Proposition 23 may be the most controversial of the many voter initiatives on this year's ballot. If passed, the proposition will delay the implementation of AB32 — California's broad mandate to reduce greenhouse gas (GHG) emissions — until unemployment levels are reduced. Proponents of the measure assert that it is necessary to avoid the devastating financial consequences of complying with AB32 during the current economic downturn. Those opposed to Prop 23 argue that its passage would undermine California's clean energy and pollution reduction efforts, and destroy the clean technology industry that is creating new jobs for Californians.

While Prop 23 may be hogging the headlines, the real estate community should be keeping its eyes on a different climate change ball that is getting ready to drop. Even if Prop 23 were to pass, California cities and counties would continue to be required to reduce greenhouse gases through land use and transportation planning. Prop 23 would leave intact Senate Bill 375, legislation adopted in 2008 and sometimes referred to as the "anti-sprawl bill." Regardless of how voters decide on Prop 23, property owners and real estate professionals across the state can expect new development opportunities and challenges to result from California's efforts to combat climate change.

THE BASICS OF SB 375

SB 375 mandates that the California Air Resource Board adopt targets to reduce GHG emissions from cars and trucks to certain levels by 2020 and 2035. After adoption of the targets, each of California's 18 metropolitan planning organizations (MPO) must develop a "sustainable communities strategy," to be approved by CARB. Each strategy must identify development areas capable of meeting the region's projected housing needs, identify a transportation network capable of serving the region, and forecast regional development patterns which, when integrated with the transportation network, will reduce vehicle miles traveled to achieve the 2020 and 2035 GHG reduction targets. Jurisdictions that have their sustainable communities strategy approved get priority for new transportation funding. If an MPO cannot develop a sustainable communities strategy that will meet the targets, SB 375 allows for adoption of an "alternative planning strategy," which must include measures to achieve GHG reduction targets but does not require consistency with the regional transportation plan. SB 375 also provides that mix-use and transit priority projects consistent with a CARB-approved strategy may undergo a streamlined environmental assessment. In addition, certain transit priority projects may be exempt from environmental review.

CURRENT ACTIVITY ON GHG TARGETS

While Prop 23 remains an open question, the regional planning efforts required by SB 375 are continuing in full swing. CARB recently adopted the GHG reduction targets for the vast majority of the MPOs, including the Southern California Association of Governments — the MPO which includes the city and county of Los Angeles. The next step includes development of the sustainable communities strategy, including identification of development areas that can be supported by the region's evolving transportation network. Southern California cities are expected to designate as growth areas both new transit-oriented districts and existing regional centers well-served by public transportation, like downtown Los Angeles. Further, with new rail lines and extensions being planned and delivered each year, the areas for sustainable, transit-supported development will expand.

FUTURE OPPORTUNITIES FOR DEVELOPERS

California real estate developers and property owners need to plug in to the creation of these sustainable communities strategies and seize the opportunities they present. The public debate over identifying new transit-oriented districts and other growth areas can provide valuable insight into the neighborhoods and communities that developers will be targeting in the future. Moreover, the private sector needs to ensure that the development areas and incentives identified by the government agencies make sense in the real-world marketplace.

At the risk of stating the obvious, the identification of growth areas will make some areas easier to develop, and therefore, more valuable. This value includes not only the ability to build higher density projects, but also to complete those projects faster by streamlining the environmental review process. Delays in the entitlement and review process have historically been one of the key barriers to development in Los Angeles. Reducing that obstacle will allow cities like Los Angeles to compete for quality development against other major California cities, or places like Chicago or New York.

While Prop 23 may be generating the heat, SB 375 will create the light that guides future development in California. As real estate developers and property owners plan for the next development cycle, they should keep their eyes open for the insights and value that will result from the creation of California's sustainable communities strategy.  

Published in the Los Angeles Daily Journal