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What is CEQA and How Does it Affect Real Estate Development?

The California Environmental Quality Act (CEQA) is a landmark piece of legislation that was put in place to add protection for the environment.

It is California’s state counterpart to the National Environmental Protection Act (NEPA) and has important provisions that can sometimes affect real estate developers.

What Is CEQA?

CEQA was signed into law in 1970, during the freeway and dam boom. The goal of the law was to require California’s public agencies to consider the environmental consequences of discretionary actions.

It applies to all projects that are subject to a public agency’s discretionary or approval, which causes a direct or reasonably foreseeable indirect physical change in the environment.

Projects may have a statutory exemption, created by the legislature, or a categorical exemption, which refers to exemptions established by regulators.

Who Is Affected by CEQA And How Does CEQA Work in Real Estate Development?

Any project that either receives state funding or requires a state-level permit is affected by CEQA.

For example, CEQA applies to affordable housing projects subsidized by the state, although with a streamlined review process designed to deal with California’s housing shortages. Because this is state level, it is likely to apply to all projects of significant size.

Thankfully, many projects will be able to get by with a negative declaration, indicating you don’t think it will have a significant impact. B

Brownfield development, for example, may not have a negative impact at all. However, the negative declaration still requires a lot of information about the project, which must be made public and allow it to potentially be challenged.

A Contractor at a Commercial Building Construction Site

How Does a CEQA Review Work?

A CEQA review starts by determining whether any statutory or categorical exemptions apply. If they do not, then the following steps need to happen.

  1. A preliminary study is done to determine whether the project might have significant environmental effects. This study is prepared by the lead agency, although they may farm it out to a consultant.
  2. The appropriate level of review is determined. If the initial study concludes that the project will not cause a significant effect, the agency will prepare a negative declaration. In some cases, the agency might attach conditions. This means that the original project design did have impacts, but the applicant has agreed to changes to prevent them, such as moving structures to avoid a stream. If the initial study does come up with a significant effect, then it goes to the next stage.
  3. An Environmental Impact Report (EIR) is prepared. The agency may prepare the draft or, more likely, the applicant’s consultant will, with the agency reviewing.
  4. The EIR is released for public comment for 30 to 60 days.
  5. A final EIR is put together taking into account comments and recommendations.
  6. The project is either approved or denied.

Unlike its federal equivalent, CEQA is binding. The project can be denied or an alternative is required.

This means that developers may spend a lot of time on an EIR only to be told no or, worse, face other consequences as given below.

CEQA review can also take an extended amount of time, running into years, making the law unpopular with many developers. It can also result in other issues because of its mechanism of enforcement.

What Sections Does an EIR Have?

An EIR is a complicated and often lengthy document. Unlike with NEPA, there is no standard template that has to be followed. However, the EIR is required to contain certain elements, namely:

  • A description of the project
  • An environmental baseline, that is to say, the current condition of the affected site
  • An evaluation of environmental impacts
  • Thresholds of significance, which can also include historic and cultural significance
  • Evaluation of short-term and long-term water supply needs
  • Impact of climate change and energy use
  • Any mitigation measures being suggested
  • Cumulative impacts
  • A meaningful discussion of project alternatives.

The historic and cultural significance often requires a separate study, which is one reason why an EIR can take a long time and result in significant project delays.

For this reason, it’s a good idea to get your own initial study done before committing to a project, to establish how likely it is that you will need an EIR to proceed.

How is CEQA Enforced?

Controversially, the primary mechanism for CEQA enforcement is litigation or threat thereof. That is to say, the public is allowed to sue if a project moves forward without proper review.

They might sue the agency and/or any contractors working on the project. Because of this, you should make sure that proper review has been done, even if the agency is taking care of it.

This has resulted in lawsuits that some view as frivolous. CEQA has no single agency responsible for enforcing it, but rather compliance is placed with all of the agencies.

Needless to say, this results in a good amount of differential enforcement. But it does make CEQA more than a set of guidelines that should be followed.

Some developers are afraid to work in parts of California because of the law.

What Should Developers and Contractors Consider for CEQA in Real Estate Development?

First of all, developers should generally not let CEQA have a major chilling effect. However, they should also consider the environmental impacts of a project before breaking ground, and ideally before purchasing land, especially if they need a permit or state or local funding.

By doing proper environmental surveys first and taking them into account, with proper mitigation, developers can often avoid having to do an EIR in the first place, and greatly increase their chance of being approved if they do need to complete one.

Developers should bring in an expert to do initial surveys which can help determine environmental impacts, such as soil testing and vegetation surveys.

They should also bear in mind less direct environmental impacts (for example, the amount of traffic a project is expected to produce). It’s also a good idea to get a cultural and historical survey done, and if necessary, bring in an archeologist to check the site.

Getting a proper survey done by an expert is the best way to avoid a CEQA lawsuit and a massive delay while your project is tied up in the courts. At Essel Environmental, we can help you find the best route for completing a proper survey for your CEQA compliant real estate development project.