By Linara Teruni Gunasekera ’28 

Californians spend a larger share of their income on rent than the national average, despite living in the richest state economy in the country. 

Over the past decade, housing construction has struggled to keep up with economic growth. Since 2011, the Bay Area has added over 500,000 jobs but built fewer than 125,000 new homes, disproportionately placing housing out of the regions where job growth is created. Low and middle-income residents face the burdens of this trend; housing costs consume larger portions of income, impacting where these workers live, whether they remain in California, and how much of their income is left after housing costs. 

While there are many factors contributing to California’s housing shortage, the California Environmental Quality Act (CEQA)is one of the top contenders for the debate. CEQA was originally intended to give insight into potential environmental impact to government officials who could respond with mitigation efforts. However, it now plays a significant role in determining whether housing projects move forward, are delayed, or abandoned. Reforming how CEQA is applied to housing development may be necessary to both increase the supply of housing and maintain meaningful environmental protections. 

The California Environmental Quality Act (CEQA) focuses on the potential environmental effects of development, including housing projects. The statute requires agencies to disclose the environmental consequences of projects and identify feasible ways to minimize environmental impacts. CEQA does not directly place a ban on development, but it is expected to ensure environmental risks are studied, documented, and reported to policymakers before a project commences. It generally applies to projects that require discretionary approval from a public agency or have the potential to affect the environment. 

Consequently, the law creates challenges. CEQA lawsuits typically argue that an agency failed to adequately analyze or disclose environmental impacts under the statute. By this process, projects can face additional review, revision, or extended litigation if courts find the environmental analysis was incomplete. 

CEQA continues to contribute to the complex approval process needed to grow California housing projects, posing the dilemma of balancing environmental protection with the need for robust housing development. The statute affects housing through three means: cost, delay, and legal uncertainty. Most large housing projects require environmental review and local approval, so developers must take into consideration the burden of the time and expense associated with compliance before construction even begins. CEQA elevates prices associated with housing, adding litigation and compliance costs. Environmental documents can be expensive to prepare and file, and the possibility of legal challenges poses speculation, especially about financial risk and possible gains from building. 

CEQA also has the capacity to extend project timelines. Legal issues such as review, public comment periods, and litigation can add months or years to approval processes. CEQA litigation often focuses on whether environmental analysis was sufficient, which can require projects to undergo additional review or revision. For housing projects built on complex financing, added time can increase interest and uncertainty, neither of which is attractive to project implementation or viability. 

Finally, uncertainty about environmental standards can create an additional risk. Because environmental analysis requirements continue to change through court decisions and updates, developers, as well as local governments, may face uncertainty about whether projects will survive legal scrutiny. Over time, this uncertainty can discourage possible projects from moving forward, especially because of shaky timelines and compliance requirements. 

Recently, California has been exploring options to make the environmental review process for housing more efficient, but larger structural issues about the role of CEQA need to be resolved. Instead of eliminating the environmental review, many of the present policy discussions center around improving predictability so that CEQA continues to identify major environmental hazards.

CEQA was adopted at a time when many of the targeted environmental protection laws we see today did not exist. As such, there have been numerous expansions of environmental regulations over the years concerning air quality, coastal zone management and endangered species. Focusing CEQA’s breadth on significant environmental hazards may result in less litigation uncertainty while maintaining existing environmental protections. Additionally, clearer statutory guidelines on what constitutes a significant environmental hazard could help allow housing projects to proceed where environmental impacts can be appropriately mitigated. 

Prior CEQA reforms have sought to increase predictability through increased evidentiary burdens on challengers and by encouraging the judiciary to confine its remedial authority to specific environmental harm(s) as opposed to enjoining an entire project. Consistent application of CEQA’s “substantial evidence” standard would provide assurance that challenges to housing projects are based upon demonstrable environmental hazards, as opposed to hypothetical ones. Likewise, by encouraging courts to tailor relief to individual environmental violations as opposed to halting an entire project, delays could be minimized while retaining environmental accountability. 

These reforms altogether would not eliminate environmental review, but hold the potential to make CEQA more predictable and more closely aligned with California’s environmental goals and housing needs. 

California’s housing crisis raises an important question about how the state balances environmental protection with housing sustainability. If housing supply does not grow alongside job growth, affordability will change the landscape of where people live and work. How California chooses to redesign its review process can help determine if the state can remain economically competitive while also environmentally protective in the decades to come.

Contributors: Hector Camaton ’28 and Arvind Salem ’29; Photo Credit: SF Travel