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May Revision housing proposals would add CEQA and VMT options, create statewide mitigation banking and revert unspent housing funds
Summary
The May Revision would give housing applicants new CEQA and permitting options, create a statewide VMT mitigation banking fund to finance affordable housing near transit, and revert $31.7 million in unspent housing monies, the administration told a Senate Budget subcommittee.
The Subcommittee reviewed multiple May Revision items the administration says are aimed at accelerating housing production and aligning climate and land-use policy. Key proposals include trailer bill language to amend CEQA paths and permit streamlining, creation of a statewide VMT mitigation banking program tied to affordable housing near transit, and a budgetary reversion of $31.7 million in unexpended housing funding from prior budget acts.
Deputy Secretary Sasha Kurgan of the Business, Consumer Services and Housing Agency described three principal changes in the climate-aligned housing trailer bill: 1) remove the Permit Streamlining Act exemption for the Coastal Commission so coastal projects use the same streamlined permitting rules as other areas; 2) expand judicial CEQA streamlining so larger housing projects (over $100 million) may use the expedited litigation pathway already available to smaller projects; and 3) create a statewide VMT mitigation banking system — a developer could pay a set fee to the HCD-administered fund to meet VMT mitigation requirements and those funds would be used to finance affordable housing and related infrastructure near transit.
HCD Director Gustavo Velasquez said the VMT mitigation bank would link mitigation fees to the Transit-Oriented Development (TOD) program and prioritize investments that reduce vehicle miles traveled while producing housing near transit. Natalie Cuffel (Governor’s Office of Land Use and Climate Innovation) and other administration officials said the proposal would not replace CEQA's legal requirements but would provide options intended to reduce delay and create one pathway for mitigation revenue to support affordable housing.
The administration also proposed reverting $31,700,000 in unexpended affordable housing funding from prior budget acts (infill infrastructure grants, catalytic programs and others) because some funds are undersubscribed or not projected to be liquidated by the current deadline. HCD staff said those funds are not currently committed to projects and therefore the department recommended reversion as a budget solution given the state’s fiscal condition.
LAO recommendation and members' concerns: The Legislative Analyst’s Office recommended the Legislature defer policy-oriented May Revision trailer bill items until the policy process, noting the fiscal focus of the May Revision and the need for time to assess tradeoffs. LAO also said reverting the $31.7 million is reasonable given the money is unawarded and would provide near-term budget savings. Subcommittee members pressed administration witnesses on whether the trailer bill delegations (particularly a VMT banking approach and fee-setting authority) were appropriate for trailer-bill language or should be handled in the policy committees.
Implementation and timeline: Administration witnesses said design work and stakeholder taskforce work on VMT mitigation banking and permitstreamlining changes has been underway and that any guidelines would be developed with academic and agency support. They emphasized the VMT mitigation fund would be prioritized to the same region as the project that pays the fee to preserve nexus between impacts and mitigation.
Ending: The subcommittee left the housing item open for further consideration and asked staff for additional information on the proposed VMT mitigation guidelines, the legal guardrails for the CEQA changes, and the details of the $31.7 million in reverted funds.
