California Housing Production Bills Focus on CEQA and a Pandemic

Despite a record-breaking 19 housing bills that were signed into law in 2019, California's housing supply and homelessness crisis continues and has been further exacerbated by the coronavirus (COVID-19) pandemic.

On May 20, 2020, the California State Senate leadership released a Housing Production Package of five bills that are designed to increase and expedite housing production. All the housing production bills include modifications to existing California Environmental Quality Act (CEQA) requirements for housing projects. Although the Assembly has not announced a similar housing production "package," four Assembly bills aimed at spurring housing production also include amendments to curtail duplicative CEQA review and make other changes to CEQA requirements for housing. It's hard to miss the big picture message of these bills: CEQA is an obstacle to the timely approval and construction of housing.

Meanwhile, one of CEQA's staunchest defenders, Sen. Hannah-Beth Jackson, is the author of SB 950 – dubbed by environmental lobbyists as "CEQA 2.0" – which expands CEQA's substantive and procedural requirements, and repeats yet again the virtually unworkable "exemption" for affordable housing that can be built silently (no noise). SB 950 has achieved the unusual political distinction of earning the California Chamber of Commerce ranking as a "Job Killer," the Building Industry Association's ranking as a "Housing Killer," and outright opposition from the State Building and Construction Trades Council as well as the civil rights group, The 200.

Summary of Housing Production Bills

The Senate's Housing Production Package, and the Assembly housing production bills, are briefly described below.

SB 902 (Sen. Scott Wiener) would permit (but not require) local governments to implement zoning ordinances that would permit housing projects of up to 10 units without CEQA review, if the housing is located in a transit-rich or jobs-rich area, or an urban infill site, does not require demolition of existing homes, and meets various eligibility criteria. A local government's adoption of the zoning ordinance change would not trigger environmental review under CEQA. 

SB 995 (Sens. Toni Atkins and Wiener) would extend the former AB 900 Environmental Leadership Development Project CEQA streamlining bill, limited litigation to 270 days instead of three to five years, from $100-plus million employment and entertainment complexes to housing projects in qualifying infill locations that include a minimum of 15 percent affordable housing and cost at least $15 million. To qualify for streamlined CEQA litigation, the housing project must earn support from the governor's office, which has for previous projects typically required Building Trades Council support (project labor agreements) and environmentalist support. No project approved through AB 900 has been overturned in a subsequent CEQA lawsuit. Additionally, the bill provides a mechanism to streamline individual housing project approvals by mandating local municipalities that receive state funding to utilize the Master Environmental Impact Report (MEIR) process to do upfront planning, thereby expediting a limited environmental review for subsequent proposed housing projects.

SB 1120 (Sens. Atkins, Wiener and Anna Caballero) creates a "ministerial" (CEQA exempt) approval process for duplexes or lot splits on parcels zoned for single-family residential use, which are located within an urbanized area or urbanized cluster, as designated by the U.S. Census Bureau. (These urbanized area designations apply generally to large multicounty/multicity urban regions, and to smaller and more isolated downtowns in rural, agricultural, mountain and desert communities.) The bill generally excludes projects requiring the demolition of housing units, or the alteration of housing units that would require evictions.

SB 1385 (Sens. Caballero and Susan Rubio) establishes the Neighborhood Homes Act, which authorizes residential uses on properties zoned for commercial (office) and retail uses. Authorized residential densities under this bill fall into the "affordable by design" densities in Regional Housing Needs Assessment law, which range from 15 dwelling units/acre (DU/ac) in rural areas, to 30 DU/ac in highly urbanized areas, with most cities falling into the mid-range of 20 DU/ac. (Townhomes, attached homes, flats, and two- to three-story apartment projects typically fall within these density ranges.) Cities may remove this residential zoning designation by designating alternate locations for comparable housing elsewhere. The bill also includes an opt-in assessment district mechanism allowing local governments and housing applicants to enroll projects in assessment districts in lieu of paying upfront development or mitigation fees for infrastructure or services covered by the assessment district. Finally, the bill would extend SB 35's ministerial (CEQA exempt) housing approval process to retail and commercial properties that have been vacant or less than 50 percent tenanted for the past three years. For all other projects, the bill would not change CEQA, coastal,  historic or environmental laws, or any zoning, design or procedural requirements applied by local government to these projects.

SB 1085 (Sen. Nancy Skinner) incentivizes more affordable housing in mixed-income projects by increasing the number of local zoning standard waivers (incentives/concessions) under the state's Density Bonus Law (DBL) in exchange including more affordable units in these projects. The bill also disallows reliance on a project's specific significant adverse impact on the physical environment (a CEQA finding) from the list of reasons that a local government can use to deny a concession or incentive to a housing project using the DBL.

AB 1279 (Assembly Member Richard Bloom) directs the Department of Housing and Community Development (HCD) to designate "high-opportunity areas," which are expected to overlap at least in part with federal Economic Opportunity Zone tax relief areas – but which cannot cause displacement of low-income and minority neighborhoods. The bill extends SB 35's ministerial (CEQA exempt) housing approval process for residential development projects meeting size and other eligibility criteria to these areas. AB 1279 would allow a city or county to appeal HCD's high-opportunity area designations if it has adopted its own policies that would accommodate a similar number of affordable and market-rate units, and complies with fair housing statutory mandates (e.g., by not worsening residential racial segregation.).

AB 2323 (Assembly Members Laura Friedman and David Chiu) makes common sense amendments to CEQA to facilitate housing production, such as allowing housing on formerly contaminated properties that have received state environmental agency clearance for residential redevelopment. The bill would reduce duplicative review by extending an existing exemption for projects that are consistent with specific plans to projects that are consistent with community plans, since both specific plans and community plans already require CEQA compliance. The bill also allows farmworker housing to be constructed on land subject to a state conservancy, and expands the size of sites qualifying for existing statutory infill exemption from 4 to 5 acres.

AB 2345 (Assembly Members Lorena Gonzalez and Chiu) is another legislative proposal that seeks additional concessions/incentives for residential projects under DBL that provide a greater percentage of lower income and low-income rental units or moderate-income units in common-interest-developments, which would allow for a density increase of up to 50 percent under certain circumstances. The bill would allow local municipalities the authority to grant additional concessions/incentives above and beyond what is currently provided under state DBL if a project exceeds maximum density limits. Proposed changes also include a uniform method to measure the distance between a major transit stop and a project location in order to maximize the number of eligible properties within a half-mile radius of a major transit stop. Lastly, the bill proposes to reduce maximum parking requirements for specified eligible projects, and would eliminate parking requirements for 100 percent affordable projects (exclusive of the manager's unit) and senior housing projects that meet specified criteria.

AB 3155 (Assembly Members Robert Rivas and Sharon Quirk-Silva) is focused on an often-ignored housing issue: the absence of attainable homeownership caused by the housing crisis. The bill requires ministerial (CEQA exempt) subdivision and building approvals for housing on 10 lots or fewer to incentivize production of for-sale fee simple homes, townhomes, flats and condos on property that meet SB 35 eligibility requirements. This bill also amends SB 35's 50 percent affordability requirement for jurisdictions that are on pace to meet their overall Regional Housing Needs Allocation (RHNA) goals but are falling short of their affordability targets. The bill provides that these projects may comply with the local jurisdiction's inclusionary, mixed-income affordability requirement in lieu of constructing 50 percent affordable units as required by SB 35, and would require prevailing wages and a skilled and trained workforce only for those projects that receive public funding.

Conclusion

This year's legislative Housing Production Package, coupled with the Assembly's housing bills, are the "production" component of the "preserve/protect/produce" strategy to solve the state's housing crisis. While many proposals to publically fund housing were sidelined by the pandemic, the modest regulatory reforms included in these bills do not drain the state's budget coffers and should help unlock and expedite housing production.

For more information regarding the state's housing production bills, contact the authors or another member of  Holland & Knight's West Coast Land Use and Environmental Group.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem. Moreover, the laws of each jurisdiction are different and are constantly changing. If you have specific questions regarding a particular fact situation, we urge you to consult competent legal counsel.