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California Reinstates and Expands Streamlined CEQA Review to Promote Sustainable Development and Affordable Housing
Practical Law Legal Update w-031-1782 (Approx. 5 pages)
California Reinstates and Expands Streamlined CEQA Review to Promote Sustainable Development and Affordable Housing
by Practical Law Real Estate
| Published on 27 May 2021 • California |
California has reintroduced an initiative to expedite its environmental review process for real estate, manufacturing, and other development proposals satisfying certain sustainability and energy efficiency goals. Eligibility for streamlined California Environmental Quality Act (CEQA) approval also now extends to smaller housing projects meeting designated affordability requirements and a reduced investment threshold.
On May 20, 2021, California Governor Gavin Newsom approved Senate Bill 7, the Jobs and Economic Improvement Through Environmental Leadership Act of 2021 (the 2021 Leadership Act), immediately reinstating a lapsed statutory scheme to accelerate CEQA approval for development proposals incorporating and advancing clean energy, energy efficiency, renewability, and sustainability standards. The 2021 Leadership Act broadens its predecessor's scope by offering eligibility and a relaxed investment requirement to housing development projects with dedicated affordable units.
Background
CEQA and its guidelines govern the environmental review of nearly all public and private projects in California (Cal. Pub. Res. Code §§ 21000 to 21189.57; Cal. Code Regs. tit. 14, §§ 15000 to 15387). Public agencies must generally:
- Identify whether a proposed development project is subject to CEQA review.
- Analyze a qualifying project to determine its potential environmental impact and any necessary avoidance or mitigation measures.
An environmental review can be complicated and expensive even when a lead agency (often the local permitting authority) ultimately finds that a proposed or amended project does not have a significant environmental effect. If the lead agency decides instead to prepare an environmental impact report (EIR) because it anticipates harm from a project, the entire approval process may take years to conclude.
The Jobs and Economic Improvement Through Environmental Leadership Act of 2011, commonly known as AB 900 (the former act), sought to streamline California's environmental review procedures by authorizing the governor to certify certain projects for expedited approval under CEQA. Applicants had to abide by specific labor standards and cover the costs of challenging a lead agency's determination in court. In exchange, the law set a deadline for judicial review of an agency action and provided other benefits. The former act expired on January 1, 2021.
2021 Leadership Act
The 2021 Leadership Act reinstates the key components of the former act and adds new elements (Cal. Pub. Res. Code §§ 21178 to 21189.3). As before, eligible projects include:
- A residential, retail, commercial, sports, cultural, entertainment, or recreational use project located on an infill site that:
- obtains a gold level or higher Leadership in Energy and Environmental Design (LEED) certification (the former act required only a silver level); and
- achieves, where applicable, a 15% greater standard for transportation efficiency over comparable projects (the former act required only a 10% greater standard).
- A clean renewable energy project that:
- generates electricity using only wind or solar power; and
- excludes waste incineration or conversion.
- A clean energy manufacturing project to create products, equipment, or components for renewable energy generation, energy efficiency, or the production of clean alternative fuel vehicles.
Housing Developments
A housing development may qualify for relief under the new legislation if it:
- Is located on an infill site and, where applicable, is consistent with a local greenhouse gas reduction strategy.
- Dedicates at least 15% of the project to affordable housing.
- Requires at least $15 million of investment in California. The minimum investment level for all other projects is $100 million.
- Offers only residential units, mixed-use occupancy with at least two-thirds of the square footage reserved for residential use, or transitional or supportive housing.
- Prohibits manufacturing, industrial, and short-term or other transient lodging uses (other than residential hotels).
Conditions for Certification
A developer seeking expedited CEQA review must apply to the governor for certification. In addition to satisfying the minimum investment requirement, the applicant must demonstrate that the project creates highly skilled jobs with prevailing wages and promotes apprenticeships. For any project that is not a public work, a private developer must ensure all construction workers either receive prevailing wages (and include that requirement in all contracts) or operate under a labor agreement providing similar protections. In addition, each project must:
- Refrain from producing any net additional greenhouse gas emissions.
- Comply with applicable recycling procedures.
An applicant must agree to pay the costs of preparing the lead agency's record of proceedings and any court challenge. The applicant must also concede the enforceability of all required mitigation measures.
Certification and Benefits
Once a project is certified, the lead agency must organize the record of proceedings in a publicly accessible electronic format under an accelerated timeline during the administrative process. Judicial review (including all EIR or project approval appeals) must conclude within 270 days after filing the certified record with the court when feasible.
The governor may certify a project (or any recommended alternative) before the lead agency issues its final certification for an EIR. All projects must obtain the governor's certification by January 1, 2024. Any project failing to receive lead agency approval by January 1, 2025, loses its certification. A project timely certified by the governor under the former act still qualifies for streamlining under the prior legislation if the lead agency approves the project by January 1, 2022.
Practical Implications
The 2021 Leadership Act addresses two longstanding issues affecting development in California: a complex environmental review process and a lack of affordable housing. By fast tracking sustainable and energy efficient projects, the legislation seeks to encourage development without sacrificing the state's commitment to environmental protection. The new law's focus on affordable housing and lower investment threshold are intended to both stimulate residential growth in less populated regions and provide more flexibility for projects in larger metropolitan areas.
A developer planning to use the streamlined approval procedure should work with counsel experienced in the CEQA review process and familiar with applicable local practice (see CEQA Private Project Initial Workflow Checklist (CA)). For more information on CEQA, see Practice Note, California Environmental Quality Act: Overview.
Affordable housing requirements (including replacement housing and relocation benefit rules) vary by municipality and region (for example, see Practice Note, Los Angeles's Affordable Housing Linkage Fee: Overview (CA)). For an overview of affordable housing concerns at the local level, see Practice Note, Affordable Housing Issues for Local Government. For discussions of recent issues affecting affordable housing in California, see Legal Updates, California Court of Appeals Broadly Applies Affordable Housing Law and California Adopts Redemption Right for Residential Trustee Sales in Move to Promote Affordable Housing.