Q&A with Jennifer Hernandez, Partner, Holland & Knight
September 27, 2022
As the leader of Holland & Knight’s West Coast Land Use and Environmental Group, law firm partner Jennifer Hernandez is well-versed in the issues surrounding California’s acute housing shortage. In a newly released report, Anti-Housing CEQA Lawsuits Filed in 2020 Challenge Nearly 50% of California’s Annual Housing Production, Hernandez sheds light on a key contributing factor to the state’s housing affordability crisis—how one of the state’s preeminent environmental laws, the California Environmental Quality Act (CEQA), is being used to slow or stop the construction of tens of thousands of new homes each year.
As vocal advocates for an increase in affordable housing access, Eden appreciates Hernandez’s work to reveal the law’s unintended consequences, its abuse by groups opposed to new housing and new residents, and its detrimental effects on production of affordable housing close to jobs and transit. We sat down with Hernandez to get some additional insight into how the law is being used to stop high quality affordable housing—and what we can do.
Q. The California Environmental Quality Act (CEQA) was originally passed in 1970 to require public projects to review their potential environmental impacts before starting construction. However as your study found, its use has expanded in the 50-plus years since and CEQA lawsuits are now filed against nearly 50% of California’s annual housing production. How did we get from there to here?
Well, as they say, it took a village, but in this case it’s not a positive development. This change entailed several players.
We saw courts become very indulgent in defining any change to the physical status quo—something as minimal as building a small house on a vacant lot—as having potentially significant impact to the environment, which required analysis and mitigation under CEQA. They also began requiring agencies to rescind project approvals and restart the whole process, rather than simply compelling any minor deficiencies in a CEQA document to be fixed.
Then state environmental agencies became extremely aggressive in using CEQA to enforce policies and practices that were not required by either enacted Legislation or adopted regulations.
Finally, an increasing number of lawyers, planners and environmental consultants saw they could make their living by exploiting CEQA, and therefore now would be at risk of income or job loss if CEQA was restored to its original mission. The way it is now, filing a CEQA lawsuit is the easiest and cheapest way to stop an approved project because banks won’t issue loans, charities won’t approve grants, and agencies won’t award contracts to projects mired in CEQA litigation. This created leverage for lawsuits having no credible environmental objective—like lawsuits by economic competitors, as well as “bounty hunter” lawsuits by contingency fee lawyers, where the lawsuit was dismissed when an economic settlement was reached. Because the media typically reported these stories as “protecting the environment,” the general public rallied around the groups on the side of CEQA. Taken together, these factors have ensured that anyone proposing to build anything near anyone anywhere was vulnerable to a CEQA-based challenge.
Q. As your report notes, the Legislature has passed more than 80 laws in the last seven years to address California’s housing crisis, including many that seek to provide CEQA exemptions to particular types of housing, for example when they’re close to transit or most recently for student housing near UC campuses. Still, production remains flat. Why have these laws not been enough to allow housing projects to move forward?
Each of these laws has multiple “gotchas” that make them either a unicorn (laws with so many qualifying criteria and exclusions that they were discussed but never seen in nature), a buddy bill (special favors for special interests like sports stadiums and the legislature’s own office remodel projects), or economically infeasible.
Sometimes there are also special interest wars; for example, some equity advocates want to stop all market rate housing production and allow building of only affordable units, even though the housing crisis is affecting working families at all but the highest income levels.
Q. One of the biggest housing bills in recent years was SB 35 by Senator Scott Wiener (D-San Francisco), which aimed to create a streamlined approval process for affordable housing in areas that are failing to keep up with their housing needs. Does SB 35 insulate projects from CEQA lawsuits and how are projects using that process faring in legal challenges?
There is definitely some good news there; SB 35 does insulate projects, and we are winning in court. Yet in practice, SB 35 also adds significant costs to housing production and has many qualifying criteria, so it has been most useful for smaller projects and 100% affordable housing projects.
Q. Another major housing bill passed this year, AB 2011 by Assemblymember Buffy Wicks (D-Richmond), which again seeks to speed up affordable housing development—this time on underused commercial sites. Do you expect that legislation to have an impact on the state’s housing shortage? Is there anything that could be done to strengthen it?
AB 2011 should create more multi-family (likely apartment) housing in high-cost urban areas, along with inclusionary affordable housing in new apartment complexes. The cost of producing a new apartment unit, however, is approaching $1 million in these locations, and most markets just don’t have enough renters who can afford $6,000 or more in rents for small one- and two-bedroom apartments. Until we bring down the cost of housing production to match the ability of working families to buy a home, the California housing crisis will persist, and we’ll keep losing our young and middle-income families to other states.
Q. Eden, like most affordable housing providers, is often subjected to lawsuits by neighborhood groups that oppose new housing—in many cases even after local governments have set aside sites for affordable housing and have done everything they can to try to get the projects built. How can the state solve for this specific challenge—balancing the need to give communities a voice in new projects, with the equally important need to move forward with construction once funding is secured and housing is approved?
The key policy issue is when and how often communities should have a voice in new projects. How can we hope to produce millions of new housing units when anyone can sue to block any new housing alleging CEQA violations?
Even projects that qualify for CEQA exemptions have been sued, and in one notorious case a replacement single family home in Berkeley that was unanimously supported by all of its neighbors, the Planning Commission and the City Council was held up for 11 years in lawsuits. The family that hoped to build the home moved elsewhere, and the old structure remains—and remember this was for a single home that was exempt from CEQA.
I think the right solution is for communities to weigh in on the Housing Element of the General Plan, and sue if they think the city’s CEQA analysis of these plans fell short. These plans set the rules, and if not sued or upheld after a lawsuit, housing that complies needs to be built. At that point, the time for the community to “voice” its concerns has passed, and the General Plan needs to be implemented.
Q. You end your report on a fairly pessimistic note, concluding “CEQA favors legacy residents and special interests with wealth, power, or both.” You also say you have “no expectation that the pattern of anti-housing CEQA lawsuits…will change.” What would it take, in your mind, to finally break out of this cycle—and what can groups like Eden do to help?
Eden has been a longtime leader (and victim) of CEQA litigation abuse. CEQA’s status quo defenders regularly attack even nonprofit affordable housing providers as part of their deeply anti-housing, anti-growth and frankly often explicitly racist policy agenda. The harsh truth is opponents of new housing don’t seem to want anything to change: They have spent decades fighting housing that would integrate our neighborhoods at a time when regions like the Bay Area have become more racially segregated than they were before Dr. Martin Luther King was assassinated.
New York Times columnist Ezra Klein has frequently opined that blue state liberals just can’t seem to agree and actually build much of anything. However, too often our political leaders hide behind process (approval of a housing law or plan) and refuse accountability metrics measuring progress (number and purchase/rental price of housing actually built).
I think the hope is that we have finally mustered enough pro-housing political support to break through false rhetoric about “protecting the environment,” but unfortunately the strongest pro-housing supporters tend to be healthier, whiter and much wealthier than many of our working families who also deserve to be able to buy a home. Other pro-housing special interests spend too much time competing against each other or market rate housing.
We could all benefit from working more collaboratively on an “all of the above” strategy for housing and stop supporting unicorn and process-over-progress distractions. We could build a lot more housing a lot faster by bringing housing costs down, assuring implementation certainty for housing that follows the rules and sending anti-housing lawyers to the Hall of Shame.