Despite a wide coalition of support and millions in funding from business leaders, builders, and even some Native American tribes, California’s latest effort to cut red tape around housing development failed at the polls after meeting opposition from an alliance of unions and environmental groups.
Prop 45 would have limited timelines for environmental reviews of larger projects under the California Environmental Quality Act, or CEQA.
A landmark California state law passed in 1970, CEQA requires state and local public agencies to identify, disclose, and minimize the environmental impact of proposed building projects.
The law addresses air quality and greenhouse gas emissions; water and energy resources; habitat and wildlife preservation; noise and traffic pollution; and projects’ impacts on cultural and tribal resources.
Had it passed, Prop. 45 would have limited environmental reviews on “essential” infrastructure, housing, schools and broadband internet access projects to 365 business days and require projects to be evaluated based on the environmental standards in place when the project is applied for.
Additionally, it would have limited tribal consultation to tribes officially recognized by the federal government; 55 tribes in California have not been recognized by the federal government. It would have also required courts to rule on lawsuits related to environmental review law within 270 days and to shorten the public comment period on new projects.
“We drafted Proposition 45 with full knowledge that the road ahead wouldn’t be easy, that the defenders of the broken status quo would do anything — and say anything — to protect their exclusive leverage over the permitting process for housing, clean energy, water, and public works,” said Jennifer Barrera, president of the California Chamber of Commerce, which sponsored the measure. “Our diverse and vocal coalition didn’t back down, working tirelessly to convince millions of California voters to take a stand against our state’s affordability crisis.”
That coalition included the California Building Industry Association, which donated $2.5 million, and the California Association of Realtors, which donated $1.5 million.
The PAC Building a Better California, which also mounted a successful defeat of a proposed billionaire tax, secured $10 million in donations from Google co-founder Sergey Brin and former Google CEO Eric Schmidt.
As well, the Yuhaaviatam of San Manuel Nation, a Southern California tribe, donated $750,000 in favor of Prop. 45.
But opponents of Prop. 45 nearly matched that amount. Schmidt’s wife, philanthropist Wendy Schmidt, donated a hefty $10 million opposing the measure, but environmental groups and trade unions also gave big, creating a confounding—though not unprecedented—coalition to defeat CEQA reform.
An unlikely alliance
It’s not surprising that a wide coalition of environmental groups opposed Prop. 45, claiming that the measure would limit environmental review and community oversight of major building projects.
“Proposition 45 would allow many of the state’s most polluting or risky projects to go forward without meaningful consideration of health and environmental impacts, and without the community input that we all rely on,” wrote Sean B. Hecht, an attorney with environmental legal defense group Earthjustice .
But environmental advocates found a somewhat unlikely ally in labor groups, who donated nearly $10 million to oppose Prop. 45.
Chris Hannan, the president of the State Building and Construction Trades Council of California told The Sacramento Bee in a statement the council opposed Prop. 45 because “it would gut longstanding protections for public and environmental review, severely limiting the ability of communities and local governments to ensure major projects are built responsibly.”
But longtime CEQA watchers say that unions oppose CEQA reform because they’ve often leaned on the act to settle labor disputes and negotiate favorable labor agreements.
A 2017 article by Jonathan E. Shardlow and Martin P. Stratt published in Environmental Law News argued:
“The use of CEQA litigation, or threats thereof, to leverage the execution of project labor agreements is well-known throughout the state. The process typically begins with a phone call from a law firm that regularly represents a certain union. The developer and local agency are then invited to sign a project labor agreement, and, if not interested, are informed of the union’s “environmental concerns” related to the subject project. Thereafter, CEQA litigation is often filed by the same law firm on behalf of an unincorporated association.”
Earlier this year, Yes on 45 published a report finding that two law firms had made nearly $90 million filing CEQA-related lawsuits on behalf of trade unions. Yes on 45 alleged that the labor unions used the threat of the lawsuits to gain union-friendly concessions.
Labor groups have disputed this, with anti-Prop. 45 campaigner Woody Little telling The Sacramento Bee, the allegation was “desperation from a failing campaign.”
YIMBY Groups Stay Out of the Fray
That alliance between labor and environmental groups may be why nearly every governor going back to George Deukmejian, who served from 1983 to 1991, has failed to successfully reform CEQA, leading former Gov. Jerry Brown to once quip: “Reform of CEQA is the Lord’s work, but unfortunately the Lord’s work doesn’t always get done.”
Last year, Gov. Gavin Newsom was able to pass AB 130 and SB 131, which created CEQA exemptions for urban infill housing and community facilities such as health care centers and foodbanks. Those bills also provide exemptions for larger manufacturing projects that meet strict wage and labor standards.This unlikely alliance may have also led some pro-housing YIMBY groups to offer more neutral stances on Prop. 45.
In a statement about the Prop. 45, California YIMBY’s policy manager Max Dubler wrote that when it comes to housing, “the central question here is how you feel about sprawl.”
Generally, YIMBY groups have supported high-density development over urban sprawl, preferring to focus on urban infill housing development that promotes walkability over exurban development that is car-dependent.
However even Dubler noted: “Given the scale of the housing crisis, we need all the new housing we can get. Further, lots of people want single family homes on larger lots; and they should be able to have them, to the extent that is sustainable and feasible.”
Dubler went on to say that “our friends in the environmental movement have raised significant substantive concerns about this measure. Most relevant to housing voters: we should not be building new homes in the fire-prone wildland urban interface because doing so puts people in harm’s way and exacerbates our insurance crisis. The fact that Prop 45 makes it easier to build freeways but not high speed rail also gives us pause.”
Affordability remains a major concern
In 2022, California estimated it needed to build 2.5 million homes by 2030. So far, 677,000 homes have been built.
The state’s housing shortage has created an affordability crisis, and is a large part of why California garnered failing grades on Realtor.com‘s State Affordability and Homebuilding report card.
California’s median listing price is $719,000, $300,000 more than the national media listing price of $415,000. California’s Legislative Analyst’s Office found that households need an income of approximately $221,000 to qualify for a mortgage on a mid-tier home — more than double the state’s median income. The share of million dollar listings in the state has climbed to 30% compared with the national average of 12%.
A legislative impact report published by the state of California estimated that had Prop. 45 passed it would have cost the state up to $100 million annually, noting: “State and local governments would have costs to develop new guidelines and standards for reviewing eligible projects’ environmental impacts, meet tighter time limits, and address court challenges.”
But once implemented, the analysis conceded that state and local governments would likely have lower project costs, though responding to environmental impacts could potentially ratchet up costs.
“In short, California has not figured out how to build enough housing. While the state’s unique physical geography is a factor, state and local housing supply regulations are the driving force behind California’s housing shortage,” Realtor.com Senior Economist Jake Krimmel previously said.
“Again and again, research has shown that complex webs of local regulations and red tape – especially in California – prevent new construction, delay and shrink construction projects, and increase rents and house prices as a result,” he continued.
Barrerra says the California Chamber of Commerce will continue to advocate for housing reform.
“There’s simply no path forward that doesn’t begin with establishing clear and consistent rules for building the essentials of a prosperous future. We will continue to advocate for reform that’s both comprehensive and consequential, and we will hold elected officials accountable for whether they take action that makes a difference.”
Realtor.com has reached out to the Building Industry Association of Southern California, the State Building and Construction Trades Council, Clean and Healthy California, and Building a Better California for comment.
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