Gavin Newsom Finally Gets Serious About the California Housing Crisis

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Four years ago, a California judge ordered UC–Berkeley to freeze its enrollment on the grounds that more students would be bad for the environment. Ridiculous as the argument was (practically nowhere in the United States would students have a lower carbon footprint than in Berkeley), this was not the only time that Cal students would be labeled as “pollution” under the California Environmental Quality Act, or CEQA (pronounced “see-kwuh”). Berkeley residents also used that reasoning to object to a student dormitory, in a case that went all the way to the state Supreme Court.

The stories thrust the Golden State’s dysfunctional housing politics into the national spotlight, and offered an extreme example of what’s become a familiar storyline nationwide: NIMBY homeowners exploiting environmental rules and community input procedures to stop new housing. Each case required a special bill in the California statehouse to resolve, a surprisingly typical remedy when high-profile projects—whether a football stadium in Los Angeles or a renovation of the state Capitol in Sacramento—have run up against the state’s onerous environmental law.

But the Legislature cannot long serve as a zoning appeals board for a state of 40 million people. On Monday, California Gov. Gavin Newsom signed two bills that scale back CEQA—curtailing local power to stop urban development, and particularly housing, on environmental grounds. After more than a decade of reform talk, the state’s housing and homelessness crisis has finally prompted an overhaul of a development procedure that a state study compared to “urban warfare—contested block by block, building by building.”

CEQA reform is not really a defeat for environmentalism—as the New York Times insisted on framing it. Rather, it reflects a 21^st-century understanding of the environmental movement, one that recognizes that an existing neighborhood is the greenest place for housing to be built. (Of note, one of the bills also permits a variety of non-housing stuff to be built in cities without environmental review, including day cares, food banks, water infrastructure, and critically, “advanced manufacturing” plants, in industrial zones.)

Nor does CEQA reform represent a serious philosophical shift in the California statehouse’s treatment of NIMBYs, whose ability to interfere with housing construction was, on paper, already undermined by a series of earlier “streamlining” bills that exempted plenty of affordable housing, student housing, housing near transit, and sustainable transportation infrastructure from environmental rules.

What’s different this time is the Democrats’ deal with organized labor. Previously, every CEQA reform came with the caveat that a developer seeking an exemption must hire union workers, or pay comparable wages and benefits. When the Legislature voted in 2022 to exempt student housing in Berkeley and elsewhere from CEQA, for example, they did so only if the project used union labor.

As of Monday, not anymore. Just about all housing that’s more urban than sprawl is no longer subject to environmental review, no matter who builds it. (There are exceptions for affordable housing, steel-frame construction, and projects in San Francisco—three categories where unions already predominate.) That was the breakthrough, and it hints at a subtle realignment between Democratic politicians and labor unions in ways that could go well beyond California. Brian Hanlon, the CEO of California YIMBY, which has pushed for state housing reform, called the bill “one of the biggest wins for housing in a generation.” How much housing will get built? How much faster? How much cheaper? No one knows—CEQA has been an integral part of California governance since Newsom was 3 years old.

When Ronald Reagan signed the act in 1970, the idea was to compel governments to analyze the impact of their work on the environment, and the law has been credited with protecting treasures like old-growth redwoods, mountain valleys, and San Francisco Bay. But courts soon expanded the law’s purview from heavy infrastructure projects like freeways and power plants to any private-sector project that needed government approval, including housing, including in cities. That decision sent shock waves through the permitting departments in San Francisco and Los Angeles, explained Jacob Anbinder, a historian working on a book about anti-growth liberalism.

If those early CEQA filers sincerely believed they were protecting the environment, by the millennium a diverse and decidedly non-environmental coalition had harnessed the law for horse-trading and community politics. As Liam Dillon wrote in the Los Angeles Times, “what’s clear is that CEQA has become embedded as a key point of leverage in California’s development process. Los Angeles Mayor Karen Bass once recalled that when she worked as a community organizer in the 1990s, Westside land-use attorneys who were successful in stopping development in their communities taught her how to use CEQA to block liquor stores in South L.A.” Today, about a quarter of CEQA lawsuits target some form of housing development.

The California press often describes “labor and environmental groups” as supporters of CEQA without additional explanation, as if it were obvious that unions of plumbers and electricians would share an interest in owl habitats with Jonathan Franzen and the Sherman Oaks Homeowners Association. Robert Selna, a lawyer who represents developers, explained that this is not just because hiring the union has been a “get out of CEQA free” card in recent reform bills.

It’s also that construction unions have been among the most adept and powerful users of CEQA as a point of leverage. While just 2 percent of CEQA-covered projects result in litigation, reformers describe those lawsuits as the tip of the iceberg that hides negotiations, concessions, and canceled projects with unions and other interest groups. “I think of it like an iceberg,” said UC–Davis law professor Chris Elmendorf, who has studied CEQA. “The lawsuits that are filed are the visible tip of the iceberg of negotiations and concessions and projects not proposed in the shadow of the litigation threat. That’s the bigger part under the sea, and we have no idea what’s going on with the rest of that iceberg.” What distinguishes the unions from organizers south of the 10 is that they wield real power in Sacramento.

Organized labor, for its part, has been forthright about the fact that CEQA creates (in a roundabout way) safer, higher-paying jobs in the construction industry—a transfer from a developer’s bottom line to his workers’ bank accounts—at a time when the cost of living in California cities has created an army of super-commuters who commute multiple hours each day. “When you expedite the process and you let a developer get the TSA pass, for example, to get quicker through the line at the airport, there should be labor standards attached to that as well,” Pete Rodriguez, leader of the carpenters union, told the Los Angeles Business Council this spring. If developers are getting relief from the 55-year-old law, unions have argued, that should be paired with higher wages and union work rules. A noble goal, if one that has little to do with the environment.

All this amounted to an arrangement that planning scholars Michael Manville and Taner Osman have called “pretextual planning,” in which jurisdictions “write rules primarily for the purpose of bargaining them away.” For unions, CEQA has provided a sizable bargaining chip.

“To suggest it’s a pretext is not to suggest the pretext is an invalid goal,” Manville told me. The CEQA bottleneck is not a straightforward way to raise construction wages, which could be legislated on its own. “The more things you try to funnel through zoning in land use, the less direct your outcomes are.”

That is the context to understanding the debate last week, when Berkeley assembly member Buffy Wicks introduced a bill to allow infill housing (homes built in existing neighborhoods) without environmental review, if developers paid a certain wage for the privilege. The trade unions went nuclear. “This proposal is a wage grab of construction workers’ wages disguised in an ‘affordable housing bill,’ ” State Building and Construction Trades Council president Chris Hannan said in a letter. “We urge you to abandon any pursuit of this harmful and unprecedented proposal, which would devastate construction workers.” The representative of the electrical workers union told Politico the bill was a “complete debacle and devastating to workers all across California.” At a hearing, a lobbyist representing the trade unions called it a “law to suppress wages” and compared the policy to the Jim Crow era, while a local trade council director told lawmakers the bill “will compel our workers to be shackled and start singing chain-gang songs.”

But Gov. Newsom threw his weight behind the reform. By the end of the week, the wage floor was replaced by some relatively small concessions (more on these in a moment), and the Trades Council was “neutral” on the bill. We eagerly await the L.A. Times/CalMatters ticktock of these negotiations. Several construction unions did not respond to requests for comment.

On Monday, after signing the bill, Newsom shouted out “Ezra,” as in Klein, co-author of the recent bestseller Abundance with Derek Thompson, who had challenged Newsom on California land-use policy in a recent interview. One of Klein’s oft-cited observations about the housing crisis has been the “everything bagel” mix of requirements—such as union labor—that add overlapping burdens to the creation of new housing. But the book fell short of doing the hard work of dissolving those requirements, and deciding which members of the Democratic coalition get left out.

Construction unions did not walk away empty-handed. Publicly funded affordable housing, high-rise, steel-frame construction, and projects in San Francisco will still require union labor. But those are categories in which unions already predominate. Instead, labor unions may have made a new, different bet. Rather than cordoning off a limited slice of CEQA-exemption work for their members, they’ve opened the door to a bona fide construction boom that might create much more work for every construction worker, driving up wages, creating the conditions for union expansion, and easing the state’s crippling housing crisis.

For a clue to this shift, consider the debate over a previous CEQA reform bill, Wicks’ 2022 legislation that permitted California’s commercial properties to be developed into affordable housing without environmental review. That bill had a wage floor but stopped short of requiring union workers, a provision that divided organized labor. The trades were against it, labeling it “anti-worker corporate greed,” but the Northern California Carpenters Regional Council, which has 37,000 members, was in favor. Their logic? At a state assembly hearing that year, NCCRC executive secretary-treasurer Jay Bradshaw implied that the new, mixed jobsites presented an opportunity for the union to expand its ranks, raising working standards across the board. An abundance mindset.

That’s a strategic shift, and it will be interesting to see if other blue-state leaders follow in California’s footsteps. In New York City, for example, the hotel workers union has supported a law that makes it all but impossible to build new hotels in much of the city—sending room rates skyward and shoring up union power in Manhattan hotels. It’s a similar calculation to the old CEQA status quo, reserving a small slice of the pie without imagining how much work and how many new members might really be out there. And with a similar result: Hotel rooms in New York have surged to record highs, and employment in the hotel industry is flat.

In California, meanwhile, we’re about to learn how big that CEQA iceberg really was. As the nonprofit newsroom CalMatters sums it up: “Most urban developers will no longer have to study, predict and mitigate the ways that new housing might affect local traffic, air pollution, flora and fauna, noise levels, groundwater quality and objects of historic or archeological significance.” New homes in cities can no longer be called an environmental nuisance—even if they are occupied by noisy Berkeley undergrads.