A special guest post by our friend Chris Elmendorf, Professor of Law at UC Davis School of Law.

The California Environmental Quality Act, or CEQA, has become a bogeyman for YIMBYs, an excuse for cities to deny housing, and tool with which opponents can delay projects for years (for reasons that have nothing to do with the environment).

Housing advocates have sought relief from the legislature, which has responded with a proliferating list of CEQA exemptions. But these exemptions are narrow and themselves riddled with exceptions. To give just one example, a developer hoping to qualify for the “Infill Housing in Urbanized Areas near Transit” exemption must satisfy no fewer than 27 distinct conditions, including such invitations to litigation as “[t]here is [no] reasonable possibility that the project will have a project-specific, significant effect on the environment due to unusual circumstances.”

The narrowness, and the mushiness, of the legislated CEQA exemptions is a byproduct of the difficult politics of CEQA reform. Environmentalists will oppose any CEQA exemption that might have the incidental effect of accelerating development on parcels with sensitive natural resources. Labor unions will oppose any CEQA exemption that would cover larger projects, as unions use the threat of CEQA litigation to extract project-labor agreements. NIMBYs will oppose CEQA exemptions for their usual parochial reasons. But legislators want credit for doing something, so they keep introducing CEQA exemptions which get honed to near-pointlessness by the legislative gauntlet.

Fortunately there’s another way to crack the CEQA nut—and all it requires is clear thinking about how to conduct an environmental analysis when local governments have a legal duty to accommodate housing.

Let’s begin with first principles: CEQA requires environmental review prior to discretionary governmental decisions. The purpose of the review is to inform and shape the decisionmaker’s exercise of discretion, by identifying environmental effects of the proposed action and ways to mitigate them.

In order to assess the effect of a proposed action (“project,” in the lingo of CEQA), one must compare it to something else. A project has no environmental effect except with reference to some alternative. Consider an analogy: What is the effect of a new drug or medical device? The answer depends on what you’re comparing it to. Relative to a placebo, the effect of a new drug may be quite large. Compared to the best treatment currently in use, the effect of the very same drug could be small or even negative. Before one can even investigate the drug’s effect, one has to specify an alternative.

The same goes for housing projects, rezoning decisions, and general plan amendments. They have effects only when they’re compared to some alternative. Let’s call the point of comparison the reference alternative.

Conventional CEQA analysis presupposes that the reference alternative is the status quo, called the “no-action alternative.” For CEQA review of a development proposal, the no-action alternative is leaving the site in its current use. For CEQA review of rezoning or general plan amendments, the no-action alternative is leaving the zoning code or general plan as-is.

This convention has an obvious logic if the decisionmaker has unfettered discretion to say “No” to the proposal at hand. That was the context in which CEQA practices took root. But the convention makes no sense at all when the no-action alternative is not a legally available option, as is increasingly the case when housing is on the agenda. As the courts have explained time and again, the purpose of CEQA is inform the exercise of governmental discretion. It is not informative to measure the effect of a project relative to an alternative that the decisionmaker is legally prohibited from choosing!

Where perpetuation of the status quo is not a legally available option, the CEQA reference alternative should be something like the “typical lawful alternative,” rather than the no-action alternative.FOOTNOTE: Footnote This simple change in thinking would work wonders for housing development.

Consider an example. The Housing Accountability Act HAA prohibits a local government from denying or reducing the density of a housing project that complies with the land-use rules in effect at the time of the developer’s application, unless the project would violate a written health or safety standard. If there’s no live argument that a housing project implicates the health / safety exception, then it’d be silly to conduct a CEQA assessment of the project’s environmental “effects” relative to the current use of the site. That’s not informative since the decisionmaker lacks authority to deny the project. All she may do is impose conditions which are compatible with development of the site at the density the developer has proposed. CEQA review should be calibrated accordingly, with the reference alternative defined as a typical project on the same site and of the same density as the developer’s proposal.

Once the reference alternative is redefined in this way, “effects” that are purely a function of the housing project’s size—say, crowding of neighborhood parks, or increased demand on the city’s wastewater system—would disappear entirely from the environmental analysis. They would require no mitigation, and they’d occasion no litigation, because they are “effects” relative to the status quo, rather than effects relative to the proper reference-project alternative. Other effects, like shadows or reflective glare, would not disappear from the analysis, but they’d usually fall below any plausible threshold of environmental significance. While the project as submitted by the developer might cast a marginally different shadow pattern than a typical project of the same density on the same site, the difference would be so insubstantial in the mine run of cases that the legal threshold for preparation of an environmental impact report would rarely be reached.

The same logic can streamline CEQA review of the housing element of local governments’ general plans. California requires local governments to update their housing element every 5-8 years. To comply with state law, the housing element must accommodate the local government’s share of regional housing need, called the “RHNA.” If a local government currently has zoned capacity to accommodate 5,000 new units of housing, and if its RHNA share is 15,000 units, then the local government must provide an additional 10,000 units of zoned capacity. The local government has discretion to decide where the upzoning will occur, but not how much additional capacity to provide.

When the status quo is not a legally available option, CEQA analysis of a new housing element should measure effects not relative to the current housing element, but relative to a counterfactual “reference housing element” that accommodates the additional dwelling units in some normal or typical way. For example, the reference alternative could presume a geographic distribution of new housing that replicates the pattern of growth observed during the previous planning cycle. As in our HAA example, effects that are solely a function of the citywide increase in population or housing stock would disappear entirely from the analysis. Neighborhood-level effects resulting from a different geographic distribution of housing units (relative to the reference alternative) would have to be considered, but in many cases these effects would fall short of the thresholds of environmental significance.

Finally, when the local government updates its zoning to conform to its new housing element, CEQA review would again be streamlined. Environmental effects of the zoning change would be measured relative to a “reference rezoning” that complies with the housing element in a standard or typical way, rather than by comparison to the then-current zoning code.

These ideas can be implemented today. They require no change to CEQA or the official CEQA Guidelines, just clearer thinking about how to implement them. And there are a number of useful precedents to draw upon. The Governor’s Office of Planning and Research recently issued a technical advisory positing that projects should be presumed not to have significant transportation impacts if their “vehicle miles traveled” (VMTs) are less than 85% of the VMTs of a typical project. The project under consideration is compared to a counterfactual typical project, rather than to the status-quo use of the site.

Meanwhile, an important recent decision of the Court of Appeal, McCorkle Eastside Neighborhood Group v. City of St. Helena, treats discretionary design review of housing projects as exempt from CEQA altogether—if the local ordinance which provides for discretionary review only authorizes the local government to mitigate aesthetic impacts. The court reasoned that the scope of the local government’s decisionmaking authority ought to inform the nature of any CEQA review. Because St. Helena’s city council only had authority under municipal law to mitigate aesthetic impacts, because those impacts would not be environmental impacts within the meaning of CEQA, and because CEQA itself does not confer any substantive authority to mitigate impacts, no CEQA review was required. While McCorkle does not address the appropriate reference alternative when the decisionmaker has some—but limited—discretion to redress a project’s environmental impacts, the court’s reliance on the decisionmaker’s scope of authority to shape the nature and focus of environmental review is very much in keeping my approach.

The Governor’s Office of Planning and Research (OPR), which prepares the official CEQA Guidelines and assists local planners, is working to clarify the relationship between CEQA and housing development. OPR’s recent Technical Advisory on Housing Projects nicely summarizes the relevant CEQA exemptions, and this summer OPR will release an important “lookup tool” that allows users to search online for any land parcel in the state and retrieve information about the parcel’s potential eligibility for CEQA-streamlined development (https://sitecheck.opr.ca.gov/).

While OPR has been reluctant to get ahead of the courts, its statutory responsibility to “implement a public assistance … program to ensure efficient and effective implementation [of CEQA]” would certainly allow it issue a new Technical Advisory about how to conduct environmental review when the status quo is not a legally available option. As the Governor looks for ways to achieve his ambitious housing goals in a world of cratering public revenue and sheltering-in-place workforces, this arrow belongs in the quiver.