California’s Pro-Housing Laws Are a Small Step in the Right Direction

The California Environmental Quality Act (CEQA) has long impeded the construction of housing—and almost everything else—in the Golden State. The law, passed at the peak of environmental fervor in 1970, requires all state government agencies to study, disclose, and take steps to mitigate the environmental impacts of their projects. CEQA is even more far-reaching than the notoriously disruptive National Environmental Policy Act (NEPA), a law that critics have identified as one reason that “we can’t build things anymore.”

While several states have modeled their environmental statutes on NEPA, California is one of only three that routinely subjects local permitting decisions about private construction to environmental review. Two of the others, Vermont and Washington, though, have at least exempted certain housing projects from environmental review; the third, New York, has always given exemptions to by-right permits and development on lots of record. With Governor Gavin Newson’s signature of AB 130 and SB 131 last month, California has finally joined them, enacting a small but meaningful reform to the state’s sclerotic housing regime.

California’s past pro-housing legislation generally has been marked by what New York Times columnist Ezra Klein calls “everything-bagel liberalism”: the tendency to cram left-wing priorities into every bill. These set-asides, which, in the housing context, range from union-labor requirements to below-market-rent mandates, have blunted the impact of many (though not all) of the state’s previous pro-housing-supply laws. Unsurprisingly, builders won’t provide sufficient housing if the state drives up costs and drives down revenues—even it eases their permitting burden.

But the two recent laws, particularly AB 130, are different. They provide sweeping exemptions from environmental review for market-rate, infill housing development across the state. If your project is in an urban or incorporated area, doesn’t include sensitive lands, meets a minimum density threshold, complies with local zoning, doesn’t occupy a large parcel, and mitigates any environmental harms identified in a “Phase I” assessment, the laws exempt your project from further reviews. That’s a lot of caveats, admittedly, but it’s better than the status quo.

The new laws also exempt “advanced manufacturing,” high-speed rail, wildfire mitigation, and certain public-serving facilities from environmental review under CEQA. These exemptions seem focused on the examples of self-defeating red tape laid out in Klein and Derek Thompson’s bestselling book, Abundance. Governor Newsom even gave shoutouts to YIMBYs and “the abundance agenda” when signing the bills.

For years, reformers tried and failed to reform CEQA. What explains these bills’ success?

One potential answer is Newson’s presidential ambitions. Some in California believe that Newsom twisted arms and dangled carrots to get these bills across the finish line. A policy win on housing—a bipartisan issue with national relevance—would bolster the California governor’s prospective bid for the White House in 2028.

If Newsom did intervene to support these bills, that would help explain their success. Governors are generally more pro-development than legislators, because, unlike the lawmakers, their reelection depends on good statewide economic performance. Legislators are also more likely than governors to have close ties with municipal officials, who mostly oppose state zoning-preemption laws that limit their autonomy. Whatever the ultimate reason for these bills’ success, including them in the state budget liberated Democrats from having to take contentious roll-call votes on standalone bills.

How much new housing will these laws spur? The short answer: some, but nothing dramatic. Infill development is often more costly than greenfield development and appeals more to young singles and seniors than families. And the new laws do nothing to change one of the biggest barriers to building: local land-use regulations.

The closest analogue to California’s reforms is Vermont’s June 2023 relaxation of an environmentally motivated state-level permitting process for infill housing development. That move boosted the state’s permitting rate by about 25 percent even as permitting fell nationally. (Vermont’s housing costs then leveled off, just as the YIMBYs predicted.) Perhaps the Golden State will see a similar change.

Of course, laws can be amended or repealed. Already, NIMBY environmentalists like the state’s Sierra Club chapters are crying foul. Organized labor also mobilized against the new laws and extracted concessions before they passed. Law professor Eric Biber, one of the academics whose research underscored the need for reform, is already signaling that the new CEQA exemptions may be “overinclusive” and will “likely” be amended. And the courts haven’t had their say yet.

California’s complex and transactional politics haven’t gone away. As long as Newsom is in office, he’ll tenaciously defend his policy accomplishments. Long term, however, getting California to embrace an “abundance mindset” will require fundamental changes to the state’s political culture—and that means moving away from its embrace of interest-group politics and its pessimism about capitalism, and toward a mentality that values economic progress and entrepreneurial freedom.

CEQA reform is an important symbolic victory that makes a small dent in California’s massive housing shortage. That’s worth celebrating—but there’s much more work to be done to fix the state’s broader problems.

Photo by FREDERIC J. BROWN/AFP via Getty Images