Sacramento Report: CEQA Reform Is a First Step, Not a Gamechanger

Earlier this summer, California lawmakers updated a landmark environmental law to expedite housing construction. 

Now San Diego business leaders say that will help… a little.  

In June, the state legislature and Gov. Gavin Newsom revised the California Environmental Quality Act, which has safeguarded communities from air pollution, habitat loss and sprawl for more than half a century.  

The law, known as CEQA, requires developers to disclose potential impacts of projects and find ways to address them. And it allows the public to weigh in, or to challenge projects in court. 

Critics complain that some groups have used the law to kill projects for reasons other than environmental concerns, such as labor negotiations or neighborhood disputes. Those stalled or sidelined developments have contributed to the state’s housing shortage, they argue. 

This summer the legislature created carve-outs that exempt housing developments up to 20 acres in or near developed urban areas from CEQA review. The projects have to be mostly residential and still have to comply with local zoning ordinances, general plans and coastal programs. 

State and local leaders hailed it as a win, saying it will cut red tape on home construction. 

“Any time we are removing those burdensome barriers to housing, we’re going to applaud and support it,” Chris Cate, president and CEO of the San Diego Regional Chamber of Commerce, and a former San Diego City Council member, told me. Cate is also on Voice of San Diego’s Board of Directors.  

Yes, but… Business leaders I spoke with were happy about the reforms, and said the changes were long needed, but just a starting point. 

“I really appreciate the legislature confronting the CEQA challenge, because CEQA is a challenge to building housing,” Lori Pfeiler, president and CEO of the Building Industry Association of San Diego told me. “I appreciate that there’s a few steps forward on this, but it’s not enough.” 

No one I talked to expects the CEQA reforms to kickstart a building boom in San Diego. Instead, they think it will relieve some pressure on construction and greenlight smaller projects that could take the edge off the housing crunch. 

For instance, Pfeiler said, the new law will make it easier to redevelop strip malls as combined retail/residential projects in urban core areas.  

“This could be an opportunity to waive CEQA for areas that are already disturbed,” she said.     

“That is already a black parking lot.” 

When will we see the results? The CEQA carve-out targets smaller infill projects, so it won’t affect big, master-planned projects that would add thousands of homes on hundreds of acres, Pfeiler noted.  

“In order to build the housing that we need, we need to look at the opportunity to build in a variety of places, not just infill,” she said. 

Robert Vallera, senior vice president for the San Diego Office of Voit Real Estate Services, said the CEQA reforms could boost home production over the long-term, but won’t produce immediate results.  

“We’re not going to see an increase in deliveries in 2026 because of these changes, but deliveries that may have previously taken six or seven years might now take only three or four years,” he said in an article the firm posted. 

Other factors play a role in home-building. Despite the streamlined CEQA rules, other things can delay construction, including local regulations and macroeconomic conditions, experts said.  

“It’s surprising how long it takes to process permits for even small projects,” Vallera told me. 

It can take up to a year to get permits to convert a garage to an accessory dwelling unit, or ADU, he said. Building multiple homes from the ground up takes even longer. 

Plus, building materials and financing have gotten pricey. 

“With the sharp escalation of construction costs and interest rates, we’re seeing a lot of developers pull back on developments right now,” he said. 

Vallera said strict liability laws have discouraged the sale of condominiums, limiting many San Diegans from reaching the first rung of the home ownership ladder. That’s a separate issue from environmental review and deserves its own discussion, he said. 

Cate and Holt also pointed out what they see as a hidden snag in the CEQA reform law. A provision of the lengthy legislation allows local governments to impose vehicle miles traveled, or VMT fees, to new housing projects. VMT is a formula for calculating the amount of driving that residents of a development do, and is used to estimate impacts on air quality, climate change and traffic.  

San Diego City and County already have VMT formulas they use to calculate how new developments affect transportation, and can require developers to take mitigation measures or pay fees to offset those impacts. 

The new law would create a statewide mitigation bank that developers would pay into if local governments deem it necessary. It’s not clear how that would change existing practices or how much the fees would be.   

But home building advocates warn that could add thousands of dollars to the price of new homes. They’re urging the legislature to pass cleanup language that would revise that part of the law. 

“We don’t want it to be a backdoor way of stopping development, when you’re making the fee so high that you can’t build housing,” Cate said. 

Overall, business leaders applauded the CEQA update as part of a “multi-pronged solution” to California’s housing shortage. 

“This is one of the pieces of the puzzle,” Vallera said. “It’s a step in the right direction and we need to continue to make steps in the direction that will allow home-builders to provide more housing for our residents.” 

San Diego Is the Toughest City for New College Grads 

On a related note, a business news site listed San Diego as the second least affordable city for new college graduates, comparing their average earnings against the cost of living. 

“The analysis compares median earnings data from the U.S. Census Bureau with cost-of-living estimates from the Economic Policy Institute to assess how far a graduate’s income goes across the country,” the travel and credit website Upgraded Points reported. 

The median earnings for college graduates in San Diego is $61,770, but it costs $71,400 to cover necessities here, the website reported. That leaves new workers with a $9,640 gap. 

Surprisingly, San Francisco made it to the top 10 best areas for new graduates, with a high cost of living, but even higher median earnings. 

The regional rankings underscore questions about the value of a college education, the report stated: “College enrollment among Gen Z has been declining as more young adults question whether a costly degree still offers a reliable return on investment,” the report stated. 

The Sacramento Report runs every Friday. Do you have tips, ideas or questions? Send them to me at deborah@voiceofsandiego.org. 

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