Developer Nightmare: California Climate Change Land Use Regulation

By: Roger A. Grable
– GlobeSt.com

California is among the first states to aggressively attempt to regulate climate change through land use regulation. First AB 32, and the Governor’s follow on executive orders, and most recently SB 375. AB 32 grants virtually unlimited authority to the California Air Resources Board to adopt regulations on “any source of green house gas emissions” in order to achieve the targets set by AB 32. These targets are to reduce emissions to 1990 levels by 2020 and to further reduce GHG emissions to 80% below 1990 levels by 2050. These regulations could include land use regulations.

The subsequently enacted SB 375, in contrast, focuses entirely on land use regulations, with a program intended to address GHG emissions from automobiles and light trucks. Whether CARB will defer to the SB 375 regulatory scheme with regard to land use or adopt its own regulations is an open question.

The Premise of SB 375

The fundamental premise of SB 375 is that a reduction in vehicle miles traveled and therefore GHG emissions can be accomplished by modifying the pattern of urban development to reorient new housing to areas which are either close to jobs or to areas where transit service is available to provide alternative forms of transportation to job-rich areas. The methodology intended to create this model is based on regional planning.

First CARB will set regional targets for GHG emission reductions. That effort is currently in process and is due to be accomplished in September of this year. Following the adoption of the regional targets, regional municipal planning organizations such as the Southern California Association of Governments will adopt Sustainable Communities Strategies designed to meet these regional targets. CARB will review these Strategies but can only accept or reject the MPOs determination that the plan will meet the targets. If the MPO determines that the Sustainable Communities Strategy will not achieve the established targets, the MPOs must adopt an Alternative Planning Strategy that will. While the Sustainable Communities Strategies and Alternative Planning Strategies are not binding on local government, the carrot and stick to be applied is federal transportation funding. The Sustainable Communities Strategy becomes part of the Regional Transportation Plan (the Alternative Planning Strategy does not), which in turn is the basis of allocating federal transportation dollars to local projects.

What Does All This Mean for the Development Community?

The SB 375 land use model is completely unique. Not only will it be an unfamiliar process, it may even play out without the involvement of land owners and the development community. The MPOs are not subject to the normal land use processes. No notice or hearings are required. No specific opportunities for landowners and developers to participate in the process need be afforded. The staff of the MPOs are not typically planners by profession. This process will be unfamiliar to them as well. Moreover, the process is designed to be a lengthy one. It is projected that Sustainable Communities Strategies will not be adopted for several years. SCAG for example is projected to adopt its Strategy in 2012. The Bay Area in 2013.

What will local agencies do in the meantime? Will "no growth" oriented communities elect to put a moratorium on development pending adoption of the Sustainable Communities Strategy applicable to them? Will local agencies such as the City of Irvine attempt to adopt its own climate actions plans in advance of the MPOs, which plans may or may not end up being consistent with the Sustainable Communities Strategy for their region?

What this all means for developers who are just hoping to emerge from the deep recession and adverse housing markets is not good. Developers seek to anticipate the market. The want to acquire land and get a product on the market at a time when demand for that type of product will emerge. With SB 375 that may no longer be possible.

Also, will green field development come off the table? While one can predict that the strategies will likely promote infill development, will there be a market for this socially engineered product? Will households with children want to move to infill areas where the schools may not be the best and where recreation opportunities may be limited? Will there be a fear that these areas are plagued with high crime rates?

Proponents of SB 375 point to demographic analysis showing that households are reducing in size and that the growing number of the aging and the young would prefer to live in sustainable communities. But are these demographic projections accurate? While twenty-somethings may prefer an urban walkable community now, will they still feel that way when they start raising a family? While the older population may well wish to downsize, will they want to live among the twenty-somethings among the clubs and active nightlife? The languishing condominium projects around the state may well be the harbinger of things to come.

The bottom line is that no one knows. And uncertainty as to where the market is going will not aid in the recovery of the housing market.

Roger Grable serves is counsel in the Orange County, CA office of Manatt.