Senate Standing Committee on Judiciary

Madam Secretary, please call the roll for purpose of establishing a quorum.

[Roll call] You have a quorum.

All righty. And I see we have Senator Glazer present. So, Senator Glazer, you may begin SB 393.

Thank you. Thank you, Chair Umberg. I have about a two-minute statement.

Oh, I didn't. You know what, Senator Glazer? I'm brand new at this job, so I forgot to mention the rules.

The rules are as follows, that we're going to conduct this hearing just like we've conducted all the other hearings in the course of the last several years, which means that there'll be two primary witnesses in support and two primary witnesses opposed. Each primary witness will have two minutes to speak.

After the primary witnesses in support speak, then we will take the so called me toos, those who wish to provide their name, their affiliation, and their position, and then we'll turn to opposition. Opposition will have exactly the same time frame. They will have two minutes each, two witnesses.

And then those who wish to testify in opposition, providing me too testimony, may proceed to the microphone and give us their name, their affiliation, and their position. If you wish to provide additional information, we can read, so you can go to our website, and you'll find information as to how you might submit additional information for our consideration.

Now, Senator Glazer, SB 393, we're hearing pursuant to Senate rule 29.10, Sub D. Go ahead.

Just for record, I just want to say. Wahab and Stern here, too.

Will happen. Stern here, too. Got it. Okay.

Chair Umberg, thank you. And Members, thank you for giving me this opportunity. This bill actually originated out of a problem in my district, and I'll explain that in a moment, but let me set the foundation for it.

This bill helps affordable housing developers facing a CEQA lawsuit brought in bad faith, recoup some of the costs of that litigation. Under existing law, a defendant in this case, the builder in a CEQA lawsuit that is against an affordable housing project may motion the court to require the plaintiff, the entity bringing the CEQA lawsuit forward, to post a bond of up to $500,000 if the builder satisfies the following.

The housing project is affordable. The court agrees the CEQA lawsuit was brought in bad faith, and the builder proves the entity bringing the lawsuit forward would not face undue economic harm.

This last requirement has been nearly impossible for any affordable housing developer to meet because it's difficult to find any admissible information about the entity's finances.

This difficulty is in part because those bringing a CEQA action may file anonymously or set up an organization to hide the individual member's identity. In my district, a 130-unit affordable housing project has been significantly delayed by litigation.

After the court agreed that the lawsuit was brought in bad faith and the environmental concerns were unsubstantiated, the court granted a bond only after the plaintiff accidentally admitted information about their finances showing they would not be unduly harmed by posting a bond. So, they met the requirement, but in an unusual, unexpected way.

One report found that this case was the only known one where the court granted the builder a bond. Due to the difficulty to prove anything about the plaintiff's true identity and finances.

This bill balances the scale, I believe, by allowing the entity bringing the CEQA lawsuit forward to submit evidence to the court that it would be unduly economically burdened if it were required to post a bond.

This bill then directs the court to consider that evidence when making this decision on whether to grant the bond and the final amount. Finally, this bill requires the court to find a lawsuit that has as meritless. The bill will make affordable housing developers whole when they're unfairly targeted, as we explained in this case for illegitimate economic concerns.

With me to testify and support is Linda Mandelina, who is the President and CEO of Eden Housing, and Marina Espinoza, the Policy Director of California Housing Consortium.

We also have an expert in the audience, Andrew Sabib with Cox, Castle, and Nicholson, who can specialize, who specializes in land use, can answer technical questions, and with that, I respectfully ask for your aye vote.

Thank you, Senator Glazer. Go ahead, the floor is yours.

Thank you. My name is Linda Mandolini. I am the President and CEO of Eden Housing. Eden is one of California's oldest nonprofit developers and we've developed more than 11,000 units statewide. We work very closely with elected officials to win approval for our projects, ensure they comply with local zoning, and fit into the character of their communities.

Nonetheless, we've seen an increase in the number of lawsuits against our projects from anonymous groups whose members are not required to disclose their identities and whose lawsuits are intended to delay or derail projects that are identified in local housing elements and supported by local elected officials.

In the case of Livermore, as Senator Glazer noted, we were faced with a daunting CEQA suit by a well-heeled opponent who kept their identities anonymous. We were lucky enough to secure the 529.2 bonds because they made a mistake in their own disclosures. But no other nonprofit that we are aware of has been able to do this.

And in the 40 years of the 529.2 bond, we're the only one who has ever gotten one. We're simply asking that you shift the burden of proof to the plaintiffs who are suing us and give us one more small tool in our effort to build affordable housing.

If this plaintiff hadn't sued us on this spurious lawsuit, we would have 130 families living in this community today. Instead, we continue to be held up by well-heeled litigation. And so, we're just asking you to consider giving all of us who are fighting the good fight one more tool. Thank you.

Thank you. Next witness, please.

Good afternoon, chair and senators. I'm Marina Espinoza with the California Housing Consortium. CHC advocates for the production and preservation of low-income housing, and we're in strong support of SB 393. Expanding affordable housing opportunities for low-income families in high-resource areas like downtown Livermore is a critical strategy for affirmatively furthering fair housing.

While experiences like those described by Eden Housing are not expansive, they are not unique, and more importantly, they have a chilling effect on the state's ability to address its housing shortage. Affordable housing developers cannot afford years of costly legal battles and will continue to shy away from providing the housing we need in high resource areas.

SB 393 makes a modest change that would provide some protection to housing developers facing civil actions, including CEQA lawsuits that challenge affordable housing projects in bad faith.

By shifting the burden to prove the plaintiff's financial hardship from the defendant onto the plaintiff, we hope this change in law will deter frivolous lawsuits whose sole goal is to stop affordable housing. For these reasons, I urge your support on this bill today.

Thank you very much. All right, others who wish to express their support, please approach the microphone. Give us your name, your affiliation, your position.

Holly Fraumeni De Jesus with Lighthouse Public Affairs on behalf of Spur, Habitat for Humanity California, and the California Building Industry Association in support.

Thank you. Anyone else?

Chair and Members of the Committee, Jordan Panana Carabajal on behalf of California YIMBY in strong support. Thank you so much.

Seeing no one else approached the microphone, let's now turn to the opposition. If you're opposed to SB 393. Please come forward. Seeing no one coming forward, let's come back to the Committee for questions and comments. Senator Caballero.

Let me just say that I really appreciate this bill. The bigger issue is we got to have CEQA reform. We just, we got to reform it. Every single affordable housing project in my region was, had either a threat of litigation or litigation over CEQA.

We wouldn't have built any affordable housing if we had, you know, listened to them. And so, this is a real problem, and I think this is a really measured solution to trying to get around the issue of put up money or shut up.

If you're going to run frivolous lawsuits and there's no basis upon which a court can find in your favor, you should have to put up money. So, I'll make the motion when it's appropriate.

All righty. Thank you. Senator Wahab.

Thank you. I just want to echo some of the comments that my colleague has made. I also appreciate you bringing Eden Housing largely in my backyard. And I agree that even the threat of a lawsuit, it stalls production and much more unnecessarily. And we need to develop more housing. Thank you.

Thank you. All right, other comments, questions. Senator Niello?

Thank you, Mister Chair. As a co-author of the bill, what they said.

All right, other. Senator? Senator Durazo, did you want to comment?

Well, I appreciate that you're zeroing in on a specific way in which we can change this to be able to give affordable housing developers, as she said, the witness said, a real opportunity. So sometimes we come at CEGA all the problems with, you know, trying to say the whole thing is no good.

Parts of it are, but you're solving a particular issue that. So, I appreciate that.

All righty. Thank you. Other questions or comments? Seeing none. All right, Senator Caballero has moved the bill. Thank you. Senator Glazer, you've been working in this space for quite a number of years, and I'm grateful for your persistence, your dedication, and your concern with respect to the development of affordable housing.

As was illustrated by the witnesses, this simply shifts the burden to the plaintiff. So, the plaintiff then has the both the burden and the opportunity to demonstrate their financial wherewithal in terms of posting a bond. Would you like to close?

Just to say thank you, and this could be my final hearing on certainly involving CEQA. I have worked hard in this space. It's been very difficult. I've had many bills that have been defeated that tried to do things in a bigger way. So, I've kind of now narrowed things where I think I can chip away at it.

We have a real-life case that I think made the case so well. They lost, I think, a $65 million, $68 million tax credit because of this delay. Can you imagine? You had all your financing. You know how difficult it is to get nonprofit housing, to get.

To come together, to get all that money, and then, bang, because the court losing $68 million and then nothing gets billed. So, appreciate the consideration of this bill. And I agree, of course, with Senator Caballero, that there's much more to do in this space as well as Senator Wahab.

This is narrowly tailored that hopefully gets the support of you and the Senate and the Governor.

All righty. Thank you very much. All right. There's been a motion by Senator Caballero. Madam Secretary, please call the roll.

This is file item one, SB 393. The motion is that the Assembly amendments be concurred in. [Roll call] 11 to zero,

11-0 that bill is out. Thank you, Senator Glazer.

Thank you very much.

And we are adjourned.