Calibrating Environmental Review to the Scope of Municipal Discretion Under the HAA

This is the last in a four part series. SLoGLaw thanks Chris Elmendorf and Tim Duncheon for this timely treatment of the important issue of affordable housing for California, and urban regions around the country--Ed.

The California Environmental Quality Act (CEQA) requires state and local agencies that have discretion to choose among possible options to study environmental effects before making their choice. In theory, this leads to better agency decisions. (A contestable claim – but that’s for another day.) But when other laws require an agency to select a particular option, CEQA doesn’t apply. There’s no reason to write a detailed list of the pros and cons of different options if you know from the start exactly which choice you have to make.

When a developer submits a housing proposal, the Housing Accountability Act (HAA) substantially limits the choices open to the city. So you would think that review under CEQA would be limited accordingly. You would, unfortunately, be wrong – at least as revealed by current practice.

So it is that a proposal to build 500 apartments on a downtown San Francisco parking lot, a block from the subway, in a designated “priority development area” under the region’s climate plan, ended up mired for years in the most extensive and costly form of environmental review required by CEQA: the Environmental Impact Report (EIR).

And why? Because San Francisco’s planning department had concluded, on the basis of a 342-page Initial Study, that a “fair argument” could be made that the Stevenson St. project may have a significant local environmental impact in the form of shadows, wind, or (during construction) noise and air pollution. The Initial Study evaluated the project’s potential impact relative to current environmental conditions nearby. It did not ask whether the project would have a significant marginal impact, relative to any other project of the size that the HAA entitles the developer to build on the site.

If the Stevenson St. project’s marginal impact would be close to nil (as we think likely), then the EIR was an environmentally pointless exercise. Its real function, apparently, was to give local activists and city officials a way to tie up the project until the developer either walked away or paid off TODCO, the politically connected nonprofit that led the charge against it.

The argument of this post is that the scope of CEQA review of housing development projects should be tailored to the scope of municipal discretion. A housing project should require an EIR only if the city exercises discretion to shape the project in some way that generates a significant marginal impact, relative to what the HAA compels the city to approve.

Our approach would not “relieve local governments from complying with” CEQA. But it would require overturning or significantly limiting several judicial precedents that have been incorporated into the official CEQA Guidelines. As such, our proposal poses a stark test of whether the HAA really is a super-statute, one that “sticks in the public culture” and exerts “a broad effect on the law.” If courts and the gubernatorial appointees responsible for the CEQA Guidelines get behind our approach, then the HAA will in fact “meaningfully and effectively curb[] the capability of local governments” to hobble housing development projects. If they do not, there can be little doubt that NIMBY cities will become ever more expert at exploiting CEQA to undermine the HAA.

“Effect” Relative to What?

We begin with an elementary point about causation. It is senseless to try to characterize the environmental effect of a proposed housing project without comparing it to some alternative use of the site. Consider an analogy: What is the effect of a new drug or medical device? The answer depends on what you’re comparing it to. Relative to a placebo, the effect of the new drug may be large. Compared to the best treatment currently in use, the effect of the very same drug could be small or even negative.

The same goes for housing projects. They have effects only when they’re compared to some alternative. Let’s call the point of comparison the reference alternative. What is conventionally labeled “the baseline” in an environmental impacts study is, properly understood, a compound of two things: an alternative use of the site (the “reference alternative") and a projection of environmental conditions in and around the site conditional on that use of it.

CEQA analyses, relying on CEQA caselaw, usually elide this fundamental point. By convention, they purport to measure the “effect” of a project relative to “current environmental conditions” on the site and in its vicinity. This is a misleading point of reference if current environmental conditions would change absent the project. No medical researcher would measure the “effect” of an experimental treatment by comparing the health status several years in the future of elderly patients who received the treatment with their health at the time the treatment was administered. That comparison would obscure the effect of the treatment, because old people tend to decline as they age.

The CEQA analyst’s conceptual mistake about baselines is not a problem in contexts where the permitting agency has authority to deny the project and doing so would maintain current environmental conditions. In such circumstances, the current-environmental-conditions baseline is equivalent to treating the “no-action alternative” as the reference alternative. This is like a placebo reference condition in a drug trial.

But the current-environmental-conditions baseline is nonsensical when the public decisionmaker lacks legal authority to maintain it. This is precisely the situation that cities face when developers propose HAA-protected housing projects. Cities may place discretionary conditions of approval on such projects, but they may not deny the project or reduce its density. Accordingly, the environmental impact of the project should be gauged relative to a reference-alternative project of the scale the city is required by law to approve.