How an Outdated Environmental Law is Sabotaging California's New Housing Rules

In October, outrage erupted when San Francisco’s Board of Supervisors voted down a proposal to build nearly 500 new homes — many affordable — on a downtown site at 469 Stevenson St. now being used for valet parking.

Of course, these same supervisors reject housing developments all the time. And yet this denial was especially brazen.

It came short on the heels of a major Court of Appeal decision upholding the state’s powerful Housing Accountability Act, which requires cities to approve housing projects if a reasonable person could deem the project compliant with applicable standards. Yet the supervisors who voted “no” didn’t even try to argue that the project was noncompliant.

Instead, they attempted to evade the HAA by using a different law, the California Environmental Quality Act.

Technically, the board voted to reverse the city planning commission’s certification of the project’s environmental impact report—a report that took over two years to complete and certify in the first place. Board members demanded additional environmental studies, even as they openly admitted that their objections to the project — too big, not enough affordable units, risk of gentrification — had nothing to do with the environment. Oakland and Sonoma have also used similar CEQA maneuvers to hold up housing projects, too, albeit to much less fanfare.

The immediate question this raises is whether cities will be allowed to keep using CEQA to launder denials of housing that state law protects. Can bad-faith cities keep getting away with demanding round after round of ever more elaborate environmental studies, until developers cry uncle and walk away?

But there’s also a deeper question. Why is a housing project that a city can’t legally deny — because it is protected by state law — required to undergo an exhaustive environmental study in the first place?

CEQA requires local governments to carefully consider environmental concerns whenever they make discretionary decisions. For example, it requires cities to do environmental studies when they change their zoning ordinances.

San Francisco’s city charter subjects all development projects to “discretionary review,” making them all potentially subject to CEQA, even if they conform to zoning. But that doesn’t mean every single project in San Francisco is put through the wringer of a multiyear environmental impact report. A report is required only if the development may have a “significant impact” on the environment.

But significant relative to what?

The developer of the Stevenson Street project had to complete an environmental impact report because San Francisco’s Planning Department concluded (after its own yearlong, 342-page study) that the building might have a significant local environmental impact in the form of shadows, wind, or (during construction) noise and air pollution, relative to leaving the site as a parking lot.

This is nuts.

After all, this was a proposal to put dense housing a block from a BART station, in a designated “priority development area” under the region’s climate plan. Few projects could be more environmentally friendly.

Also, critically, California law doesn’t allow the city to retain the site as a parking lot once a developer applies to build housing there.

There was no reason to require an environmental impact report for the Stevenson Street project unless it would have a significant larger impact than any other project of the size that state law authorizes and encourages developers to build on the site. If the impact of the 500-home building the developer proposed would be about the same as the impact of any other 500-home building on the site, then requiring the developer to prepare an environmental impact report was a colossal waste of time (two years and counting) and money. In the midst of a worsening housing crisis.

It doesn’t have to be like this.

Under the federal statute on which CEQA was modeled, environmental review is limited to effects that are proximately caused by a government agency’s discretionary decisions. Because California law prohibits San Francisco from downsizing the Stevenson Street project, the project’s size isn’t caused by the city’s permitting discretion. And so the Stevenson Street project wouldn’t require environmental analysis.

Or consider New York, where if a developer proposes a 10-story development on a site where the zoning currently allows a five-story building, the effect of the larger project is analyzed relative to a smaller one the zoning allows.

The bottom line is that there’s an urgent need for fresh thinking about how to fit CEQA and the HAA together in a sensible way. Ideally, California’s Legislature would do it, with clarifying amendments to one or both laws. But achieving meaningful CEQA reform through the Legislature has proven to be a Sisyphean task due to the powerful interest groups — first and foremost the building trades unions — that have mastered the art of using CEQA litigation to hold developers hostage until the unions secure a side-deal, thereby making housing harder to build — and more expensive when it is built.

Action on this issue will require a full-court press by other actors: the courts, the Attorney General, and most importantly Gov. Newsom, who is riding high after crushing the recall attempt.

The governor has tools at his disposal to get the job done. He oversees the Department of Housing and Community Development, which is tasked with enforcing the HAA and other state housing laws. He also appoints the directors of the Natural Resources Agency and the Office of Planning and Research, who in turn issue the official CEQA Guidelines, which spell out the nitty-gritty of environmental review.

The governor’s housing department has launched an investigation of the 469 Stevenson St. debacle. A few days before Thanksgiving, the department delivered a strongly worded letter to San Francisco. This letter suggested that bad faith demands for superfluous environmental studies may violate the HAA. This interpretation — which is plausible but not open-and-shut — would greatly curtail CEQA-laundered project denials. And it’s an interpretation that courts are more likely to accept now that the executive branch of state government endorses it.

The letter is great, but it’s just a start.

CEQA guidelines must be revisited, too. They don’t even mention the HAA. Worse, they arguably call for full environmental impact reports even when a city has limited discretion over a project.

Stevenson St. is a case in point.

This is no way to run the show in a world where, as the HAA puts it, the lack of abundant infill housing is “undermining [California’s] environmental and climate objectives” by causing “urban sprawl, excessive commuting, and air quality deterioration.”

The housing shortage gets worse with each passing month that is wasted on irrelevant environmental review.

One of Newsom’s first official acts after trouncing the recall was to sign a spate of new housing bills. Next in line for the governor’s signature should be an executive order directing a revision of the CEQA Guidelines in light of the HAA. There’s no time to waste.

Christopher S. Elmendorf is a professor of law at UC Davis. Tim Duncheon is a lawyer based in San Francisco. Portions of this commentary were published on the State and Local Government Law Blog.

[Cross-posted from the San Francisco Chronicle]