With Sacramento bogged down in the annual battle over the state budget, it appears that the Schwarzenegger administration may not push forward a housing agenda before the legislative session concludes on August 31.

But whether or not the administration gets behind legislation this year, it is apparent that administration officials led by Business Transportation and Housing (BTH) Secretary Sunne Wright McPeak are devising broad housing policies.

During the week of July 19, McPeak conducted two days of intensive discussions with representatives of numerous interest groups, including development, local government, low-income housing, agricultural and environmental organizations. Outside planning and policy experts also participated.

It appears that the administration is headed toward a policy to require cities to designate a supply of land for 20 years worth of housing growth. The details, however, remain fuzzy. One of the major questions is whether the 20-year supply would be part of a local agency’s housing element or the land use element. The state reviews and certifies housing elements, which are also frequently the subject of lawsuits by affordable housing advocates. Where exactly counties would fit into the 20-year land supply mandate also is unclear.

Environmentalists and agricultural interests are concerned about the 20-year land supply requirement. They appear willing to accept the notion only if it is accompanied by a requirement for an urban growth boundary and possibly increased review of environmental impacts — conditions opposed by builders and some local government representatives.

The administration also is reported to be weighing changes to the regional housing needs assessment process. Affordable housing advocates, though, want to ensure that any changes do not favor market-rate housing at the expense of low-income units.

Also under discussion are amendments to the California Environmental Quality Act (CEQA) and to general plan law with the goal of providing more certainty to project proponents. The idea is to “front load” the planning process with the intent of minimizing project-by-project battles. Environmentalists, though, are very wary of tinkering with CEQA and can usually round up enough opposition to kill substantial CEQA bills.

For months, at least some of the discussion has centered around SB 558 (Ducheny), which McPeak said the administration intends to use as a vehicle for housing policy. As originally introduced last year, SB 558 would have required cities and counties to designate a 20-year supply of land. The California Building Industry Association and the Home Ownership Advancement Foundation (a collection of large homebuilding companies) co-sponsored the legislation. The Senate passed the bill in January, but the 20-year land supply requirements remained poorly defined.

The bill then morphed into what appeared to be a dream bill for developers. It would have required cities and counties to adopt community plans for all sites designated for housing development. Local governments would prepare master environmental impact reports for these community plans. Once that advance planning work was done, builders — in theory — would have an easy time because individual projects that were consistent with a community plan would not undergo full CEQA review.

An analysis for the Assembly Local Government Committee strongly questioned this approach. “Unlike previous legislation concerning CEQA exemptions for development, this bill is not a focused policy initiative,” the bill analysis stated. “It would apply to all residential development, from a small infill development to subdivisions of hundreds or thousands of homes on the suburban fringe. It makes no pretense of encouraging either smart growth or affordable housing.”

The Assembly Local Government Committee rejected the community plan approach, and passed the measure only after all of the offending provisions were removed. As of late July, SB 558 was a “spot bill” awaiting amendments.

Capitol insiders expressed doubt that the administration would try to advance SB 558 or any other piece of legislation with substantial housing policies, in part because time is so short before lawmakers adjourn and in part because of uncertainty over the state-local fiscal relationship. “This stuff has been changing weekly,” said one legislative staff member. “It may never get anywhere.”

Still, representatives for the League of California Cities and for the California Building Industry Association continue to negotiate over a housing bill. Those rather unusual talks are driven partly by the League’s desire to get the builders’ substantial political muscle on the cities’ side during the ongoing fight regarding state-local government finance. With their police powers, cities could, in turn, make life easier for the builders. A working group of League and CBIA representatives has met twice in Oakland – and once was joined by McPeak.

“We’re talking at kind of a broad, conceptual level,” said Richard Lyon a CBIA lobbyist. “What we would like to do is provide a better planning process so that land on a long-term basis could be identified and entitlements accompanying the land could be provided.”

League lobbyist Daniel Carrigg said that a front-loaded process that is heavy on community involvement could actually help city councils because they would not have to reopen old fights every time a project is proposed. But the difficult part is balancing developers’ desire for certainty with local control and public input. And any new approach must have some flexibility simply to account for changes in market conditions, Carrigg added.

Lyon said that the builders and the League have not made any great breakthrough and have drafted no specific measures that could be placed into SB 558 or another piece of legislature. “Whether we’re able to get anything done this year remains to be seen,” he said.

Some believe that McPeak and other members of the administration may be laying plans for a full-scale policy initiative next year. The Department of Housing and Community Development has commissioned a study headed by University of California, Berkeley, Professor John Landis on infill sites throughout the state to determine the existing capacity for housing construction. That study is due this fall and could provide a basis for state policy decisions.

A former Contra Costa County supervisor, McPeak was executive director of the Bay Area Council, a fairly progressive business group, before accepting the governor’s appointment to BTH late last year. During her time at the Bay Area Council, McPeak spoke strongly about housing being a key component of a region’s overall economic well-being. She also advocated linking housing with investments in infrastructure.

McPeak has carried those themes with her to Sacramento. During recent speeches, McPeak has advocated “anti-dumb growth” and making the most efficient use of infrastructure. And, according to people who participated in the recent meetings at McPeak’s office, the secretary is willing to go for broke.

During a recent speech to the Solano Economic Development Corporation, McPeak said, “This administration has made it clear the state’s economic success relies on adequate housing, and that means a radical change in land use planning.”