Kathy Hochul Pitches SEQRA Reform to Speed Up Housing

When the City Council approved the City of Yes for Housing Opportunity, opponents sued to annul the sweeping zoning changes.

A year later, when voters approved a package of ballot measures intended to speed up housing development approvals, some of those same opponents filed another lawsuit.

The complaints hinged on a similar argument: The policies weren’t legitimate without further environmental review.

Though these complaints were both dismissed, they continued a pattern of using New York’s State Environmental Quality Review Act, or SEQRA, as a cudgel in legal fights over new development.

A proposal to reform SEQRA could rebuff such legal challenges.

As part of her executive budget, Gov. Kathy Hochul proposed exempting housing projects in New York City from the lengthy environmental review process. Lawsuits could still be filed, of course, but opponents would potentially have a harder time making their case if exemptions are codified in state law.

David Rosenberg, an attorney with Rosenberg & Estis, noted that even though the city frequently emerges victorious in these fights, the cases still do damage.

“The city doesn’t lose these things easily, but the time can kill projects,” he said.

As a project is halted by litigation, interest rates can rise, financing can dry up and the market for ground-up development can otherwise turn hostile. Planned towers in Two Bridges, for example, were delayed by various lawsuits for years, including some that challenged the legitimacy of the projects’ environmental review. After the developers and the city won these legal fights, some of the projects have moved forward, while others have struggled to do so.

New York enacted SEQRA in 1975 to ensure a project’s environmental impact was weighed alongside its potential economic and social effects, per the law. Such reviews consider things like greenhouse gas emissions, potential shadows cast by a project, the strain on local infrastructure, air quality, traffic and noise pollution. New York City uses its City Environmental Quality Review, or CEQR, to implement the state law, adding its own specific requirements.

If a project isn’t classified as “type II,” a category automatically exempted from review, an environmental assessment must be completed to determine if a project’s environmental impact would be significant. Those that are deemed significant must then complete an environmental impact statement, which includes potential ways of mitigating the project’s expected damage.

Rosenberg said that while SEQRA sets a high procedural bar, it often doesn’t change the substance of a project.

“It requires you to study, take a hard look, and now we can do what we wanted to do anyway,” he said. “It doesn’t impose a lot of substantive requirements on agencies anyway.”

What could change

Hochul’s pitch would spare housing projects from environmental review in the city if they have 500 or fewer units, if located in a medium- or high-density district, or 250 or fewer units in a low-density district.

Those exemptions doesn’t apply, however, to projects located in coastal flood zones or areas zoned for industrial use. A project that has more than 50,000 square feet of nonresidential space would also need to still undergo review.

Most of the housing permit applications filed within the past five years — more than 6,400 of the 8,380 filed between January 1, 2021 and Feb. 18, 2026 — called for projects with 500 or fewer units. Within that subset, a majority of the projects included 200 or fewer proposed units.

That, of course, doesn’t account for how many projects would be ineligible under the governor’s proposal due to their location or the amount of nonresidential space included in the project.

“I don’t think that a tremendous amount of projects will suddenly not be subject to SEQRA,” said Laura Smith, an attorney with Nixon Peabody.

The proposal’s reach could also depend on how the city interprets “areas zoned exclusively for industrial use,” given that many of these districts are home to a range of non-manufacturing uses, she said. The city also recently floated rezoning industrial zones close to residential districts and transit, which could further affect how widely the governor’s proposal applies.

Outside of New York City, the governor’s proposal would exempt projects with 100 or fewer units proposed on previously disturbed land that will be hooked up to existing sewer systems “at the commencement of habitation.” For a mixed-use project, the non-residential portion cannot exceed 50,000 square feet or 20 percent of the gross floor area, whichever is less.

Because local review policies must be at least as stringent as the state’s, the city has been limited in the kinds of changes it can make on its own. The Adams administration exempted some small housing projects from review, but eligibility was limited to those with fewer than 250 units (or 175 if in a low-density district), that use all-electric heating and do not have other site-specific issues related to air quality, coastal flooding or other factors.

If the governor’s proposal is ultimately included in the state budget, the city would need to adopt rules to implement the changes. The Mamdani administration supports the reforms and has further committed to reducing the pre-certification process to six months if the state follows through on these changes.

A 2022 report by the Citizens Budget Commission found that environmental review and pre-certification typically take two years, most of which is taken up by the former. The report also estimated that environmental review in New York City increases costs on 500-unit projects by 11 percent, or $82,000 per unit.

The executive budget also requires that environmental impact statements be completed within two years. Land use attorneys who spoke to The Real Deal said this cap should be reduced for New York City because review times typically fall within that range unless something goes terribly wrong. (The CBC report detailed projects that took upwards of four years to complete review.)

The potential impact

Pro-housing groups view SEQRA reform as a way to remove a powerful NIMBY-weapon and reduce housing timelines and costs. The governor’s proposal wouldn’t intervene in zoning changes or other discretionary approvals needed for a project to move forward, though the city recently made a number of changes aimed at reducing those timelines as well.

Annemarie Gray, executive director of Open New York, pointed to the lawsuit challenging City of Yes, which included allegations that environmental review hadn’t properly considered how added making it easier to install rooftop solar panels and equipment would affect a building’s height.

“If our environmental laws are being abused to stop solar panels, something’s gone very wrong and we need to update those laws,” she said in a statement.

The governor’s proposal has, however, faced pushback.

During a budget hearing in January, Assembly member Deborah Glick, who chairs her chamber’s Committee on Environmental Conservation, questioned the rationale for the bill and blamed the state’s housing crisis on “real estate speculation.”

In testimony submitted to state lawmakers in January, Adrienne Esposito, executive director of Citizens Campaign for the Environment, argued that SEQRA isn’t responsible for the dearth of affordable housing in New York. She said the measure doesn’t mention affordable housing specifically and is too expansive.

“Essentially, instead of using a scalpel to help build affordable housing, we would be using a machete to create an open season for developers,“ she said in prepared testimony.

The governor’s proposal follows earlier attempts to overhaul SEQRA. In 2021, Sen. Rachel May proposed the Sustainable Affordable Housing and Sprawl Prevention Act, which would exempt affordable housing projects (as defined by the state’s housing regulator) with fewer than 1,000 units from SEQRA. The latest version of the bill, sponsored by May and Assembly member Anna Kelles, has advanced to a third reading in the Senate and is in committee in the Assembly.

The Environmental Advocates NY argued that the state needs to further clarify what is meant by “previously disturbed land” and ensure that farmland is still subject to SEQRA.

Meanwhile, some land use attorneys believe reform should go further.

Wesley O’Brien, a partner at Fried Frank, questioned requiring review of projects in flood zones and industrial areas when the city already has “highly prescriptive” flood resiliency standards and health and safety regulations to address such concerns. He also said changes could be made to the substance of SEQRA review, to refine or eliminate things like traffic studies or analysis of projected childcare costs.

“It’s a great step forward in eliminating useless red tape,” he said. “But to realize the benefits of what the governor is proposing, and what the governor hopes to accomplish, more needs to be done.”