Is Prop 45 a Quick Fix to California’s Slow Construction Pace?

The Golden State’s perpetual morass when it comes to quick development has been generating all the wrong kinds of headlines. In addition to the growing issues with housing production and affordability, it seems like any megaproject or big idea envisioned for California sinks due to red tape and regulations. 

The state’s perpetually delayed high-speed rail project continues to get pushed back. Recently, homebuilder Lennar went ahead with building homes on the site of the proposed rail line because land acquisition hadn’t taken place yet, nearly two decades into development. In Los Angeles, the 2.25-mile automated People Mover train has been delayed again, now stretching the project opening to early 2027, at a cost of $3.3 billion. The development has taken twice as long as it took to build the Golden Gate Bridge. 

That sense of being stuck has animated a campaign this year to pass Proposition 45, an effort to rework the state’s infamous California Environmental Quality Act (CEQA) to encourage more “essential infrastructure” and, in the words of advocates, streamline building and construction. 

Placed on the ballot by the California Chamber of Commerce and supported by big players in development, including homebuilders and the California Building Industry Association, the effort would designate certain projects as essential — including infrastructure like roads and bridges, certain kinds of housing, schools and broadband expansion — then impose time limits on environmental reviews and lawsuits to speed up approval and construction. 

This law would represent a “sea change,” said Ethan Elkind, a climate law expert at the Berkeley School of Law. 

Backers also argue it would be a windfall for the state. A study by Blue Sky Consulting, funded by the California Chamber of Commerce, claims its passage would advance nearly 20,000 homes annually and generate $1.5 billion in combined savings and revenues for state and local governments.

While commercial real estate isn’t directly mentioned in the proposition, many developers would reap many benefits from its passage. It encourages the construction of larger, master-planned communities in exurbs — sprawl-style housing that will necessitate more adjacent commercial development — as well as the kinds of infrastructure projects, including for water and freeways, that expand what areas are developable. It basically expands the map for more potential commercial projects. 

What it doesn’t do is expedite infill, urban development in already dense areas — the kinds of developments already encouraged by significant housing bills at the state level such as Senate Bill 79. That’s one reason that California YIMBY, the influential pro-housing advocacy group that has supported so many state housing bills in the past, stayed neutral in regards to Prop 45. 

There was already a bill last year that passed and granted CEQA exceptions to infill development, and Prop 45 paints with a very “broad brush,” said Matthew Lewis, the group’s communications director.

“We tend to try to be more surgical in our approach,” he said. “It’s not that we don’t think there are other things that can be done to reform state rules for housing. It’s just that the thing that we’re focused on, we already got done.”

There was division within the group, Lewis said, and one reason that the organization didn’t make any recommendations. It boils down in part to whether it’s better to only incentivize certain kinds of housing — infill, near jobs and transit — or help build any housing, especially sprawl housing, to help reduce the state’s production shortfall.

“The problem is that because it’s also most of the housing we build, it’s very hard to say, ‘Stop building it,’ once it starts,” he said. “And there’s a really good case to say, ‘Make it easier.’ And the developers, the greenfield developers, have been saying, ‘Help us make that easier.’”

Experts in environmental law and CEQA believe that, regardless of the merits of the change, it would be a monumental one. The California legislature has been carving out exceptions to CEQA for decades, said Elkind, including the measure last year to expedite infill housing. This would be much more wide-reaching.                 

Chris Carr, a partner at Paul Hastings and a CEQA expert, believes the most significant changes involve shortening the time and power other agencies have when it comes to what he called secondary permitting. These changes, he said, underscore that those who authored this proposition are experts in land use and know all the typical barriers faced by greenfield developers in the state. 

“This is by people who are in the nuts and bolts of it, who need to get stuff developed and are facing the financial pressure of carrying costs of money and capital,” he said. “They’ve got lenders and investors, and time is money.”

Although CEQA can significantly delay projects with third parties able to lob appeals at a proposed development’s environmental impact report, the number of extensive delays and setbacks can get overblown, according to a report from the Rose Foundation for Communities and the Environment, making the act a bogeyman builders point at to argue for cutting regulations.

The initiative has also raised significant alarm among environmental groups, including the Coalition for Clean Air, the National Wildlife Federation and the Sierra Club, due to the ways it limits the ability of the public and public advocates to challenge projects. 

The proposition will not only severely restrict environmental challenges that can improve projects and lessen impacts, but ultimately undermines the drive for more housing, said Fernando Gaytan, a senior attorney with Earthjustice. 

Fast-tracking development and “ramming it through” in the face of community opposition is a problem, he argues, and places significant and costly burdens on local government to fast-track reviews. It may also open the door for further weakening of CEQA, and it deprives developers of a valuable back-and-forth, Gaytan said. The process may add time, he added, but it ensures the kind of community buy-in that helps make projects succeed in the long run. 

By favoring sprawl development and single-family homes, it adds competition to the dense, multifamily housing that many housing groups like California YIMBY argue is necessary to create affordable living near jobs and opportunity. Gaytan is also alarmed by the potential wildfire impacts because the proposition speeds development of more power lines by utilities and housing amid wildfire prone areas.

“California has these laws for a reason,” Gaytan said. “We’ve existed with these laws for 50 years, and we’re still the fourth-largest economy in the world for a reason. You can’t start cutting corners now.” 

A very concrete fear raised by opponents involves the way the proposition seeks to enshrine itself beyond more accountability. Not only does this change to permitting take the debate out of the legislature, but the language in the proposal says that a two-thirds legislative majority would be needed to overturn the changes brought about by Prop 45, making it very difficult to change. 

Opponents also believe there’s a real possibility that the changes envisioned by Proposition 45 get applied to data centers. The biggest supporter of the measure, the PAC Building a Better California, composed of tech leaders like Google founder Sergey Brin, invested $10 million in the measure. The legislative language mentions “essential broadband internet access project,” which some are reading as a reference to data centers. 

While the California Chamber and the state’s Office of Legislative Counsel argue it does not apply to data centers, they aren’t specifically spelled out in the proposal (the language does note, for instance, that these new rules don’t apply to high-speed rail). It also expedites review on transmission and energy projects — hence significant utility support for its passage — which can also help speed up energy-hungry data center development. 

The San Francisco Chronicle, in an op-ed about Prop 45, argued that the confusing legislative language will lead to extensive litigation — ironic considering its stated goal of accelerating, streamlining, and simplifying development decisions — and data center backers have sunk considerable money into promoting a Yes vote. 

Carr doesn’t think the fear of Prop 45 being applied to data centers is credible as any type of application would need to be litigated through the courts first. But, he also said that developers tend to be aggressive and push the envelope, so, ultimately, he won’t be surprised if Prop 45 passes, and if someone tries and invites a longer legal battle over whether or not the language does apply to data center development. 

If there’s any sure bets in California development, it seems, the odds remain strong with lawsuits and uncertainty.