Land Use
California Lawyer

Land Use

June 2013

California land use law has endured tectonic upheaval in recent years, and even more is coming. We're in the midst of implementing laws that address global warming and infill development as well as mandate sustainable communities. And reforms of California's 43-year-old state environmental protection law are being proposed. Our panel of experts discusses what these changes may mean to evolving land use litigation and policies. They are Richard M. Frank, law professor at UC Davis; James R. Janz of Sideman & Bancroft; and R. Zachary Wasserman and Todd A. Williams of Wendel, Rosen, Black & Dean. The roundtable was moderated by California Lawyer and reported by Cherree P. Peterson of Barkley Court Reporters.

MODERATOR: The California Environmental Quality Act (CEQA)(Cal. Pub. Res. Code ยงยง 21000-21189.3.) has been around for more than 40 years. Can you outline how it works, and how it's out of date?

FRANK: CEQA is best described as a "look-before-you-leap" law. It's modeled on the National Environmental Policy Act, enacted by Congress in 1969. CEQA is one of probably 30 "little NEPA" statutes that states around the country have enacted. But CEQA is the most powerful and robust law of its type - not only in this country, but anywhere in the world.

The key reason is that, unlike most of these environmental disclosure laws, CEQA has substantive effect. That is, in addition to its dual objectives of improving government decision-making and making environmental data and considerations more accessible to the interested public, CEQA also requires that state and local agencies do their level best to mitigate or avoid the adverse environmental impacts of a project whenever it's feasible to do so.

But it is a 43-year-old statute. I believe it would benefit from some updating. One simple but necessary change in my view is to bring CEQA into the digital age. When it was enacted, we didn't have computers. We didn't have the Internet. So, for example, notices of availability of environmental impact reports (EIR) should be posted on local government websites instead of on the county clerk's bulletin board.

A more controversial proposed reform seeks to narrow the standing rules under CEQA. Currently, California has very broad standing rules, and virtually anyone with an interest in a proposed project can bring a lawsuit, including those who arguably are not motivated by environmental concerns, such as business competitors and labor unions. There's been a vigorous debate going on about whether and how the ability to bring lawsuits to enforce CEQA should be narrowed to a smaller range of interest groups and stakeholders.

WILLIAMS: Hand in hand with the standing debate is the disclosure debate: whether those who are bringing CEQA lawsuits need to essentially identify who they are.

Unlike many other laws, standing in CEQA includes unincorporated associations who usually have an environmentally friendly -sounding name, but the actual membership is not disclosed. So many times the public, the court - potentially even the city - isn't sure whether the challenge is being motivated by an environmental interest, a business interest, or an economic interest.

MODERATOR: How would CEQA change in terms of mitigation?

WASSERMAN: One area that has gotten some attention is beefing up the reporting and monitoring requirements on mitigation. You got mitigation approved but now what? Who is monitoring the mitigation? Many cities simply do not have the resources to do it. The interests that sued, unless they are truly the next-door neighbor who cares, are probably not in a position to perform, or may not care about, any monitoring.

WILLIAMS: And we've got about two dozen plus bills floating around the Legislature right now that propose some type of CEQA reform, including Senate President Pro Tem Darrell Steinberg's SB 731. It includes a requirement that the lead agency prepare an annual report, on a project's compliance with adopted mitigation measures. One challenge is that many mitigation measures are ongoing, so that annual report could in theory continue for decades. The other issue that's been brewing is whether CEQA should be used to evaluate the greater environment's impact on a project.

Where that comes up are with issues like climate change, sea level rise, and health risks from the existing environment, and whether, for example, a project that is built near the ocean should take into account whether those ocean levels will rise and impact the project in future years.

WASSERMAN: I'm glad Todd [Williams] raised that. The CEQA guideline that addresses the impact of the environment on the project has been there for some time. There's a whole line of cases that say, "wrong, not part of CEQA."

A set of people are very concerned with that issue. The question is whether that is a proper CEQA issue.

JANZ: Clearly, the environment, like a fault or a rising tide, should be accounted for by the project. But whose responsibility is that? One would think that the proponent of the project would be as concerned about that, if not more so, than anybody else. And that brings up the issue of, well, if the proponent of the project is not paying attention to something as fundamental as that, shouldn't someone bring the issue to the attention of the public and bring it into the public debate?

Right now, other than standing before any agency involved in issuing any permits, there are no places for those advocates to go, other than, perhaps, the press.

MODERATOR: Then that takes me back to the issue of standing. How is narrowing the number of people who can bring an issue going to help as a reform measure?

WASSERMAN: One of the interesting and potentially creative - I'm not sure workable - solutions is to have greater scrutiny over settlements. In bringing the suit there is often an alliance between environmental groups and unions. In crafting settlements, there may be a difference. The unions may be perfectly happy to settle if they get a project labor agreement. That probably does not have much to do with the environmental consequences. The environmentalists may have a different issue.

FRANK: And there's some precedent for doing that under Proposition 65, the 1986 initiative formally known as the Safe Drinking Water and Toxic Enforcement Act. There was concern about the alleged misuse of that statute by private plaintiffs. The California attorney general was given a new, institutional role of gatekeeper and reviewer of proposed private settlements, with the ability to go to court and object to a proposed settlement if he or she thinks that that settlement is contrary to the public interest. Given everything else on the attorney general's plate, I'm not sure that the attorney general would welcome similar, gatekeeper authority under CEQA, simply because CEQA litigation is far more frequent than Prop. 65 litigation. But it does provide one prophylactic option - having a neutral party out there who presumably would be motivated by the public interest to police private CEQA litigation and settlements.

MODERATOR: What about specialized CEQA courts? Are we going to be seeing those?

FRANK: No, the California judiciary has for many years resisted the notion of specialized courts. This is one area where the development community and environmentalists might agree that conceptually the specialized CEQA courts would be a good idea. But with the active and continuing opposition of the California judiciary, I would be very surprised if that proposed change occurred.

MODERATOR: Cars are the largest single source of greenhouse gas emissions. State law to reduce those emissions, SB 375, [the Sustainable Communities and Climate Protection Act of 2008] created targets for reducing greenhouse gas. How is that law playing out in land use planning today?

WILLIAMS: We're sort of watching the sausage being made as we speak. At least here in the Bay Area the metropolitan planning organizations are putting together the Sustainable Community Strategy for the Bay Area. It's become a bit of a punching bag from all sides.

On the one hand, you have portions of the development, businesss, and local government communities who are concerned that the assumptions are unrealistic in terms of the high percentage of growth that is being presumed to happen in infill areas, even though people agree that infill development is more sustainable and green. On the other hand, groups that tend to be more on the far right complain that this is part of a government takeover of local decision-making, forcing not only dense, but also affordable housing, on communities that don't want it. That's sparked a lot of very emotional political protests that are continuing.

Other jurisdictions, such as Sacramento, Southern California, and San Diego, have adopted Sustainable Community Strategies and are just starting to put them into practice, although the attorney general has intervened in a lawsuit against one. (Cleveland Nat'l Forest Found. v. San Diego Ass'n of Govts, 2012-00101593 (San Diego Sup. Ct.)).

MODERATOR: What does it mean to have a sustainable communities plan?

WILLIAMS: In a nutshell, it is a plan that links housing development and housing projections with regional transportation planning. The ultimate goal is to reduce the amount of vehicle miles traveled, which in turn would reduce greenhouse gas emissions and then, presumably, would help to address climate change.

In the Bay Area, essentially the plan is to focus on increasing infill development in the more metropolitan areas. The question is if you build it, will people actually come?

FRANK: SB 375 represents the current big thing in California land use policy - getting out of the silo approach to environmental and land use regulation. About 20 years ago the state Legislature adopted what was then a radical idea: that we would tie land use planning decisions to water supply availability. Those two concepts and decision-making processes had previously been totally unlinked.

Now we're talking, really for the first time and as a result of SB 375, about linking California housing decisions to state transportation policy. And I think in many ways that's transformative.

MODERATOR: But if there's no money for this kind of housing or for building transit systems, how will this play itself out in terms of either litigation or the money for government to deal with it?

JANZ: Well, that's a great question. From a planning perspective, it is an attempt to get higher density in smaller areas linked by mass transit so that people will not have to use their cars for their local trips and won't have to use cars to get to work. The state mandated a housing element in every general plan, requiring that every city and county in every jurisdiction had to meet its fair share of projected housing. So you couldn't just sit back if you were an isolated suburban town and say, well, we've got as much housing as we want, and any new housing has to go further out.

They went through this huge process of allocating housing needs to jurisdictions, to the regional planning agencies. And then those entities would reallocate it down to the jurisdictions under their purview. But it was just housing. It didn't address transportation, which is one thing that the sustainable community strategies bring in.

WASSERMAN: One of the interesting aspects of sustainable community strategies right now is that transportation agencies are the primary source of available funds. As underfunded as they may be, that's still where the funds are flowing.

The emphasis under SCS [Sustainable Communities Strategies] is on primary development areas, which the cities themselves designate. But then the criteria for funds going into those areas is being developed by the local congestion management agencies, who are therefore taking on very significant planning roles. Now, they're not substituting for local planning staff and planning commissions. They don't have approval rights. But by creating the criteria that dictate where relatively limited transportation funds go, they're deciding what the priorities are. So you really are shifting, in a way that's not terribly transparent, responsibility for very fundamental allocation decisions to bodies that do not have planning backgrounds.

MODERATOR: So if people perceive it as outsiders requiring more high-density housing, are we going to see a lot more litigation?

WASSERMAN: [Laughter] Yes. Exactly what form it takes and where the lead cases will be is hard to predict. But there will be more litigation, absolutely. And to some extent the attorney general's lawsuit down in San Diego is an indication of that.

FRANK: Well, that litigation and SANDAG's [San Diego Area Government] promulgation of the first regional transportation plan and related sustainable communities plan is an important development. That's because the attorney general and the environmental groups with whom she is allied in this litigation are basically advocating that what they perceive as short cuts in the SB 375 implementation process, should not be allowed. Both local governments and regional governments have to take this responsibility seriously and can't play a numbers game to avoid the long-term substantive obligations of SB 375.

WILLIAMS: People who are feeling either disenfranchised or are concerned about the regional housing allocation and regional planning efforts that are going to "densify" their communities, have an extremely uphill battle in trying to challenge what is going to be approved ultimately at the regional level - other than potentially on CEQA grounds.

MODERATOR: How does CEQA play into climate protection law [SB 375]? If people want to use CEQA, aren't they going to feel more disenfranchised if you limit standing?

FRANK: SB 375 itself contains rather extensive amendments to CEQA. I, along with a number of other people, am skeptical that those changes, which were intended to facilitate infill development and other types of development prioritized under SB 375, will do much to have that effect.

But CEQA will continue to be an important legal tool that a variety of players will use as we see SB 375 and other climate change reform initiatives being implemented.

WILLIAMS: Nothing in SB 375 itself limits standing. The odds of adoption of reduced standing for CEQA suits are slim.

Disclosure is a separate issue. It doesn't necessarily mean you can't bring a lawsuit, you just need to disclose who you are and who you are representing, in the same way that we have similar types of laws in the campaign finance realm. That may organically limit some lawsuits from being filed.

MODERATOR: How does SB 375 change the investment incentives to move away from urban sprawl and do something different?

WILLIAMS: Part of SB 375 included streamline provisions with projects that are consistent with an adopted Sustainable Community Strategy. However, there are a number of qualifications and prerequisites. And even then you don't necessarily get a complete exemption from CEQA. Because all of these changes are just now coming online, it's going to take an investor and a developer who are willing to run the risk of using a more streamlined, short-form document that may be susceptible to challenge and is untested.

JANZ: You've got other problems though. When I served as an elected official, I saw a lot of opposition to high-density infill development. That's a political issue that will have to be dealt with. Also, building a project, even though it may increase the density and the demand for people to go to a particular location, doesn't create the transportation system to get them there.

So then you've got Facebook and Google and companies like this that now have their own transportation systems - a bunch of buses. That's sort-of mass transit, but it's not the kind of mass transit that planners had in mind when they dreamed up high-density urban node concepts.

WASSERMAN: But that may be a testament that we shouldn't depend on those planners.

JANZ: I agree with that. Obviously, the companies, even more than the developers, can move a lot faster than the planners ever can.

MODERATOR: Doesn't this leave small communities on the rim of urban areas out in the cold? Doesn't this destroy the hopes and dreams of a small city that wants development?

FRANK: It's a major concern. I was just in a meeting with representatives of a number of rural and outlying areas, including some environmental justice groups. They're very concerned that the attention and the priority being given to infill development in California at a high policy level is sucking all the political oxygen - and ultimately all the available dollars - away from rural and agricultural areas that need assistance. They're quite concerned that they will quite literally be on the outside looking in.

WILLIAMS: Another concern of some in outer suburban areas is that the focus hasn't been on job creation. They're already, essentially, commuter cities, where they have an out-of-whack housing-jobs balance. Should this planning effort also look at job creation in some of those areas so that people aren't traveling into the urban centers for their jobs?

JANZ: And when they do the housing-needs analysis, they allocate jobs first and then the housing to support those jobs. And that analysis doesn't do anything about encouraging job growth in an outlying town that might want it or may need it.

FRANK: But all that said, the mid-20th-century trend of land use development constantly growing outward and gobbling up open space and consuming finite agricultural lands is just not a sustainable strategy for California in the 21st century. So the types of policies we're now trying to implement, albeit imperfectly, make a whole lot of sense and really are the way we have to go in the long term. We shouldn't be encouraging land use policies that require or facilitate, for example, two-hour automobile commutes twice a day over Altamont Pass or from Newhall to downtown Los Angeles.

MODERATOR: Look at Southern California, where there's much more sprawl. There's much more concern about water. What are they going to do, tear down freeways?

WASSERMAN: No. Certainly nobody is talking about tearing down freeways, although talk about new freeways has largely died. Southern California is tougher because you have much, much more spread out nodes of concentration.

What you're going to find is that there's very similar focus on infill that has been going on for some time in Los Angeles, in San Diego. What is less clear is whether you're going to find any true nodes of urbanization, which would allow for infill between those two centers. That's a real challenge. With the loss of redevelopment, the ability to create incentives to create jobs in any particular area has vastly diminished. So almost all you can do is rely on transportation issues.

MODERATOR: Last year the state shut down more than 400 redevelopment agencies in California. Where are we now with land use planning without RDAs?

WASSERMAN: People are still scrambling a lot, and they're going to keep scrambling. One could say it's almost a Wild West situation. The denial factor reigned for a long time, even after the Supreme Court ruled. Developers are mostly doing the scrambling. Some local agencies are. A lot of them were totally decimated by the cutback in redevelopment. I think you're going to see increase in searching for, and influxes of, offshore money.

The related issue that has received much, much less attention is the loss of eminent domain powers for economic development uses. When the Kelo case, [Kelo v. City of New London, 545 U.S. 469 (2005)], came down, it got lots of attention. It didn't have much impact in California because we had redevelopment.

Some of the bills in the Legislature are attempting to address the eminent domain issue, but you've got a much harder situation. You may have a viable development, but you've got a couple of landowners who don't want to sell right in the middle of that. And you no longer have the absolute mechanism to acquire that property. They're only beginning to try and deal with that.

WILLIAMS: My concern and hope is that some redevelopment 2.0 may emerge that can serve communities on the cusp of redevelopment that need that extra boost.

JANZ: That's probably the best thing that could be said about it, actually. It gives the opportunity for the do-over to make sure it's done right.

MODERATOR: But a number of redevelopment agencies didn't implement the required affordable housing development. So what does that say about the potential for the other reforms going forward in sustainable communities?

JANZ: I've been an advocate of the state housing Density Bonus Law [Gov. Code Sec. 65915] because I've used it successfully. It's not really a replacement for redevelopment, but it's a tool that people in the redevelopment community, obviously low-income housing developers, could use. It's sort of one of California's best kept secrets.

MODERATOR: How have the market forces shifted with the loss of redevelopment?

WASSERMAN: Redevelopment provided an incentive for the market, which could look to both subsidies from redevelopment for market-rate and affordable housing, and to commercial developments. Gone. So now it's much more looking at undervalued property, fundamental values of the property, and other sources of capital. I don't think we know yet truly where market forces are driving that.

MODERATOR: Getting back to our 'best kept secret' How does California's density bonus law work, and is it providing a tool to encourage affordable housing?

JANZ: It's been around as long as I've been practicing law. It started in '79 and it's been amended considerably over the years. In the original law, if a builder had 25 percent affordable housing within a project he was entitled to a bonus in the number of units that he could build. If he was allowed 100 units on his site, he could get 125 units if 25 of the first 100 were affordable. I don't think that stimulated much of anything. So they kept adding to it over the years. In 2004, the Legislature spelled out a whole range of number of units you get depending upon the percentage of low-income housing that you have. And I'm including in low-income, affordable, and senior housing. And day care centers figure in there, too.

On top of that, the law says if you have 10 percent affordable housing, you get one concession or incentive. If you have 20 percent you get two. These concessions can be anything: a reduction of development standards like setbacks, height, floor-area ratio [FAR], even a zoning change. When I first got involved with that, I wondered how did this ever pass?

I had a client with a project in Palo Alto. We came up with 20 percent affordable housing, which entitled him to two concessions. And the first one was to put in a mixed-use project. And the second one was for a FAR concession. Finally we got it, but that took years.

The law is pretty clear. The city 'shall approve' and 'shall grant' these concessions and so forth. It's quite a strong law and I'm just surprised that people don't use it more.

MODERATOR: Why isn't it used more?

JANZ: The developer has to be someone who's interested in low-income housing, for one thing.

WASSERMAN: There are a number of reasons why it hasn't been widely used. One is it is complex. The other piece, however, is that while it does increase incentives, it still means you're doing two things that make development more difficult.

One is you're subsidizing some units in the building, so the cost of that subsidy has to be paid for by basically one of three sources: the landowner who gets less for the land, the developer who gets less profit, and the purchasers of the other units who pay more.

The second issue is it takes a pretty aggressive and creative developer to put below-market-rate units in a building where they're trying to get the highest price for the market-rate units.

WILLIAMS: It is a very powerful law. It has been used not only in the context of affordable housing, but also it's been used quite successfully in the context of senior housing. Unlike the affordable component, which is based on a percentage of units, you qualify for a density bonus for a senior project as long as it has 35 units. And those units don't have to be affordable or available at affordable rates.

It is a difficult law in part because it does set up this adversarial dynamic of the applicant coming in saying, OK, I have a qualifying project, now I'm going to dictate something that you didn't plan for when you spent years developing your zoning. So the decision-makers struggle with it and neighbors obviously struggle with it as well because they thought that a certain set of rules would apply.

JANZ: There is one way around the open-ended nature of the incentives, though. Every city and county was supposed to actually develop an ordinance that would implement this law. And to my surprise, there were almost none. If you did it right, you could develop an ordinance that says, if you're entitled to two concessions, we'll give you two concessions and here they are. And itemize them. I don't think most cities have done that.

MODERATOR: Coming back full circle to CEQA, my understanding is that the density bonus law is not exempt from CEQA.

FRANK: No. And what you see with respect to density bonuses and the growing interest in infill development, over the last 10 to15 years is incremental changes to CEQA to facilitate in some fashion infill development.

Those reforms, if I can call them that, have always been controversial. They always generate a great deal of distrust and fear from some environmental and neighborhood organizations. But my view is that the larger question, as we sit here in 2013, is whether these incremental reforms have, to date, been terribly effective in achieving their goal of facilitating and encouraging infill development.

One of the big challenges and likely debates in the future is going to be whether we should be doing more to overtly and more straightforwardly facilitate infill development.

MODERATOR: Is urban infill law exempt from CEQA?

WILLIAMS: There are at least five different exemptions, or streamlining provisions, that are meant to encourage infill. But in practice they have been difficult to use unless you've had an agency that has already gone through a broader planning process and done an EIR for, say, a downtown plan.

CEQA is expanding almost exponentially in terms of what's being considered in an EIR, what's being sued over in courts. The number of decisions is staggering. And there doesn't seem to be any stemming of that tide.

If the current legislative efforts in CEQA reform fail, then I think you will see initiatives put on the ballot in coming years, and those will not be moderate positions. They're most likely going to represent one extreme or the other.

FRANK: I agree with that scenario. And I think that would be most unfortunate, because land use is one of those areas that is simply too complicated to legislate through the initiative process, or at least to do it well.

In the area of land use and environmental regulation, the California Legislature, quietly and without much credit, has actually done quite a bit in the last decade. We have AB 32, the Global Warming Solutions Act of 2006. We have SB 375, which is really a pioneering piece of legislation. So the Legislature occasionally does get it right.

MODERATOR: At the end of the day, after redevelopment agencies and urban infill and maybe reforming CEQA and density bonuses, how much does the marketplace dictate what is going to happen with land use?

WASSERMAN: Hugely. Plain and simple.

JANZ: There are 38 million people in the state now. And we're talking about 50 million by 2050. That's the market force. If the population weren't increasing, then it would take a long time for places like downtown Oakland to evolve. The agricultural Central Valley of California is one of its greatest assets. There are ways you could build up a bigger Fresno and Bakersfield without destroying that agricultural center, but I'd be very careful about how you go about it.

WASSERMAN: There's one other very interesting phenomenon about market forces. And that is the attitudes of the younger workers. One of the most interesting stories I heard was from a broker renting office space in downtown Oakland. Very frequently now one of the criteria asked for by tenants is bicycle facilities, because they need to address that desire for their workers. And that's a demand force. It's not simply a question of appropriate bike facilities, but it is also what those workers want in terms of proximity between housing and jobs. And that's a significant part of the evolving market force. n

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