Extracted from Law360
The Palisades and Eaton fires that ravaged the Los Angeles region in January were among the costliest and most devastating natural disasters in California and U.S. history, displacing approximately 13,000 households and causing nearly $30 billion in real estate losses.
The California Department of Forestry and Fire Protection estimates that the two firestorms destroyed approximately 9,700 single-family homes and condominiums, 700 apartment units, 2,000 units of multifamily housing and 373 mobile homes.
Nearly half of these were rentals — 770 of which were rent-controlled, and may be lost forever as affordable housing.
But even before the fires, the housing shortage in Los Angeles was one of the direst in the nation, with a deficit of over 500,000 units. This mirrors the broader housing crisis across California, where, according to a study released in 2016, only 308 housing units were being built for every 1,000 new residents.
Add on top of that a median home price 2.5 times the national average, per 2022 census data, and you get the second-lowest homeownership rate in the country.
In his campaign for governor, then-Lt. Gov. Gavin Newsom pledged: "As Governor, I will lead the effort to develop the 3.5 million new housing units we need by 2025 because our solutions must be as bold as the problem is big." But California is nowhere near meeting that goal.
CEQA as an Obstacle to Development
Among the many factors contributing to California's housing affordability crisis are the permitting hurdles imposed by the California Environmental Quality Act. CEQA requires that development projects undergo rigorous environmental review, with select exceptions.
When potential environmental impacts are found to be significant, state agencies, cities or counties must prepare an environmental impact report, which makes building in California more onerous, lengthy and costly.
These difficulties are multiplied when developers face the threat of litigation, because CEQA often serves as an avenue for opponents to challenge, delay and even block housing development projects.
According to the California Department of Housing and Community Development, it takes an average of 15 months to obtain permits to construct a single-family home in Los Angeles, and nearly 18 months for an apartment.
Attempted Reform
Policymakers have recognized the need for statewide regulatory reform.
S.B. 375, passed in 2008, allows a limited environmental impact report to be prepared for certain residential or mixed-use projects, and a streamlined document known as a sustainable communities environmental assessment for so-called transit priority projects, if they are not exempt from CEQA entirely.
But projects still must meet numerous conditions to qualify — including size, usage, density and building intensity requirements — and, for transit priority projects, must be in proximity to what the statute defines as a "high quality transit corridor." And even qualifying projects are still subject to CEQA litigation over the adequacy of the sustainable communities environmental assessment.
S.B. 35, which became effective in January 2018, similarly creates a streamlined approval process for certain infill developments meeting objective planning standards in localities that have failed to meet their regional housing needs allocation goals.
Qualifying developments must contain multifamily or mixed-use residential, with at least 50% dedicated as affordable housing, among a number of other criteria.
A.B. 2011, effective July 2023, allows for a housing development to be a use by right, and thus exempt from CEQA. Instead, such a development is subject to one of two streamlined ministerial review processes, if the development conforms to specified objective criteria.
Among other requirements, the development must meet affordability and site criteria, including being located within a zone where office, retail or parking are a principally permitted use.
In Los Angeles, Mayor Karen Bass issued Executive Directive 1 in December 2022 to accelerate and lower the cost of affordable housing. But several restrictions to the program have since been introduced to limit where affordable housing can be fast-tracked.
For example, areas zoned for single-family homes — which constitute 74% of Los Angeles' residential land — and historic districts are now excluded from E.D. 1.
While these policies may be laudable attempts to accelerate home building, they are limited to very narrow circumstances, and primarily incentivize high-density urban development. Unfortunately, this does not necessarily align with residents' preferences, or satisfy the broader needs of the housing market. What can be done?
Opportunities Ahead
Perhaps inspiration can be drawn from recent actions taken to speed up the rebuilding process in Los Angeles in the wake of the January firestorms.
In early January, Newsom issued Executive Order N-4-25 to streamline and expedite permitting for reconstruction. In pertinent part, the executive order suspends CEQA and California Coastal Act permitting requirements for the reconstruction of structures and properties damaged or destroyed by the fires.
The suspension applies only to like-for-like reconstruction of structures for the same use at the same location, if the new structure does not exceed 110% of the floor area, size, height or building footprint of the damaged or destroyed structure.
The executive order further directs state agencies to identify other permitting requirements, including the California Building Code, that can safely be suspended or streamlined to accelerate rebuilding and reduce the costs.
Newsom subsequently issued Executive Orders N-9-25 and N-20-25, extending those suspensions to the construction of new accessory dwelling units on affected properties, as well as the replacement, installation or repair of mobile homes, manufactured homes and recreational vehicles.
But what about the rest of Los Angeles and the state? If policymakers are willing to ease the path to rebuild homes, businesses and communities destroyed by the fires, why not do the same for communities that lack much-needed housing for other reasons?
Perhaps the executive orders suspending CEQA and Coastal Act requirements can be extended beyond rebuilding efforts to more broadly accelerate housing.
Policymakers should consider CEQA reform to speed up the approval process for housing projects and the timeline for any litigation challenges. With the recent fires magnifying the need to expedite permitting and rallying the political willpower to do so, California has the opportunity to rise from the ashes with a newfound effort to meaningfully alleviate the housing crisis.