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Housing and a Vibrant Environment Can Co-exist.
Show Notes:
Welcome to Episode 13 of Offshoot with Ms. Jennifer Hernandez, a land use attorney from Holland and Knight.
Jennifer is truly remarkable. She expertly and fluidly draws connections between the flaws of California’s Environmental Quality Act and the rights of its citizenry to have attainable shelter. Jennifer reveals that CEQA is no longer utilized to protect the environment from pollutants, nor to protect open space. Instead, it is actively employed by a wide array of special interest groups to advance ulterior motives. As Jennifer puts it, CEQA is used by someone who has money to stop what you’re doing. The Act’s abuse effectively stops development (NIMBY), secures project labor agreement for local unions, and stops competition from establishing a foothold. It also provides bounty hunting lawyers fertile ground to extort cash from developers before allowing their projects to advance.
There’s a lot in this one.
Listen in as Jennifer explores:
- Humility and the fact that no matter what you know, there’s a lot that you don’t. Listen and observe as your narrow expertise isn’t going to cover it all.
- The role that a home played for her mother and grandmother in tough times, and why that’s worth protecting.
- How CEQA, if you take the strictest read, would like to freeze California in 1972 (the time the law was enacted).
- How government agency discretion plus any change to the environment are enough to trigger CEQA, plus where you can find categorical or statutory exemptions from the act.
- The fact that only 13% of CEQA complaints come from entities which predated the filing of the complaint, meaning 87% are filed by entities that we created just for the CEQA complaint.
- How CEQA challengers need not identify themselves or their relationship to the project.
- How bounty hunting lawyers employ bots to monitor the internet for new Environmental Impact
- Reports in order to leach payment from the associated projects.
- How affordable housing is just a complete mess.
- How not understanding a politician is their problem, not yours. Insist on policies and politics that make sense.
Transcript
Kevin Choquette:
Hello everyone. Welcome to episode 13 of Offshoot with Ms. Jennifer Hernandez. A land use attorney from Holland & Knight. Jennifer’s a remarkable human being. She expertly and fluidly draws connections between the flaws of California’s Environmental Quality Act and the rights of its citizenry to have attainable shelter. CEQA is no longer utilized to protect the environment from pollutants nor to protect open space. Instead, it’s employed by a wide array of special interest groups to advance ulterior motives. As Jennifer puts it, CEQA is used by someone who has money to stop what you’re doing. The act’s abuse effectively stops development, secures project labor agreements for local unions, and stops competition from establishing a foothold. It also provides bounty hunting lawyers fertile ground to extort cash from developers before allowing their projects to advance. There’s a lot in this one. Listen in as Jennifer explores humility and the fact that no matter what you know, there’s a lot that you don’t. Listen and observe as your narrow expertise isn’t going to cover at all. The role that a home played for her mother and grandmother in tough times and why that’s worth protecting.
How CEQA, if you take it in its strictest read, would like to freeze California in 1972, the time that the law was enacted. How government agency discretion plus any potential change to the environment are enough to trigger CEQA. Plus where you can find categorical or statutory exemptions from the act. The fact that only 13% of CEQA complaints come from entities which predated that complaint, meaning that 87% are filed by entities created just for the CEQA challenge. How CEQA challengers need not identify themselves or their relationship to the project. How bounty hunting lawyers employ bots to monitor the internet for new environmental impact reports in order to leach from the associated project. How affordable housing is just a complete mess. And how not understanding a politician is their problem, not yours. Insist on policies and politics that make sense. I hope you enjoy the pod.
Hello everyone. Thanks for tuning into my conversation with Ms. Jennifer Hernandez. Jennifer has practiced land use and environmental law for more than 30 years and leads Holland & Knight’s west coast land use and environmental group. Holland & Knight for context has 1400 employees, books over a billion dollars of annual revenue, has 28 offices around the globe and rates in the top 50 of global law firms. Jennifer works for private sector, public agency and nonprofit clients on a broad range of projects, including infill and master plan, mixed use housing and commercial projects, university and research facilities, transportation and infrastructure projects, and local agency plan and ordinance updates. She’s written three books and more than 50 articles on environmental and land use topics. Regularly teaches land use, environmental and climate law in law and business schools, colleges and seminars. Jennifer graduated with honors from Harvard University and Stanford Law School.
She’s the daughter and granddaughter of steelworkers and was raised in Pittsburgh, California. She and her husband live in Berkeley and Los Angeles. I first had the pleasure of hearing Jennifer speak in 2018 at an annual real estate conference hosted by the University of San Diego. She blew my mind with an unbelievable expose that revealed the flaws and faults of the California Environmental Quality Act, CEQA, in a way that was and is unforgettable. If ignorance is bliss, I’m now well and truly on the other side of that, knowing that CEQA with its lovely name really has very little to do with protecting the environment. Jennifer, I’m very excited to speak with you. Thanks for joining me on the show and welcome.
Jennifer Hernandez:
Thank you so much, Kevin. It’s a real pleasure to join you and I’m glad you seem like a converted CEQA nerd. So I’ve got a button for you, CEQA nerd, that’ll be in the mail after this.
Kevin Choquette:
Perfect. Well, with that, that’s actually a perfect segue. I think this is a strained analogy, but have you ever heard of the Gold King Mine in Colorado?
Jennifer Hernandez:
No.
Kevin Choquette:
All right. So 2014, the EPA decides that this defunct mine in Silverton, Colorado needs to be remediated so they cap it because it had been putting low level tailings into the Animas River for decades. And they send a contractor out from Missouri the following year, 2015, who’s supposed to check on the cap and see how things are going. And he brings the front loader up to the cap and starts pawing at it, and the cap just blows off and three million gallons of basically hazardous waste goes flowing into the river. But the point of that story is I feel like I’m the front load operator talking to you with 30 years of CEQA expertise. So I’m just going to try to get out of the way and let you talk. But seriously, I do hope to create a venue for your expertise to shine through. Before we get deep into CEQA which I’m sure we will, could you just tell us a bit about yourself and your practice?
Jennifer Hernandez:
Sure. I’ve been at this now a long time. I’ve entered my 38th year of law practice, which is many years. I only know one thing, but I know it well. And that’s the arena of California environmental and land use law. Really stuff that the government either regulates or requires you to get permits to do activities relating to the physical environment here in California. And that’s what I grew up with in terms of my environment. Pittsburgh, California was a factory town. It was the New Jersey of the Bay area, if I could misuse an analogy. It’s named Pittsburgh because it changed its name to woo US Steel to open its first plant out in Pittsburgh. We had Dow Chemical, Union Carbide, John Mansfield. The titans of United States manufacturers. And all the dads worked in factories and they played intramural baseball and bowled, and the kids went to school and the moms stayed home.
And so that’s where I grew up. And it was an incredibly polluted environment. We all had weird rashes, endemic “allergies”. The river that ran through the town had a perpetual sheen of rainbow iridescence on any part of the river that was still because there was so much chemical content in the river. I didn’t like it. And many of my peers had asthma or other afflictions. And who likes pollution? No one really. And so I went to law school after an extraordinary golden ticket lottery ticket winner in the United States as a full ride to Harvard University, which I got as a senior in high school. And then same arrangement to go to Stanford Law School.
I think one of the most important things though to know about me is my dad, who was a solid dude, really just a good guy, and as is my mom and brother and sister, but he would periodically peer up at me and say things. Actually one thing in particular. “Jennifer, for being so smart, you sure can be stupid sometimes.” And he was exactly right. Because no matter how smart anyone is on anything, they’re likely to not be as smart on something else. And if you lose the sense of humility and the sense of responsibility to listen and observe and respect those around you, then you’re not very smart at all. I don’t care what the issue is. So when I got out of law school and decided to practice environmental law, it was with the idea of protecting the environment. That’s what it was all about. Only after just a few months as a lawyer, my dad in his late 50s was permanently laid off from US Steel as part of a late breaking rust belt phenomenon that hit California as it had hit the rest of the country. And suddenly all kinds, thousands and thousands and thousands of good union jobs with paid vacations and medical coverage disappeared.
And my sister was still in college. My brother had become a welder. And suddenly we went from what we thought of at least as a middle class family into one that struggled. And I’ll tell you the main secret sauce of success, both for my Mexican and Sicilian grandmothers who lived more than 20 years as widows on US Steel pensions and social security, and for my parents, what saved them was home ownership. And what we lost in California over the last 30 or so years is accessible home ownership to working families. Median income, hardworking families who make too much to get low income housing, which we don’t have enough of anyway, and not nearly enough to work anywhere close to where they live. And we’ve just literally watched the state social fabric crumble around us as wealthier communities become wealthier still. Wealthy kids in those communities only know each other. And working families end up living further and further away, more and more isolated and frankly more and more disrespected. And that I cannot abide.
And so my civil rights gene has periodically switched on when as it turns out, California’s famously stringent environmental legal regime is turned against its own people. And that’s what we have here with the California Environmental Quality Act. Which turns against people who need housing, who need working transportation solutions, and who frankly need water and sewage treatment and all the normal stuff that you take for granted unless you decide that California should be put in amber and flash frozen in about 1970 when the Brady Bunch was in first run and the state had half as many people. And anything that we changed to that impeccable and elusory past is a “adverse impact”. Whether it’s adding more kids to the Cal campus in Berkeley or it’s, God forbid, renovating a school to replace old fashioned light bulbs with LED light bulbs. Those are real live examples of California Environmental Quality Act, CEQA, lawsuits aimed by actual people, sometimes economic competitors, sometimes unions, sometimes even anonymous parties who just don’t want to renovate that library, gosh darn it. And they go to court using environmental law to stop it. And that’s also a real case. And this is ridiculous.
Kevin Choquette:
Well, look, and I have enough exposure to this domain to understand what you’re saying, but to the less initiated, that’s, “Hey, I thought we were talking about the California Environmental Quality Act. Isn’t that something that is protecting the environment from profiteering and private interests that would otherwise be flogging the natural resource space?” I know how you get there, but I think the humility that you hint to probably is a huge part of this too, right? Recognizing that the narrow view of this wasn’t the right view, and it’s zooming out and seeing the broad scope implications of how CEQA is used that you can get the perspective that you have, but maybe help … What do you mean? I thought this thing protected the environment. How do you get to housing and civil rights from CEQA?
Jennifer Hernandez:
What a great question. You have to really go to law school and then cynically manipulate the law for 30 years to figure that out. I can give you a shortcut. CEQA applies when a government agency, state, local, regional makes a discretionary decision. A decision they can either say yes or no to, or frankly say, yeah, but only if and add a bunch of conditions. If they make a discretionary decision to approve a project or fund a project, then they have to first stop and look at the environmental consequences of what they’re about to do. And if there are significant adverse consequences to the environment from what they’re about to do, they’re obligated to actually try to minimize or avoid those significant environmental consequences. All sounds great. That’s what CEQA is. That’s not what it is in practice.
In practice, an environmental analysis is required for … Let’s pick a more recent example. Installing one single toilet on a park where toilet plumbing is already in existence in San Francisco. And a cost for that one single toilet that the city of San Francisco estimated at $1.7 million. And why does CEQA apply to the installation of a single toilet in a park? Well, because the agency, San Francisco, doesn’t have to approve it, so it’s discretionary. The state’s going to fund it. The state doesn’t have to fund it, so it’s discretionary. Okay. So now it is a project. There’s no too small a project. It’s a construction project that’s going to result in 150 square foot single toilet that CEQA applies to.
Kevin Choquette:
A very nice toilet for $1.7 million.
Jennifer Hernandez:
One could hope, but one need not. It would also take, by the way, three years to complete. But that’s an example of how small, if you will, the project at issue needs to be. And then it’s also the case that the term environment has gotten so elastic and has so few legal boundaries that really we still fight about it all the time as to what it even is. Is this an impact to the environment? Is the act of driving a car one mile an impact to the environment? Well, maybe. I don’t know. The car’s going to emit some air pollution. Well, what if it’s an electric car? Well, yeah, but there’s still going to be tires on the road. Well, why do we care if there’s tires on the road? Well, because microscopic particles of tires could get washed into drains, which wash into streams which poison fish.
Well, okay, does that happen and does it happen for a mile of driving? And by the way, does it really matter if what you’re doing is building an apartment building, which should allow people to drive less because otherwise they’re going to have to drive longer to further away locations? Well, that’s not how we look at it. Any change caused by any project to the existing environment. Examples, humans cause environmental impacts. Not just in the case of, for example, driving a car, but also taking a shower. You’re using water and you’re creating sewage. How about kids going to school? You’re impacting a school. How about people using libraries or parks? You’re impacting public services and facilities. How about … I don’t know. Needing to look a certain way? Well, what do you mean look a certain way? How’s that the environment? Well, that’s aesthetics. Aesthetics is a big part of the environment.
How about shade and shadow? Well, wait, how is that the environment? Well, it’s the environment. You’re creating micro climates. Micro climates by building an apartment block or apartment building next to single family homes is going to cast a different shadow profile on the backyards of the existing homes. How is that an environment? It is an environmental impact. We have this notion of the environment is everything and we’re so far off from CEQA’s original intent, which was to protect people from harmful levels of pollutants and also to protect California’s fantastic actual environment like beautiful natural spaces. Yosemite and whatnot. Everybody agreed that that was a good idea. Let’s stop pollution, let’s protect our incredible natural resources. But literally with 200 or so lawsuits filed each and every year for more than 50 years of CEQAs existence … Well more in later years, but we hit that 200 mark pretty early and it stayed pretty steady. That means that roughly 50 to 80 appellate court decisions are reached every year that further shape. What is the environment in this 1970 law. And the answer is a little bit I know it when I see it. It’s the standard of judicial review and frankly, uncertainty that surrounds the old obscenity standards. What makes a naked picture obscene verses not?
Kevin Choquette:
Right. I know it when I see it.
Jennifer Hernandez:
I know it when I see it. And that’s what we get with CEQA. Judges say, “I know it when I see it.”
Kevin Choquette:
There’s so much here. I don’t even know. This goes back to my opening comments. What is it that you as either citizen, legal advisor or business person advised … This is such an expansive project or problem. How are you navigating through it? Most people don’t really know this. A lot of developers know it, but I don’t think they know it with the clarity that you just spelled it out. Any project, any impact CEQA challenge. So where do we go?
Jennifer Hernandez:
Yeah. I don’t want to actually leave it with any project, any impact CEQA challenge because actually CEQA challenges actual lawsuits happen only in some pretty interesting circumstances. And those circumstances can be summarized as someone who has money wants to stop what you’re applying to do. And so wealthy communities that don’t want apartments sue housing projects much more frequently than communities that are less wealthy who aren’t suing at all. Even when the project at issue is not an apartment, but is something potentially more environmentally impactful. CEQA challenges happen when economic competitors write a check to an environmental group to bring a CEQA lawsuit. They happen when unions decide that getting a discretionary approval from a city council or planning commission is an opportunity to leverage the project into making a deal with a particular union and entering into a project labor agreement, which is not something that can be legally required unless there’s an actual project applicant in place.
CEQA lawsuits happen when there are deeply, deeply local anti-growth policies that simply want to stop everything and everyone. So Marin and Ventura counties are the two counties in California that have been … They’re both literally next door to some of the highest performing, highest population locations in the entire country. And they both have said no to growth. And so they’ve refused to support water sewage infrastructure. They’ve refused to allow new growth and they’ve put aside just tons and tons and tons of land into permanent open space. All of which, by the way … Marin is the famously whitest county in California. It’s also the wealthiest. So CEQA is a powerful tool by what I’ll call legacy or incumbent interests to stop change. And when it’s wielded in that fashion as it is, unfortunately too often, it really stops the housing, infrastructure, public services needed by the 20 or so million Californians who moved in after 1970. And so it does have a disparate effect on working families, including the working poor. And we have all kinds of Flint Michigans in California that don’t get much attention, but God help us if you want to construct a granny unit in a wealthy neighborhood, you’re going to be faced with a CEQA lawsuit by a neighbor.
Kevin Choquette:
And this might seem a little bit tangential, but I’m sure we can weave it together. How do you reconcile this with the initiatives to create “affordable housing” with these super complicated capital stacks that are tax credit investors and this piece of density bonus? You end up building houses that cost more than market rate developers build houses for and call them affordable so that developers can get large fees off of the total construction cost.
Jennifer Hernandez:
You mean the same apartment that can be built in any number of jurisdictions for $350,000, which is already pretty high, if it’s built in San Francisco using 100% affordable full capital stack dispersion is going to cost closer to 1.2 million per apartment.
Kevin Choquette:
That’s the one.
Jennifer Hernandez:
That’s the one. Okay. So I want you to do a little thought experiment with me. Now I want you to go into your backyard and picture your five favorite lawyers and put them in your backyard in one part of the yard. And then I want you to go into your backyard and find the five people you use and call somewhat desperately when something in your house breaks and you need help. And now I want you to assign each group the task of building something.
Kevin Choquette:
Yeah.
Jennifer Hernandez:
So lawyers, when we’re in charge of design build, whether it’s on the environment or on capital stacks or on regulatory requirements or whatever, man, we love words. We love adding. We don’t really like subtracting. There are all kinds of very compelling reasons, very compelling, I swear to you, that in one of the most temperate climates in the world, that California’s building code has all but shut down windows that open in the name of energy efficiency. Really? Is it really more energy efficient in most of California, or at least the coastal part of California, to not simply open and shut your window rather than have to spend hundreds of dollars a month on electricity. Now the most expensive electricity in the country. Why is that a good idea? Well, I’ll tell you. A bunch of lawyers and policy wonks didn’t talk to engineers or developers or even lenders and just decided because we say so.
Kevin Choquette:
But isn’t the political momentum or sentiment in the state generally much more favorable to pushing forward more affordable housing projects and somewhat … I don’t know. I’m not tuned into the CEQA log jam like you are. What I see is just a whole cottage industry that thrives on the status quo, which we can get into in a moment. But why are we finding … It appears to me there’s support for affordable housing even though it’s not affordable and it costs way more than market rate guys can do it, but yet everybody’s like, we need more affordable housing. And nobody … Well, I don’t want to say nobody. I don’t perceive the same sort of support for CEQA reform.
Jennifer Hernandez:
Yeah. The most potent political factor preventing CEQA reform in Sacramento for now some number of years has been opposition from some of the construction trade unions who do use CEQA to leverage project labor agreements. And again, those are agreements with specific locals. So if you want to hire electricians, it has to be from this local, not the local the county over. And CEQA is the leverage pivot point allowing that tool to be used. There was a very significant advance made this past summer with Buffy Wick’s AB 2011, which had two components. A 15% affordable requirement for inclusionary housing, which is to say if you have 100 units of housing, 15 of them need to be deed restricted for lower income residents. If you build that kind of housing with inclusionary and you pay a union equivalent, but not necessarily union member construction workforce … So prevailing wage, pretty modest actually. Medical and 401K contribution wage package. Then you are exempt from CEQA. Exempt.
And that is a huge break. And not only exempt from CEQA. My focus today has really been on CEQA. But there’s also just the endless political process of trying to persuade first staff and then the city planning commission member majority and then the city council majority, that what you’re doing is the right thing. And as long as the cities have the discretion to say no or no, I don’t think that’s good enough yet, bring me another rock. Then the permitting process on top of CEQA for just getting approval to build housing creates additional opportunity to layer on cost and requirements. And AB 2011 really eliminates the politics of that process and tries to require staff level approval for housing on land that is used or zoned for commercial parking or office but not residential.
So you get to find sites. This is a big law. It takes effect in July next year. Find locations that are strip malls or struggling office or retail malls or whatever, even parking lots. And without going through general plan amendments or zoning code amendments, go to the counter with your housing plan and say, “I want to build this and I don’t need to go through CEQA and I am paying prevailing wage with the other labor requirements in that statute, and you guys got to approve me.” And it’s an approval process that’s pretty darn expedited. Now, there are some qualifications. The 15% inclusionary requirement for affordable means this is most likely going to be used in higher rent markets. And so it’s going to have some limited applicability for sure. But those higher rent markets can include some of the most housing resistant markets in the state. So we’re going to see some rock and roll here come July.
Kevin Choquette:
Is this inclusionary as in 50% AMI or what is the-
Jennifer Hernandez:
I think it’s 80% AMI.
Kevin Choquette:
Wow.
Jennifer Hernandez:
Yeah, it’s low. Not very low.
Kevin Choquette:
Yeah. Interesting.
Jennifer Hernandez:
And if you strip away the cost of … One person famously calls it the eco industrial complex. The mass of lawyers like me and consultants and staff members and agencies and stuff who just churn the CEQA machine. If you strip that away, if you strip away two years of process time and if you strip away the additional costs that may be layered on as you work to get your political approvals, maybe that all pencils. Inclusionary plus prevailing wage. So maybe it pencils, maybe it doesn’t. It’s most likely to pencil in high cost jurisdictions that have been resistant to housing. And those are of course the ones that are going to sue to block it. And so we’ll have two or three years of uncertainty around getting to good legal decisions. But we’ve been succeeding with legal decisions. Courts really have I think turned the corner and recognized that CEQA’s become a monster when it’s applied to environmentally benign projects like adding housing to existing neighborhoods. You may not like it, but it’s not an environmental harm. Please. So I think we’re starting to … We’re definitely seeing the pendulum start to shift.
Kevin Choquette:
Well, and you’re talking about this eco industrial complex. I think I saw somewhere else this CEQA industrial machine. I know in San Diego there’s … I don’t even know if I want to name them, but there are a few groups who build their livelihood on making CEQA challenges. And it’s my suspicion. I can’t tell you that I’ve done the research. I know that you and your team have. That the vast majority of those don’t go to trial, but they hold up the developer and end up in almost a payola.
Jennifer Hernandez:
Absolutely. Absolutely.
Kevin Choquette:
Taking a fee and getting out of the way. And a lot of them aren’t even real groups. They’re either an affiliate of a law firm and they’re the same shareholders plus a few randoms or just a single person who has a new entity that’s preserve wild whatever, and they’re grouping up together. It’s just extortion, candidly. I don’t think they have any interest. Although if I’m sure if I had them on the podcast, they would correct me. I don’t know that they have any real environmental interest. They’re just profiteering.
Jennifer Hernandez:
Yeah. That has been confirmed and actually confirmed under oath by a couple of the players in what I call the bounty hunter space.
Kevin Choquette:
There you go.
Jennifer Hernandez:
And unfortunately, California has a pretty long tradition of misconduct by lawyers. Famously, for example, small business owners, especially immigrants who have not retrofitted the bathroom in the back of the dry cleaners that their employees use to be accessible for the disabled are a classic target of a law firm that simply finds those small businesses, sues and then grabs 20 grand or whatever they can extort and goes to the next victim. And it’s not like there’s the space or the financial capacity to spend $80,000 on a bathroom retrofit at that small business marginal level, but that’s a form of bounty hunting that is particularly well known and frankly heinous. And to their credit, it’s been challenged. And those lawyers have had some consequences. Some of those lawyers have had some consequences. CEQA is much too politically charged for state enforcers at the bar or at the attorney general to come down hard on CEQA abuse in the litigation context. In every other environmental law across the country, including NEPA, which is the grandfather of CEQA by about nine months. The national version of CEQA. You have to identify who to sue under normal environmental law. You have to identify who you are and disclose what your standing is. That is what particular harm you are going to suffer through your exposure to air pollution or other environmental consequences in order to file a lawsuit.
California uses a different model, which basically deputizes anyone in California to just on their own go “enforce CEQA”. And that means those lawsuits can be anonymous. You don’t have to disclose who’s in the group. They don’t have any particular standing requirement, although we’re chipping away at that. So you can just say, I’m here representing … I’ll use one of your favorites in San Diego. Creed 97. And who is Creed 97? Well, we don’t know. When we first did our CEQA research, we looked up who the parties are that brings CEQA lawsuits using the following highly scientific method. We would do a Google search on whoever is filing the CEQA lawsuit.
And if there was any evidence that that entity existed as an environmental advocacy group before challenging the lawsuit, we decided they were legitimate environmental advocacy groups. Whether they were or not, we didn’t care. We just said, did they pre-exist this current lawsuit tactic? And using that very rough tool, we found that only 13% of CEQA lawsuits were filed by anything like a legitimate environmental organization. I’m not talking just like the Sierra Club or something. But even a neighborhood association with a prior track record of filing CEQA lawsuits, we gave the benefit of the doubt and called a real environmental group. The rest of them … 87% were filed by, in some cases individuals, in other cases anonymous sounding environmental maybe not quite committee to save the whatever. [inaudible 00:38:21] the whatever. And in many cases we then looked at who the lawyers were. There were a lot of overlapping lawyers. And then there was plenty of press around one of the lawyers in San Diego who made an unsuccessful run for mayor. But plenty of, as it turns out, press not well publicized outside the local jurisdiction, usually about the extortion tactics of the lawyers who just routinely sued to block everything under CEQA.
Kevin Choquette:
And if you follow the money … And I’m not sure that that’s as easily audited as a Google search. But my clients on the … Candidly, the more difficult it has become for projects to get approved, the less likely developers are to take them on, which fully feeds into the whole issue of the housing shortage and what’s happening with rents and affordability and home prices. So I’m seeing less CEQA stuff because guys don’t like to get punched in the face over and over. But I do see it regularly enough where there’s just a challenge. And again, if you follow the money, it appears to me that they’re just standing there until they get paid and then they go away.
Jennifer Hernandez:
That’s certainly a frequent outcome. I do though, want to pivot briefly to how you can and we do now sidestep the worst of this for housing-
Kevin Choquette:
A ray of hope would be good.
Jennifer Hernandez:
A ray of hope. Okay. So here’s a couple truths. I can’t find a speck of California that hasn’t had some level of prior CEQA document, EIR or otherwise, already completed. CEQA is triggered by general plan amendments, by zoning code amendments, by specific plans, by community plans, by district plans. There are now layers of EIRs, environmental impact reports or negative declarations or addenda to either EIRs or negative declarations all over California. They’re just all there. And many of them thankfully now are online. Also, there’s over 30 regulatory exemptions from CEQA and another 30, 35 statutory exemptions from CEQA that are very narrowly drawn, but nevertheless have some utility. So typically what we now do, unless there’s just overwhelming reasons not to, is we find a categorical or statutory exemption to wedge the project into and that sometimes means the project is different. A planner comes up with a zoning code, they adopt an ordinance, it applies to a location.
Somebody comes and looks at the location and says, “Wow. We could really go another floor here. Or there’s no way we can do subsurface parking with these economics, but if you let us do tandem parking, then we’ll do something different.” Anyway, everybody wants to design for a particular location in a way that deviates a little bit from what’s allowed. And when you do that, you can’t use some of these exemptions. So it’s like a business judgment. How much is it worth to try to get what you think of as the maximum value for the site versus do you want to take advantage of one of these … We call them C streamlining tools. Either exemptions or very short form checklists or addenda they’re called, which are expanded checklists, saying this project is not going to have any new or worse impacts than what we previously looked at when we updated the general plan or housing element or something.
So because it has no new or worse significant impacts, we’re just going to go ahead and build it. And that form of CEQA compliance and addenda or a finding that one of the exemptions applies does not trigger the three step public review and comment process that EIRs trigger. So we are often, not always, but often able to keep the CEQA piece of this puzzle down to a semi rational eight to 12 months as opposed to two or three years and run it alongside the rest of the approval process and have some risk of there being a lawsuit, but a lot less risk than if you’re doing a full blown environmental impact report, which CEQA troll bots now look for and harvest from internet searches and then generate a whole suite of consequences in terms of extortion use of CEQA.
So that’s an example of how we’re coping with CEQA now. We’re also in CEQA cases, we’re not shy about saying, “Look, your honor, of course you and I, we both went to law school. Think of CEQA as a giant essay question. And it’s a thousand pages of an EIR. And imagine getting 99% right but one thing wrong and having to go back to the drawing board. That’s not fair, your honor. And we would ask, given the housing crisis that you not send us back to the drawing board for minor errors or omissions.” Especially since we don’t even know what the boundaries are of what this law required. Imagine if you had to take a running guess at what you owed in taxes every year. That’s trying to figure out what environmental impacts are under CEQA. It’s like, I don’t know. What do you think? And each consultant and lawyer has their own little views and whatnot. So that’s a overly long answer to the question is can you navigate through it? Yeah. Absolutely. And can you win lawsuits? Yeah. Absolutely.
Kevin Choquette:
Well, and look, as this space gets more complex, to the victor goes the spoils, right? It can be very lucrative to take a piece of greenfield. In a lot of cases we’re not even talking about greenfields. And push it through a process and get to an approval. But a tangential question to what you’re saying. And I appreciate that there’s a way to get the puck in the goal. It’s good and obviously people like you and your expertise are part of the team you put together to actually navigate these complexities. But higher level, should developers really even take on greenfield development in California at this point? Do they get paid adequately for the risk would be another way of asking that?
Jennifer Hernandez:
Yeah. I think unfortunately the answer was a more comfortable yes before the latest interest rate adjustments. And also with supply chain and labor cost issues and availability, labor availability issue, it’s gotten more rather than less complicated. I do think that one good use of recessions has been in at least past cycles to go ahead and get your approvals straightened out so when the markets returned-
Kevin Choquette:
Come back.
Jennifer Hernandez:
You’re able to be in the ground rather than start the gauntlet of playing with lawyers and consultants again. But when it’s possible to actually break ground, we’re seeing, for example, we have lots more entitled housing in San Francisco with none of them breaking ground because it’s just too expensive for market rate, fully Christmas treed up projects approved over the last couple … Three years.
Kevin Choquette:
That’s class A multifamily or for sale housing?
Jennifer Hernandez:
Class A multifamily. There’s very little for sale in that space. There are some really, really luxury condos, but those are also not financially penciling very comfortably in central business districts anymore. The whole remote work evolution has created a premium value for single family or suburban scale housing where there’s a little extra space and the pricing for that housing in and outside California has skyrocketed as Californians who had been paying either high urban rents or had very expensive, but small urban homes fled to lower cost areas where they had more room. One thing about the real estate market generally in 38 years is it’s always evolving. It’s for that matter I think really fun. It’s challenging. But it’s also periodically just brutal. And I haven’t seen the brutality yet, but I don’t think it’s too far away, especially in B and C class office and retail.
Kevin Choquette:
Yeah. Well, shifting away a bit to the more personal side, in this 38 years, what’s the one thing you might be most proud of having accomplished within your law practice?
Jennifer Hernandez:
We have just a fantastic team. There’s 25 of us, including a lot of younger people. For us, I think it really is pretty mission driven. We’re proud and protective of the California environment, but we don’t see that as being irreconcilable with having places for people to live, having effective systems of transportation or water and certainly jobs. Personally, I think my focus has remained for a very long time now on families that are often ignored by policy makers who, as my dad would say, for being so smart they could sure be stupid sometimes. And I used the example of restrictions on windows that open in the name of climate change in temperate climates as just being, are you guys kidding? Do you really think that families have an extra two, three, four, $500 a month to spend on electricity and changing filters and everything else rather than simply opening or closing the window?
I do think it’s been really, really, really challenging. California is, as you know, a very blue state. People think of themselves as progressive, pro civil rights, which in this environment now means mostly pro-environmental justice, which is just a subset of civil rights. It doesn’t take into account housing or transportation or jobs or education or prison reform or any number of other things. But folks really righteously think that all we need is housing for homeless individuals and low income housing and everybody else is fine. And the answer is nobody else is fine unless you’re uber wealthy. My two grandmothers and my family confronted with very much inevitable job losses, illnesses, injuries, they owned a home. Every month they paid money toward their home when they needed it. They had the value in that home. And even without California’s crazy escalation of real estate prices, which by the way didn’t really happen in Pittsburgh for obvious reasons. Pittsburgh, California. They saved money. And our system has now in California completely kicked to the curb the idea of attainable home ownership. And I think that’s quite shameful. And to do it in the name of the environment is absolutely inexcusable.
Kevin Choquette:
Yeah. And look, the difference too … Just getting into a house with a 30 year fixed mortgage. In one of the papers that I’ve flipped through over the weekend, there was something referencing 70 times greater household wealth or family wealth for families that own homes versus those that are renters. Just getting into … Pick a year and get your 30 year mortgage and don’t touch it. And your rent has been the same for however many years back you entered into that mortgage agreement. While everybody else has dealt with … You tell me. Three to 13% rent escalations depending on what the macro economic climate’s doing. It is unfortunate and it feels like one of the big wedges between class divide candidly.
Jennifer Hernandez:
Well, and it’s a wedge and frankly I think civil rights violation perpetrated by progressive liberal Democrats in the name of the environment against everybody else. And that’s not okay in my judgment. So that’s my mission here in the twilight, not quite, but at least nearing sunset part of my career. And it’s inconceivable to me that in blue California I’m having to fight the governor and a good bit of the legislature and a ton of environmental agencies who just make it impossible for working families to thrive here.
Kevin Choquette:
Well, what’s hard for me is your message is not that of, if you will, money-grubbing Republican, right? You’re like, “Hey guys, housing, human rights, we need shelter.” That doesn’t seem like it should be at odds with a left-leaning.
Jennifer Hernandez:
Depends. You don’t live … As a Democrat in Berkeley, I’m on the far right of the spectrum.
Kevin Choquette:
For sure. For sure.
Jennifer Hernandez:
I have to deal with people who don’t believe in private property and want to just topple the capitalist system and are fine about tossing democracy over for a wise autocracy that of course they assume they will benefit from. And I’m like, “Dudes, in what autocracy can you name would it have been possible for your parents to buy a home? Tell me. Give me that example.” Because all these intellectual idealists, they think that they’re going to remake the world into some … I don’t know. Lettuce eating nirvana. And instead, when you topple what does work and has worked now for a couple hundred years, more or less with lots of warts and lots of room for improvement, when you topple that you’re much more likely to end up with just a bully who is, shall we say, not focused on equity or inclusion. But shut up boomer. Right?
Kevin Choquette:
I doubt it. In looking at your resume, I see a whole bunch of public service and give back. A bunch of professional organizations, nonprofits, academic institutions. Two part question. Why do you do it and how do you balance that against all of your professional demands?
Jennifer Hernandez:
Well, like I say, I got this golden ticket as a 17 year old sitting in Pittsburgh with a full ride scholarship to Harvard that came with plane trips and winter clothes. I’m still giving back because boy did that pay forward. And I’d like to also continue I hope to make this message clear that just because someone starts life in a tough circumstance … Whether it’s pollution or job loss or whatever, much worse, there is hope. But then on the other side, I am really quite furious with those who insist on a their way or the highway route to ending capitalism and scorning home ownership. I’m like, first you and your parents and grandparents give up your homes and your trust funds, and then you tell me why a union member shouldn’t be able to buy a house near where they live. I do not respect that perspective. And I know it makes people uncomfortable if that’s what they deeply believe, but that is just maybe a generational change. Or maybe it’s because I’m Mexican and Sicilian. I’m okay with conflict.
Kevin Choquette:
I don’t think it’s generational. I think if you pulled yourself out of the Berkeley surroundings … Just anecdotally, I remember listening to public radio out of Berkeley and there was a caller on saying that he thought the US government should go set up outposts for refugees, if you will, in a myriad of Central American countries so that they don’t have to make the harsh journey to the border to deal with finding amnesty. And it’s like, dude, what do you think the role of the US government is? We should just go build infrastructure in foreign countries and staff it with American workers, with US tax dollars so somebody can ring the doorbell and say, “Hey, I’d like to come to your country.” What? I don’t know. Anyway. You’re in a unique ecosystem there. It’s the left of the left of the left.
Jennifer Hernandez:
If I think it’s normal, then I don’t have to spend money on shrinks right?
Kevin Choquette:
Right. I know you’ve got to go, but how do you balance all of that public service against your day to day like the fact that you’ve got to get going into your next call?
Jennifer Hernandez:
I work too hard and too many hours. My husband is patient. My son survived being raised and is now having an adult life of his own. But really I am passionate about this stuff and I would really like to help.
Kevin Choquette:
All right. Well let me give you one more shot here. Any message to either, who I imagine is mostly your client, the real estate entrepreneur in the world, although you obviously have the public agencies or the broader California citizen? Where do we go from here?
Jennifer Hernandez:
I think for the broader California citizens, I would say what I say to everybody, which is if somebody who claims that they’re an expert or a politician or whatever is trying to tell you something and you don’t understand it, it’s their problem, not yours. If you don’t understand it, there’s a pretty good likelihood that what they’re saying is either nonsense or actually harmful, and you should insist on understandability as well as accountability. And both are pretty woefully short in supply. To developer clients, real estate clients it is a land of new opportunity. Especially in the housing and mixed use space to take advantage of newly created tools that most cities and counties and for that matter, consultants and real estate professionals aren’t aware of. And so if you’re looking at an opportunity, especially on a retail or office or parking lot site, even if it’s not zoned for housing, there are different pathways for succeeding more quickly than have ever been in existence before now. So you can contact one of our 25 folks or others who are in this business, but don’t give up hope. And if I were you and if I had room to make bets in the real estate market today, it would be on reasonably priced commercial property in jurisdictions with relatively high barriers to new housing in the normal way, but also a very strong market demand for housing. So that’s my parting advice.
Kevin Choquette:
That’s great. And do you want to leave any website or contact info or just tell people Google?
Jennifer Hernandez:
Oh sure. So Jennifer Hernandez. Holland & Knight. And all my information is ready on the website for you.
Kevin Choquette:
Great. Jennifer, thank you so much for taking the time. I very much appreciate it. And to the listeners, if you like it, my production people tell me I always need to remind you to go ahead and rate the podcast. But Jennifer, thanks for your time.
Jennifer Hernandez:
Hey, I really appreciate it, Kevin. Good luck.
Kevin Choquette:
Thanks.
Jennifer Hernandez:
Bye-bye.
