Sacramento Report: This Law Aimed to Cut Housing Prices. A Hidden Fee Could Raise Them

Last week we looked at the new state laws that update the California Environmental Quality Act, known as CEQA, to see how they could affect San Diego. The new policies exempt urban housing projects under 20 acres from environmental review, to cut red tape on home construction. 

Business leaders said the changes to CEQA could spur a modest increase in home-building. But they objected to a part of the law that would add a new fee for vehicle miles traveled. 

Leaders of the Building Industry Association of San Diego and San Diego Regional Chamber of Commerce say the new fee undermines the purpose of CEQA reforms, which aim to make housing more affordable and accessible to Californians. They’re pushing for additional legislation to fix that. 

Vehicle miles traveled, or VMT, is a formula for calculating the average amount of driving that residents in a particular area do. It includes things like trips to work, school, the grocery store or doctor’s appointments. Planners use it to estimate the impacts of new housing projects on air quality, climate change and traffic.   

The CEQA reform law creates a state bank for VMT funds to mitigate transportation impacts of future housing. Those fees could be used to pay for transportation projects or fund affordable housing. 

Business leaders consider it a sort of poison pill: an extra fee tucked away at the bottom of a law that was passed specifically to cut the cost of new housing. 

CalMatters columnist Dan Walters discussed that paradox this week, writing that the “New California law to make housing projects easier can also make them cost more.” 

The new VMT program wasn’t debated before CEQA reform policy passed as part of the state budget, leaving many observers blindsided by what they see as a new tax. A coalition of business and community groups mounted a campaign against the VMT provision, calling it a “‘fee’ that operates like a tax on single-family homes and apartments.”  

While taxes are used to generate revenue for general government functions and programs, fees are typically used for specific services, such as building new roads or street lighting. The VMT fees in the new law fall somewhere in between. 

“The VMT housing charges are calculated through seemingly arbitrary formulas and methodologies at the whims of local governments – many of whom are hostile to new housing,” said Lori Pfeiler, president and CEO of the Building Industry Association of San Diego. 

“Because local governments ultimately hold sole discretion to impose these charges with few safeguards to ensure the charges reflect the actual cost of mitigating vehicle miles traveled from new housing, it is effectively a tax on housing production. The new VMT charges also function more like a tax because they will be collected into a statewide fund for affordable housing to be spent at the discretion of the Legislature with no guarantee that the VMT charges will be spent in the communities that are paying them.” 

Opponents say that fee could cost up to $16,200 annually or $324,000 over 20 years for each new house or apartment unit. They pulled that estimate from a document about a similar Los Angeles program, which lists that number as an example of VMT mitigation fees. 

In truth, the cost of the program is anyone’s guess. The new CEQA reform law itself doesn’t specify any dollar amount for the fees, but says the Office of Land Use and Climate Innovation has to work with other state agencies to set the fee structure and other details of the program by July 2026. 

San Diego leaders I talked to said that ambiguity is part of the problem. Without a clear formula or dollar figure, there’s no way of knowing how much developers will have to pay into the program, and eventually pass onto home-buyers and renters. 

The law also says that the state VMT program won’t prevent cities or counties from charging similar fees. So the state VMT fees will be added on top of any local ones. 

San Diego City and County already have VMT programs for new developments. But the county scaled that back last year and decided that projects that comply with the county general plan won’t have to pay those fees. 

In an op-ed in Voice of San Diego last year, Pfeiler applauded the county’s decision to reverse course on its VMT program. She argued that rigid housing regulations have already driven people out of San Diego, made it harder for San Diegans to buy homes, and fueled homelessness and segregation by putting housing out of reach to many residents.  

She and other local leaders are pressing lawmakers who led the CEQA reform effort to add “cleanup language” to fix the problems they see with that part of the bill. As of Friday, there was no update on that.  

Getting Gas Prices Under Control 

Assemblymember David Alvarez is hoping to cut prices at the pump, if Gov. Gavin Newsom signs his bill to introduce a more affordable gas blend. 

His bill would allow California to switch to E15, a “cleaner, cheaper fuel blend,” that would bump the ethanol content in California gas from 10 to 15 percent, to save up to 20 cents per gallon, Alvarez said. Ethanol from corn starch or sugar is added to gasoline, which cuts pollution and costs. The blend is federally approved and all other states use it.  

The bill is waiting for a signature from Gov. Newsom, who has 30 days to sign it. 

Alvarez also co-chaired a hearing of the Assembly Select Committee on the low carbon fuel standard, which is looking at the costs and benefits of a state program to cut the carbon intensity of vehicle fuels. 

“Californians want to make sure that we move to a cleaner environment that addresses the impacts of climate change and we all want to get there,” Alvarez said at the hearing last week. “And I think the conversation is about how do we get their best in a way that doesn’t overly burden Californians and their cost of living.” 

West Coast States Push Back on Trump Health Policy 

As President Donald Trump fires staff at the Center for Disease Control and Prevention, and U.S. Health and Human Services Secretary Robert F. Kennedy Jr. limits vaccine availability, California is teaming up with neighboring states to form a West Coast Health Alliance, Newsom announced this week. 

“Through this partnership, the three states will start coordinating health guidelines by aligning immunization recommendations informed by respected national medical organizations,” Newsom’s office stated in a press release. “This will allow residents to receive consistent, science-based recommendations they can rely on — regardless of shifting federal actions.” 

The initial coalition partners included California, Oregon and Washington. Hawaii also announced that it is signing onto the alliance. 

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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