsuits is below one percent of all projects that were subject to CEQA review.

— In San Francisco, where critics say Nimbys rule the day and CEQA is a huge impediment, only 14 projects in the past three years have required environmental impact reports – while development has exploded. The city “routinely uses the streamlining procedures built into CEQA statues and guidelines,” the study says. If anything, San Francisco is a case study in how CEQA is NOT used to delay development, and how city agencies allow projects to go forward with minimal obstruction.

— CEQA doesn’t cost developers a lot of money or add significantly to the cost of construction. Environmental review in San Francisco adds as little as one quarter of one percent and a maximum of one half of one percent to development costs.

— CEQA is not a major brake on growth; in fact, the study concludes,

California’s strong framework of environmental protections, including CEQA, does not constrain growth and indeed helps ensure the state’s future sustainability.

CEQA is part of a framework of laws passed in the late 1960s and early 1970s, in the early days of the US environmental movement. Richard Nixon signed the National Environmental Policy Act into law in 1969 with bipartisan support and very little business opposition.

The laws seemed pretty toothless to industrial lobbyists; like CEQA, signed into law by Gov. Ronald Reagan in 1970, the legislation didn’t halt any sort of development or put any new rules on land use. It simply said that any time a project might have an impact on the environment, that impact should be studied, and policy makers should consider that study and any appropriate mitigations.

In fact, nothing in either law prevented policy makers from approving a project that was bad for the environment. The rules only said that before they made that decision, elected officials had to study the impacts, make that study public, and consider alternatives and mitigations. After doing all that, the federal government, or a local city council, had every right to say: Never mind the impacts. We want the development anyway.

But NEPA and CEQA changed environmental law forever, in a way that only a few people understood at the time.

In the 1960s, the emerging environmental movement was running into trouble in the courts: Activists tried to sue to stop major developments in rural and undeveloped wilderness areas, and they ran into a problem called “standing.”

Under federal law, and state laws that derived from it, you weren’t allow to sue unless you could prove that you were damaged. Want to stop a development that would ruin a pristine ecosystem? Unless you owned land that would be impacted, you were out of luck.

A couple of key court decisions in the late 1960s gave environmentalists the ability to say that their rights to hike and enjoy the wilderness counted as standing, but the issue was still a huge impediment.

Until NEPA and CEQA.

Under those laws, every citizen had the right to an honest assessment of the environmental risks of a project. If an environmental review was lacking, you needed no other standing; anyone could go to court and challenge an EIR. No state agency was assigned to enforce CEQA; it was the classic case of a private right of action defining the enforcement of the law.

 

And over the years, that right has been transformative. Thousands of terrible projects that could have gone forward have been slowed down by NEPA and CEQA lawsuits; in many cases, the projects were ultimately approved, but only after the environmentalists were able to win changes and mitigations that should have been part of the deal in the first place.

CEQA changed San Francisco environmental and planning politics in the 1980s. The city had been routinely approving vast numbers of new highrise office buildings, each one treated as an individual project, with no concern for the fact that all of them together would create havoc for Muni, would clog traffic, would cause huge increases in energy use, water and sewer issues, and impact the daily lives of people in the city.

Sue Hestor, attorney for San Franciscans for Reasonable Growth, sued, saying that the city had to take into account not just one project but what all of them put together would do. She won a landmark decision by the state Court of Appeal, concluding that the EIRs done by the city were woefully inadequate. From that point on, environmental review was held to a higher standard and was a part of long-term city planning.

Developers have been trying to gut CEQA for decades, and have won all sorts of changes and exemptions in the Legislature. Still, the law remains one of the most powerful tools for ensuring that policy decisions are made with full public review of the environmental impacts.

It’s not perfect. It has only limited teeth – elected officials can and very often do ignore the results of EIRs and make approve bad developments anyway. But it’s critical to the planning process.

According to the study,

A broad look at the evidence shows that litigation under CEQA has not increased since 2002, a fact that rebuts assertions that the vast majority of projects in California are now subject to lawsuits.  Furthermore, CEQA has been amended to institute streamlining procedures, and the evidence from San Francisco indicates that a very high percentage of approvals are subject to exemptions from CEQA, and that the number of EIRs prepared is small.

 

The study looked specifically at San Francisco, where we’ve heard complaints for years that he EIR process is too cumbersome and that “streamlining” review would cut down the cost of development.

Between 2013 and 2015, the study found, San Francisco planers received 127 projects that were eligible for CEQA review. Of those, only 14 wound up needing a full EIR.

In fact, 75 of those projects, including some fairly substantial developments, never had to undergo and EIR process because of the “Community Plan Exemption.” Projects in any area that’s undergone a detailed local planning process, including an EIR, and be totally exempt from CEQA review – meaning that thousands of housing units have been and can be built in the area under the Eastern Neighborhoods Plan with no project-specific review.

The study notes that CEQA has been

a powerful tool for communities subjected to environmental injustice, and advocates for these communities frequently rely on CEQA to protect residents from public health impacts.  The value of CEQA, especially to address cumulative impacts, means that environmental justice advocates have taken a strong stand against many aspects of proposed CEQA reforms including the recent proposal to streamline CEQA review by exempting certain “by-right” residential projects.

We also hear that CEQA makes affordable housing more expensive. But there’s data on that:

The Affordable Housing Cost Study employs a regression analysis to model project characteristics potentially influencing development costs in 400 newly-constructed affordable multifamily projects in California that received either 4 or 9 percent Low Income Housing Tax Credits (LIHTCs) between 2001 and 2011.  The report presents the major components of total development cost (excluding land cost) across the 400 affordable development projects analyzed.  In descending order of magnitude, the largest cost category was construction (69 percent).  Other sources of development cost include demolition and site preparation (eight percent); development fees (seven percent); permits and development impact fees (six percent); architect, engineering, and site surveys (four percent), acquisition (one percent), offsite improvements (one percent) and “other costs” (four percent).

CEQA would be a part of the “other costs.” Less than four percent.

In Richmond, the study notes, a senior housing project costing $110 million spent $300,000 on CEQA compliance. That’s 0.3 percent. And that process uncovered critical air quality and toxic contamination issues that were later mitigated.

This is a critical document, mostly ignored by the local news media. It directly contradicts nearly all of the attacks on CEQA we’ve been hearing from developers (and the governor), and shows why the law is so important, effective – and relatively free from abuse.

Required reading for SF’s planning community.

 

Tim Redmond
Tim Redmond has been a political and investigative reporter in San Francisco for more than 30 years. He spent much of that time as executive editor of the Bay Guardian. He is the founder of 48hills.

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  50. Interesting about “standing.” Perhaps if we had presented the “definition of marriage as between a man and a woman” as an amendment to CEQA, the initiative might have not got caught in such trouble in the courts!

  51. I don’t mean to whine, I just get angry when people commission fraudulent studies to further an anti-growth agenda. The study in this article is a good example and the San Francisco Nexus study is another one. If you’re going to be anti-growth, just admit that you’re selfish and own it. Don’t lie to yourself and manipulate data and try to convince others it’s the best thing for everyone.

    I personally believe that a strong growth policy is the most equitable solution for everyone. Otherwise we will continue to displace large quantities of low and middle income residents and the bay area will gradually become more like Monaco, a place brimming with high income earners, no middle class, and a small number of poor service workers living in subsidized housing. I’ve been there, it’s excruciatingly boring.

  52. ‘No one has a “right” to live here in the Bay Area.’ All right, then why are you complaining that you can’t afford a place? Why is it your ‘right’ to live here (in your own house/apartment, even) any more than someone who lives in a rent-controlled place?

    “In the last 5 years the bay area has added 106,000 jobs per year but only added 19,000 units of housing per year.” It’s very easy to hire someone, but it’s much harder to build a place for them to live. How about a moratorium on office construction and new business licences until there’s a place for everyone to live?

  53. 1. They can afford the current tax rate based on the current valuation. It would probably stop them from buying a vacation house in Sonoma county and reducing the supply there (not a joke). It could definitely impact them 20 years down the road.

    2. Of course I can support having someone’s rent “jacked beyond their control.” That person in that rent controlled unit is impinging on my ability to live here in the bay area.

    Just like you can justify restricting the housing supply so you don’t have to share the Bay Area with the unwashed masses, I can justify the abolition of rent control so I can come closer to having a place of my own.

    No one has a “right” to live here in the Bay Area.

    3. No, we are not building “lots” of housing relative to demand. According to the Chronicle, in the last 5 years the bay area has added 106,000 jobs per year but only added 19,000 units of housing per year. By some estimates we would need to add 70,000 units per year to keep costs from rising.

    In Tokyo, where there is a similar per capita influx of residents but prices are not rising (and are lower than here), the rate of housing added per capita is about 5.5x higher than here.

    I don’t expect builders to create $2000/month units, I expect them to create market rate units. If they don’t create market rate units, their buyers will just displace someone vying for an existing unit who is lower on the ladder, and that person will displace someone else, and so on.

  54. If Prop 13 wasn’t in place, wouldn’t much higher taxes burden your parents so much that they and you couldn’t stay at the house anymore?

    Some people are in your situation, but staying in their parents’ rented, not owned home. Without rent control, they can have their rent jacked beyond their means. Why would you support that?

    Lots of housing is being built, but almost all of it is not affordable for people making $86K. That is not by chance. What makes you think anyone would want to build $2000/mo units if they can rent them for $4000/mo instead?

    Market rate housing is expensive here because there are plenty of people who will pay higher prices, and plenty more are coming in. Building tens of thousands more units will hurt the “NIMBYs” as you call them, but won’t help you.

  55. What mean by social cost is the economics of living in the bay area are much less equitable than in the past.

    To get a sense of my perspective: my wife and I grew up in the east bay, are in our 30s (median age for the bay area) and together our gross income is $84k (a roughly median income for a couple). In order to save for the future, we live with my parents in their house in Oakland, which they purchased in the 1980s for $50 per square foot. Houses on our street now fetch $700-$1000 per square foot, and our neighbors include a physician and a tech company vice president, both of whom commute to their jobs in Palo Alto. Our neighbors pay a total of $6700 to rent the duplex next door while my parents pay just $300 a month in taxes.

    My wife and I are under the $86k gross income limit to purchase a BMR ownership condo in San Francisco, but we are ineligible because we have saved money, and 10% of our savings count as additional income. Even if we were eligible, it’s a lottery, and displaced San Francisco residents get priority. The market rate detached homes we can afford on our income are in impoverished african american neighborhoods in East Oakland, or Richmond, places we are unwilling to move.

    If I want to move out of my parent’s house, I am exposed to market rate forces on housing. For a person in my position, all of the so called “progressive” polices designed to lower the cost of housing actually raise my costs to purchase a home, and have effectively priced us out of the market.

    In my mind:

    -Rent control sequesters rental units from the free market, raising the cost of market rate housing, which is bad for me.

    -Prop 13 incentivizes cities to create jobs over housing because of higher tax revenues from jobs. Prop 13 also sequesters housing from the market, much like rent control, and transfers tax burdens onto younger generations. I know 3 people of my parents generation who have inherited houses in the bay area that are kept empty. Without prop 13, they might rent or sell. Prop 13 is good for my parents, bad for me at the moment.

    -Land use restrictions, CEQA, and nimbies profoundly restrict the supply of new housing, raising the cost of market rate housing. Again, bad for me.

    -Loose monetary policy of the fed incentivizes borrowing, and inflates housing/asset prices. Also makes housing prices highly volatile, which is bad for me at the moment.

    The bottom line is I get offended when older generations, who are beneficiaries of prop 13, oppose new housing because they think the bay area is “full” or it offends their aesthetic sensibilities, or they have some vague idea that developers are evil and want to pave over everything. It’s a selfish attitude, and it’s hurting younger generations. Much like you, I wish to preserve my way of life, which to me means being afforded the same economic opportunities which were available to my parents.

    Right now, because I’m feeling selfish and angry I would:

    -vote for any measure that allows more housing, especially dense, transit oriented housing
    -vote to repeal CEQA
    -vote to repeal Prop 13
    -vote to ban rent control
    -vote to ban inclusionary housing
    -vote to eliminate zoning
    -vote for any measure that exposes nimbies to market rate forces, or displaces them

    I might even vote for Trump, just so I can watch the capitol burn

  56. I am not sure what you mean by social cost or how you measure it. However, the social cost of destroying a family neighborhood may be greater than the cost of maintaining it. If families with children have fewer places to live and leave the City, that would diminish the City’s quality of life.

    There is value in multi-generational neighborhoods like where I live now. That may add to the quality of life. But it seems that as we are living longer and heathier lives the turnover of single family homes has slowed. I and other seniors don’t’ really need large homes and may be better off in a more densely populated neighborhood with more convenient services. If we would move it would free up homes for families with children. That may be the best thing for everyone. But I am not sure what can be done about it.

  57. All human behavior is in some way related to water and energy. The SB375 movement might have been well intentioned, but give California regulators and inch and they will take the proverbial mile. The involvement of the State in human behavior should be limited. The alternative is government micromanagement of far too many aspects of behavior. For example, people who work from home, or are retired are not really part of the sprawl vs CO2 commuter/jobs equation.

  58. I think CEQA is desperate need of reform. We have no business mixing the impact on the natural environment with the impact on humans and the built environment.

    I also think CEQA has had the perverse effect of promoting less density and more sprawl, pushing commuters further away from jobs. This is definitely worse for water and energy consumption, and CO2 emissions.

  59. If you wish to preserve your own quality of life, regardless of social cost, I respect that. I don’t think it’s the best thing for everyone, but we do have a right to fight for our own interests.

  60. So you are supporting the abolishment of CEQA? Just because it’s not ideal doesn’t mean it should be rescinded. Perfect, the enemy of good?

  61. I agree homeowners benefit financially from the restricted housing supply (if they sell and leave the City) but that is not the main reason for wanting environmental controls. The issue is quality of life. I like my single family owner occupied neighborhood. The lower density has benefits and provides homes for families with children. If one prefers more density and some of the benefits it provides, there are other neighborhoods. There may be some areas of the City that would not be greatly impacted by a little more density which could improve the quality of life, however. And over time people do adjust.

  62. I don’t think there’s much of a tradeoff if you’re a homeowner. Existing homeowners derive many benefits from a restricted housing supply and at the same time are shielded from the negative consequences. It’s a version of the free rider problem, in which typically older homeowners are beneficiaries and younger generations are marginalized.

  63. Yes, I can see how that would raise the price of housing. But if CEQA protects our quality of life in our neighborhoods then higher costs may be a fair tradeoff. I will take some bad with the good. Better some protection than no protection.

  64. If you mean that CEQA is a land use regulation that has inadvertently created an avenue for extortion, and that the resulting concessions raise the cost of constructing new housing, then yes.

  65. Wouldn’t it be the cost of the concessions also?

    Most EIR’s in the City have nothing to do with the natural environment. There are many other environmental impacts.

  66. Most EIR’s are paid for by the developer and they can choose who does the report: He who pays the piper . . .! Most reports are biased in favor of the developer. Unless the opposition can afford to hire experts who can refute the EIR’s findings, the developer has the upper hand.

  67. This study doesn’t account for the fact that CEQA is routinely used as a threat to extract concessions from developers, without ever seeing a lawsuit filed. Since a lawsuit can cost millions, private interests can demand millions in concessions. As long as demands are lower than the cost of litigation, developers will concede. This tactic is used by many private interests, eg unions use CEQA to force union labor on building projects and affordable housing advocates use CEQA to force the addition of affordable units. 2/3rds of projects targeted by CEQA lawsuits are infill and have little or nothing to do with the natural environment (eg wetlands, coastal, etc).

    The city of Tokyo issues nearly double the number of new building permits as the entire state of California, desipite having no remaining open space and just 1/3rd the population. This tells us our planning process has become a powerful restriction on the creation of homes and is largely responsible for the rising cost of housing.

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