CA Comeback? How Major Reform Could Lower Housing Costs in CA with Dave Rand

THE SELF STORAGE REPORT — EPISODE TRANSCRIPT Episode: CA Comeback? How Major Reform Could Lower Housing Costs in CA with Dave Rand Guest: Dave Rand — Partner, Rand Paster Nelson LLP (land use attorney) Host: Chris Berg — Abernathey Development Recorded: July 15, 2025 Video: https://www.youtube.com/watch?v=Xk1EIbTh1i4 Key topics: CEQA history since 1970 and the new infill housing exemption; the budget trailer bill package of reforms; SB 607 (Senator Scott Wiener) left out of the trailer bill; Assembly member Buffy Wicks and the Assembly Appropriations Committee; the governor's red line on signing the budget; EIR timelines of 2 to 3 years versus under a year; the new single-issue streamlined EIR for near-miss sites; wetland, earthquake fault and fire zone disqualifiers; labor provisions for type one buildings over 85 feet and 8 stories; 100% affordable and low-income projects saddled with prevailing wage and union obligations; carpenters union endorsement versus the building trades; tax credit units at 380 to 400K versus 800 to 900K subsidized; Measure ULA in Los Angeles and Measure GS in Santa Monica; $20,000 a door development impact fees; self-storage still fully subject to CEQA; new housing approval shot clocks with automatic approval Note: Speaker attribution reconstructed from raw captions. Light cleanup of transcription errors only; wording preserved. Timestamps and YouTube chapter markers removed. Turns marked [attribution inferred] could not be attributed with certainty. ————————————————————————————— Chris Berg: Welcome to the CRE Report. I'm your host, Chris Berg. Major, major changes happening here in California, and dare I say may even bring some capital back into this state. We'll find out what our guest has to say about that. He is a land attorney. He's been battling this thing called CEQA now for about 20 years. He's a partner at Rand Paster Nelson. Testified in front of the California Assembly, spoke at a bunch of conferences about the California housing crisis, has been on housing task forces in LA and Santa Monica. So, he is the man, Dave Rand. Dave, it's great to have you with us. Let's just start at the basics. Not everyone's familiar with CEQA, so I guess what is it, and maybe more importantly, like what do these changes actually mean for the great people of California? Dave Rand: Sounds good. Thank you so much for having me on, Chris. I'm looking forward to it. So, CEQA started as a very simple, basic concept in 1970. Basically a law that said if you're doing a development project, you've got to disclose to the public what the impacts are. Sounds very benign, totally harmless. And it was, for a number of years, until a bunch of superior and appellate court cases, legislative changes really morphed what was a very simple, straightforward process into an incredibly arduous, complex regulatory beast that probably more than any other single law in California has stymied new housing production and other developments that the state needs as well, to a significant degree far beyond, you know, states like Arizona and Texas that don't have these similar types of requirements. So what we saw in the last few weeks is, as dramatic as you rightfully introduced the topic, the biggest single change at least when it comes to how housing projects have to deal with this law, in that a lot of the requirements are now waived. And there is a new exemption on the books that will relieve housing providers, developers, of having to get stuck in the morass of very complex analysis and very time consuming, expensive analysis that has slowed down good projects. So it's an exciting development for sure. Chris Berg: So let's translate that into what does it mean then for the people of California? And if you want to take kind of the eyes of a developer through us, that would be great. I guess what I'm getting at is what are you starting to hear from clients now? Because as you know in development, time is money. This is, I'm assuming, going to dramatically reduce the amount of time they've got to deal and battle with cities and lawsuits. So, like I said at the beginning, are you starting to see like, hey, capital might actually come back into California? Dave Rand: I think this is that significant, that I think it could have that kind of an effect. And I'll share how this works in real terms. So, I get a call from a developer. Hey, we just tied up 10 acres in city X. We want to do a housing project. The general plan and the zoning more or less allow for it. Tell me how long is this going to take me and what are my risks? Am I going to get challenged? What's the likelihood that either the unions or NIMBYs or third party opponents will come after me and file a lawsuit? What does that look like? And if I have to tell that developer based on my experience and work I've done in that jurisdiction or community that yeah, the general plan and the zoning allows for what you're proposing, but you're going to have to do an EIR that's 2 to 3 years, and when you're done, you're probably going to have the neighboring community and HOA potentially file a lawsuit. Certainly the unions, if you're not planning to do a project labor agreement, will be there saber rattling with their attorneys, and you could get tied up in a multi-year litigation process that dramatically extends your timeline. And it's always sort of the same reaction. It's like, yeah, great. So glad I called you, Dave. Thanks for the terrific news. Now I have to go back to my capital partners, my bank, my investors, and try to convince them that this is a worthy investment opportunity. And that's a tough sell. Don't worry, it'll just take 2 or 3 years, and then when that's over, we may get sued and that could take another 2 or 3 years. Doesn't exactly inspire a ton of lending confidence. Well, now I can tell that same developer, assuming the project qualifies for this exemption, and most of them are, because the exemption is intentionally written to really sweep in most infill type housing projects, it's going to be a dramatically shorter process that, you know, 2, 3 years can go down to under a year. No reason it shouldn't. And there's really nothing to sue on when you're done. I mean, could anyone file a lawsuit in California? Yes. You know, we are famous for come one, come all litigation. So there could still be specious, you know, nuisance type lawsuits, but people who are kind of prudently looking at filing litigation and incurring that expense in order to have a realistic chance of stymieing a project will be a lot more circumspect about challenging that kind of development. So in addition to being welcome news to the developer about their prospects for success, they can go back to their investors and say, hey, guess what? Here's a streamlined pathway that significantly derisks our process, and that is going to inspire a lot more confidence than what we had been dealing with previously. Chris Berg: I want to share with everybody a couple graphics I really want to get into. Okay, so what does this mean for the great state of California? And so this is from the California Legislature's nonpartisan fiscal policy group. And this just shows here, I mean, it's really when you see in front of your eyes, I can't help but laugh, right? Like since 2020, here's the wage growth in California. Here's the rent growth, and then here's bottom tier and like mid-tier home pricing. So, one, I want you just to address, you know, how do you see this impacting this chart, and if so, how fast? Dave Rand: Yeah, I mean that chart is, it's almost like that has to be a mistake, right? That can't be a real graph. That's not actually possible, but it is. And by the way, this is exactly why the reform happened. I mean, there were a lot of people, myself included, who thought that this was really a political impossibility. I mean, everybody knew we needed CEQA reform. Everybody knows we have a housing crisis. But the politics were so entrenched on this issue for so long. But the fact that it has gotten this bad, as reflected in this graph, is what really kind of broke CEQA's back in terms of infill housing development opportunities. What it will mean in terms of narrowing this gap, bridging this gap. Look, I'd love to say that this is the cure all for all of our ills in California and the affordability crisis will evaporate and, you know, everything's going to get better. It's not that big of a deal. It's going to help. It's going to help mainly projects that are, you know, already in process, or that are potentially, you know, on the margins of happening, to push them over the top in terms of going forward. It will help projects that, like I mentioned, maybe were unable to get financing because of, you know, certain inherent risks in the entitlement process that mainly CEQA presented that now have largely been addressed. It doesn't address, you know, what your viewers are very acutely aware of, which are all the macroeconomic challenges that we currently have, particularly that plague multifamily, you know, higher density, what we call wrap and podium style buildings right now. Those projects are just very tough to make work economically. And if, because of interest rates and construction costs and land values and tariff risks, a project doesn't make economic sense on day one, no degree of CEQA streamlining is going to save that project, right? I mean, going from 3 years to 1 year doesn't save a dead project on day one. But if the project is, you know, potentially viable because the economic factors, you know, work, but it was just a matter of the land use being the, you know, impediment to it moving forward, I think what the legislature and the governor gave us in terms of this new tool is going to make a significant difference. Chris Berg: I'm curious, what do you, like just anecdotally, what are you hearing from some of your developer clients? Dave Rand: Well, we're hearing a lot of excitement. I mean, first of all, it was like, Chris, I can't tell you, like this thing passed in the press, you know, obviously it was widely reported on, the degree of, if I could show you my phone with the text that says, what does this mean for me? Me, me, me, me. Tell me how this means. It was crazy. Which is great. I mean, that's what it's about. That's why it was so exciting, is because everyone, you know, we work with smart people who follow this stuff, and, you know, we've all been waiting for this kind of reform for a long time, knowing it's overdue. And the good news is most of those texts got returned with a message along the lines of good news. This is going to help. Not every project, but a lot of them. And, you know, the other thing, we focused so much for good reason on the CEQA exemption, and the CEQA exemption is the crown jewel of the budget trailer bill, of the package of reforms that came out of the legislature a couple weeks ago. But there was a couple other nuggets in that package of reform that will help as well. And even projects that don't qualify for this exemption, say for, you know, one environmental reason, because there are certain basic environmental disqualifiers that, like if your site is on a wetland or if it's in an earthquake fault zone or in a fire zone, there are certain, you know, restrictions that could apply that could take you out of the exemption. Even for those sites that have one of those, sort of been described as near misses on qualifying for the exemption, there's a new separate CEQA reform tool that allows you to do a super streamlined EIR, an environmental impact report, focused just on that one issue. So unlike our current EIRs, where we have to look at 10,000 things and there's, you know, 50 technical reports and the document is thousands of pages long that nobody reviews unless you're getting paid to review it, either for the developer like me or for an opponent like, you know, someone looking to challenge the document. Now we get to zero in, you know, razor laser focused, on say the one environmental issue that is in question. That's also going to be helpful. And we've had a handful of projects that are very seriously looking at that new streamlining tool. So there's a lot of good stuff in this package of reforms that go beyond just the exemption that has gotten most of the headlines. Chris Berg: How much then is this going to, I don't know, eradicate might be too strong of a word, but I'm going to use it. How much does it eradicate NIMBYism? I mean, is that kind of put these people at bay, or is it still they can get in the way? Dave Rand: It's certainly a big body blow to NIMBYs looking to challenge housing projects, and, you know, both NIMBY cities, by the way, and NIMBY third party opponents. Will it eliminate frivolous land use litigation? No. I'm sorry to say it will not. There will still be projects that will get litigated, either because the opponents just have an unrealistic sense of their chances, or more nefarious, and we do see this. We have litigants who know they're going to lose, who know they're not bringing a meritorious lawsuit, but who also know that to developers lawsuits mean lost time and lost money. And if they can just slow a project for a couple years through the courts, that may be a death knell. And, you know, that's the what I call the, you know, the win by losing strategy, knowing that they're not going to get a judgment in their favor but they may get the outcome that they actually want, which is the project doesn't move forward. So, we're still going to see some of that, but, you know, there are also other tools that we have now, bonds and other things that, you know, requirements that we can try to push on to opponents who are bringing those kind of frivolous lawsuits, to make it uncomfortable and to disincentivize them from doing that. And I think there will be, Chris, a lot of people who just decide that it's just not worth it. Like, you know, it was one thing when my lawyer told me that I could, you know, attack a project over its greenhouse gas emissions and its air quality report and its, you know, deficient construction noise analysis. And here's a laundry list of things that we could potentially throw at a judge and get him or her to say, yeah, this wasn't done right. You better go back to the drawing board and do it again and lose, you know, another 3 years. But now with this really clean, straightforward, you know, objective, verifiable, you know, check, check, check, check, check, you're in or you're out, you know, it's going to be a lot harder. So, I do think it will depress the volume of litigation challenges. And even more important than the number of challenges, what it will do is, if not eradicate, to use your word, greatly reduce the hidden effects of CEQA litigation, which is the developer and their investors that decide not to go forward with a project at all for fear of getting sued, because they know they're proposing a project in a neighborhood, community, city that is ripe for CEQA litigation. This exemption is going to embolden them rightfully to push ahead, because they know that now, you know, they've got this strong protection on their side, whereas before, you know, far, far greater risk to go through that process. So that's where I think we're going to see kind of the most benefit of this. And it's not going to be something that's easy to quantify, unfortunately, but we're going to see it in practice. And that goes to your original point of will this bring investment back? And my hope is in that sense it will, because projects won't be dying on the vine out of fear anymore. But, you know, capital will be willing to say, yeah, okay, we have to go through a discretionary process, we have to go through hearings, but at the end of the day, we're going to get approved, both because of this strong protective CEQA exemption and also the other state housing laws that we have that have been strengthened over the last 5, 6 years that now make it very difficult for cities to disapprove or reduce the permitted density of housing projects. Those two things working in tandem should convince, I'm hoping, the investment community to go forward and push the go button on a lot more projects. Chris Berg: You mentioned the, uh, what's in it for me conversation a few minutes ago. I do want to get to that and talk about some other asset classes in a moment, but I really want to just start with, I mean obviously multifamily commercial real estate, but just housing as a whole in the state, because you need people for real estate to have value typically. And so my question for you, don't want to hold this to you, but as you see this graph, you know, and knowing some of these changes, does this start to dramatically go down in 5 years, 12 months? Like what's kind of your best guesstimation? Dave Rand: I wish I knew. I, you know, it's so tethered to the macroeconomic conditions. And so, look, what is being put in place now is a structure that will help for the long term. Right now, it's not going to unleash housing in a way that collapses that graph. Again, I wish it would, but it won't. But it puts a structure in place, a far more, you know, reliable, predictable, safe and competent structure, that when the macroeconomic conditions do get better, as you know, everything's cyclical, it eventually will, then it will, you know, create a far more hospitable environment for future housing. But we've got to do other things, too. I mean, your viewers are no doubt aware in Los Angeles of the detrimental effects that Measure ULA has had on, you know, just economic development across the board. Housing production too, but economic development. We have to get out of the oppressive thumb of ULA in order to see economic development really thrive. And nothing would do more, I think, to incentivize capital coming back to Los Angeles than real meaningful ULA reform. And it's not just ULA. We have copycats in Santa Monica with Measure GS and other jurisdictions that are flirting with really problematic transfer taxes. And then, you know, construction costs and interest rates and, you know, tariffs need to stop and all those other things need to all happen. And hopefully they will. It'll take time. And then when those conditions are ripe, we'll finally have a land use regulatory structure in place in California, at least when it comes to infill housing, that will again, you know, green light a lot more of these projects. Chris Berg: It's a good lead into my next question, because you talked about infill housing. So is this very narrow and just for infill housing, or for example our asset class is self-storage, we deal with CEQA. Does this help us in self-storage as well, to help mitigate some of the CEQA challenges that we face? Dave Rand: It does not help self-storage. It is very specific to infill housing. Infill housing kind of broadly defined in a very workable, flexible way, but very much focused on infill housing. We still have, you know, the beast of CEQA to contend with on, you know, virtually every other asset class. There was a bill, Senator Wiener had Senate Bill 607, that would have reformed CEQA writ large, would have dramatically changed the legal standard of review. Not to get too technical with your viewers, but basically would have made CEQA a lot more workable for any developer, whether you're doing self-storage or a hotel or office, what have you. That concept did not make it into the budget trailer bill. So there is still plenty of CEQA reform that still needs to happen in the state of California, in particular for non-housing related issues. But housing being, you know, the issue du jour, and really the galvanizing political issue, is, you know, what led to this significant, albeit narrowly tailored, reform for that particular asset class. Chris Berg: Yeah. Yeah, I mean the number one reason people are leaving California, we touched upon before this conversation, is just the cost of living, which obviously is housing. I thought it was interesting, and I don't want to bring in politics, but I know you've got a background with some of that, you ran for city council at one point, just how the governor went about doing this and tying this into the budget. So, keep it apolitical, but I think that was a real win because, as you've talked about, it can get implemented really quickly because of that. Dave Rand: Correct. Oh, absolutely. That was just absolutely gargantuan in terms of creating the political opportunity for this to happen. Right, left, center, doesn't matter where you are in the political spectrum. It is a fact that the governor of California, whoever that person is, has outsized political influence in the budget process, far more so than your typical legislative, you know, bill making, lawmaking process, where bills advance through the legislature. So when the governor of California drew a red line and said, I am not signing the budget unless you, legislature, give me the CEQA reform. That was, in my view, a true profile in courage moment, where, you know, the governor absolutely used the full magnitude of his office in order to make this happen. Had he let it roll through the normal legislative process, who knows what would have happened? Maybe it would have gotten out, but it could have looked very different. The labor provisions, which, you know, all of us in the housing space were concerned that this bill was going forward and it was going to get to the one yard line and then what has always happened in the past was going to happen to this, which is the unions get a hold of it and all of a sudden this, you know, sweeping CEQA reform comes with a very challenging prevailing wage and union mandates that make it pretty much unworkable for most of the housing that we build in California, certainly in the LA County area, which is stick frame, wood frame, mid-rise type buildings. That didn't happen. It didn't happen because the governor again stepped in and said, you've got to give me a clean CEQA bill. It also happened because we have some legislative, you know, real champions on this issue that stepped up in a big way. Assembly member Buffy Wicks, the chair of the Assembly Appropriations Committee. This was her bill. She just basically put her career on the line for this. Just, you know, again, true profile in courage moment. And then Senator Scott Wiener, who has been a, you know, housing champion since he got to the legislature, and no different on this issue. So it all kind of came together, and thankfully it happened. Chris Berg: So just for clarity, because I had heard rumors, you know, on social media and whatnot, are there any labor provisions within this particular bill? Dave Rand: There are labor provisions. However, they are very narrowly tailored. And the labor provisions come with two types of development projects. One is projects that are over 85 feet in height, over 8 stories, which we call type one buildings. Those are buildings that are, you know, high-rise under the building code that are made from steel or concrete construction. A lot of those projects hire union trades anyways because of the complex nature of construction. Not true across the board. And the labor provisions for those type of high-rise projects still do impose some degree of cost, but those projects are able to economically sustain those labor provisions far more so than wood frame construction, mid-rise, and lower-rise construction, which was completely exempt from the labor requirements. So anything under 85 feet for multifamily mixed income does not have either prevailing wage or union mandates, with one exception. 100% affordable projects, 100% low-income projects of any size do have the labor requirements. And the reason for that is because there's somewhat of a misunderstanding, I think, in the legislature that all of those projects are getting public money, which triggers prevailing wage anyways. That historically has been true. But what we've seen recently is a sort of cottage industry of low-income, what we call tax credit affordable projects, that are getting tax credits but not public subsidy, and that have a business model around delivering units at a lower price point per unit because they don't have to pay prevailing wage and have those union obligations. So those are, you know, getting to market, you know, 380, 400K a unit versus 800, 900K a unit for some of the subsidized projects. Well, those projects, that was the one real sacrificial lamb of the CEQA exemption. Those projects did get saddled with union, excuse me, union obligations. And that's unfortunate because, you know, some of those projects could benefit from the exemption as well. But look, it's a political process. There were compromises that needed to be made. The most important political component of all of this getting done from a third party stakeholder perspective was the fact that the carpenters union endorsed the bill. The carpenters union, showing themselves to be very pragmatic, supported this. And they had some conditions. They had some conditions like the low-income projects and the type one high-rise projects having to have some labor requirements. But because they supported the bill, that gave the Democrats and the legislature the political cover to push back against the building trades that came out real hot and heavy against it and almost killed it at the end of session, before it was rescued by some of the leaders in the legislature and the governor. So again, I say all that because it's not perfect. You know, the low-income requirements, the type one union requirements, but those are compromises that serve the greater good in terms of the vast majority of housing projects allowed to use this exemption without being saddled with those labor requirements that are oftentimes economically infeasible. Chris Berg: Dave, one last question for you. I'm going to just come back to this one more time because we've kind of almost chuckled at, you know, how disproportionate this graph is. Again, you can blame the Federal Reserve. There's a lot of, you know, different pieces that you could focus on. My question that I want to ask you, to sort of wrap things up, because you've been doing this now for 20 years, you've been in California for a really long time. If you were king for a day, king for a year, what would you do to solve this housing crisis in California? Dave Rand: Oh, wouldn't that be nice? That's a nice fantasy to indulge in. I would, well, I would get rid of CEQA completely for all the, you know, projects that would make sense to do it for. Housing, you know, commercial development in infill contexts, whether it's the self-storage business that you are in, Chris, or, you know, hotel projects, what have you. Certainly for any project that provides an inherently environmental benefit, you know, green projects, public benefit projects like hospitals. You know, just completely reform the law and kind of get out of our own way in terms of letting the projects that we know we need for economic development, for public benefit purposes, for housing, go forward without getting stuck in the mud with CEQA. But I'd also, and there's, you know, a bill in the legislature that is attempting to tackle this, we'll see where it goes, but I would also, you know, prohibit these very high taxes on new development, which come in the form of these real estate documentary transfer taxes. They just make no sense. They've proven to, you know, they raise a little money and that money goes for good purposes, but if you look at the cost of, you know, economic disincentives and barriers, as well as the stymieing of housing production, and you balance that against the little bit of good the money that's raised has done, it's a no-brainer question. Like, these are, you know, we in California can't solve interest rates and the Fed has to do that. The construction, you know, cost market is very challenging based on a bunch of factors that the state can't do. But we can make it illegal to impose draconian taxes on economic development and housing. That we can do and we should do it. And if I was, you know, elected, which I never will be because I'm totally unelectable, based on 20 years of working for developers. That's what I would do. Chris Berg: All right. So, get rid of essentially the ULA. One other question I have, and I think there was, can't remember if it was a Supreme Court conversation, but development impact fees. Any thoughts on those? Dave Rand: Yeah. No, development impact fees need to be reformed, too. They've gotten out of control. And it's the same concept as, you know, the transfer tax, and we are, again it's a tax, and so the things that we know we need and we will benefit from. And look, there's a certain degree of cost recovery that municipalities should be able to engage in. I mean, certain types of new development do impose infrastructure, you know, demands and what have you. You know, I'm not saying that there should be no recovery at the municipal level, but I know of cities in our great region who use the tools of impact fees to intentionally ensure that no housing projects come forward. I mean, $20,000 a door impact fees for new housing. And that's just wrong. I mean, that is like, and we've broken down, we, the legislature and the governor have broken down, you know, a lot of sort of the, you know, the barriers and taken away a lot of the tools that bad actor cities and counties have been employing to stop housing. But impact fees are still one of those tools, and there are jurisdictions that abuse them, and that is reform that is needed as well. Chris Berg: Yeah, I mean there's a lot more to say on that. At some point you and I will have another conversation. It was great to get your insight today. Would love to have you back. Anything else, Dave, that you want to add or share that I haven't asked you yet? Dave Rand: No, the only thing I'd say is we talked a lot about the package of reforms. There's other good stuff in that package, too. We have new what I call shot clocks now that put time frames on the approval of housing projects that come with, you know, real teeth. And, you know, the law actually says that if the cities don't follow the time frames, the projects are automatically approved. We'll see where that goes. That'll be a very interesting thing when it comes to implementation and we'll see what the courts do about that. So, the story is not fully written yet. This is a big deal. A lot of good has come out of it. There's a lot of, you know, understandable excitement and exuberance. But how cities implement these rules, you know, what happens with the courts, you know, like anything, it's going to take a few years to figure out. And so it's been great being on your show, and, you know, definitely would love to come back and we can talk about how it's working in a year down the road, because I think that will be real interesting, to kind of take stock of, you know, where it is working, where it's not, and what are the inevitable holes and loopholes that will need to be plugged by the legislature at that point. Chris Berg: Well, plus, two, a year from now we'll be in the middle of a gubernatorial race and some other exciting things that we can probably discuss as well. So for the people out there watching that are actually asking themselves, hey, what's in it for me, and want to reach out to you, how do they do that? Dave Rand: You know, email me. You know, our firm, Rand Paster Nelson. Go to our website. My email, dave@rpnlp.com. And, uh, yeah, hopefully there are some developers out there who could benefit from this who have heard about it and learned about it from your show. So, thanks for having me, Chris. It's been great. Chris Berg: Absolutely. I want to just share your website as well with people so they can actually see what you're talking about so they can go check it out. But again, if you want to reach out to Dave and you've got some questions about stuff, 20 years, been battling CEQA, knows the ins and outs, go to rpnlp.com. Again, rpnlp.com. And Dave, we really appreciate the time and the insight. Look forward to having you back. Dave Rand: Okay. Terrific. Thank you so much, Chris. — END OF TRANSCRIPT —