CP&DR News Briefs July 21, 2026: Palo Alto & SB 79; California Forever Shipyard; CEQA Ballot Measure; and More

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Prior to Implementing Alternative Plan, Palo Alto Beset with SB 79 Applications 

The City of Palo Alto, which has historically favored slow growth, adopted an alternative plan pursuant to Senate Bill 79 that went into effect two weeks after the law’s July 1 effective date. In that window, at least seven projects that would otherwise have been disallowed were proposed and appear likely to be permitted. They include both market-rate and affordable units, including four housing projects by nonprofit developer Minority Television Project; some projects use state Density Bonus Law to go up to seven stories. Applications for some SB 79 projects have been accompanied by letters from developers’ attorneys threatening the city with lawsuits if it attempted to reject projects on technicalities. According to a preemptive letter from law firm Holland & Knight, the city can reject SB 79 applications only for “significant, unavoidable, and quantifiable impact[s] on ‘objective, identified written public health or safety standards, policies, or conditions.However, the Legislature has affirmed its expectation that these types of conditions ‘arise infrequently.’” Palo Alto’s alternative plan went into effect July 16, limiting the size of projects to roughly 50% of what SB 79 would allow. (See related CP&DR coverage.)

California Forever Loses $3.2 Billion Shipyard Contract

California Forever, the plan to build a new city on roughly 70,000 acres of farmland in Solano County, California, has lost its bid to recruit an industrial tenant for their planned waterfront shipyard on the Sacramento River on the southern end of its land holdings. The area has long been zoned for “maritime industrial uses.” Saronic Technologies, an Austin-based defense startup that builds autonomous watercraft, has selected the Port of Brownsville in Texas over Solano County for its planned $3.2 billion Port Alpha shipyard. California Forever had signed a 40-year union labor agreement covering its 70,000-acre project and backed legislation to speed up environmental review for the shipyard, which could still advance as a budget trailer bill this summer. Texas, meanwhile, approved a $211 million tax-abatement package in June to draw Saronic to Brownsville, where the new shipyard will sit about 20 miles from SpaceX's Starbase facility. Joshua Arce of the California Alliance of Jobs told the San Francisco Chronicle the move will send roughly 10,000 permanent jobs and thousands of union construction positions to Texas instead, faulting state leaders for failing to act quickly enough.

CEQA Reform Ballot Measure Gains Strong Voter Support 

A recent poll from the Public Policy Institute of California shows that Proposition 45, a measure to overhaul CEQA, has drawn support from voters with 73% of likely voters in support, 24% opposed and 4% undecided. The measure would impose a 365-day limit on environmental reviews for projects like housing, transit, reservoirs and renewable energy facilities, and require courts to rule on related lawsuits within 270 days. It is the biggest change to CEQA since it was signed into law in 1970. Renters, younger voters and lower-income households say the reform would cut red tape and lower housing, energy and water costs, while opponents including the Sierra Club, Defenders of Wildlife and Jane Fonda, argue it would weaken environmental protections and enable projects like data centers with minimal public input.

Weakening of Federal Endangered Species Act Could Endanger 300 Species in California 

The Trump administration finalized a rule Friday that narrows the definition of "harm" under the Endangered Species Act, eliminating protections against habitat destruction from logging, mining and oil drilling as long as animals aren't directly killed or injured. Interior Secretary Doug Burgum defended the change, saying the previous definition "interfered with private property rights" and had been abused by federal agencies to obstruct land use; officials said the move follows a 2024 Supreme Court decision limiting federal agencies' authority to interpret environmental statutes. California, the nation's most biodiverse state, is expected to be hit especially hard with roughly 300 of the law's approximately 2,300 protected species found here including condors, sea otters, desert tortoises and gray wolves. The Endangered Species Act has been credited with saving species such as the California condor, bald eagle, southern sea otter and El Segundo blue butterfly from near-extinction, recoveries advocates say resulted directly from habitat protections the new rule removes. (See related CP&DR coverage.)

CP&DR Coverage: New San Francisco Planning Director Brings Private-Sector Perspective

Shortly after the election of San Francisco Mayor Daniel Lurie, he nominated Sarah Dennis Phillips to succeed Rich Hillis as planning director. Dennis Phillip was both a conventional choice and an offbeat. Offbeat, because she was coming from over a decade in the private sector, working for mega-developer Tishman Speyer. Conventional because she had previously spent a similar amount of time in San Francisco city government, in planning and community development. Her appointment complemented Lurie's dedication to development and increasing the city's housing supply. A year later, Dennis Phillip has presided over the implementation of the city's "Family Zoning Plan" and is attempting to reform the department amid renewed public enthusiasm--or at least tolerance--for new housing. She spoke with CP&DR's Josh Stephens.

Quick Hits & Updates

A new economic analysis estimates that Los Angeles's Measure ULA, commonly known as the "Mansion Tax," generates significant unintended fiscal costs by suppressing property transactions, which in turn slows growth in property tax assessments. The study notes that in California and more than half of U.S. states, assessed property values only rise toward market value at the point of sale, so any drop in transaction frequency caused by the transfer tax directly reduces the growth of property tax revenue over time.

Environmental groups Earthworks and Comité Cívico del Valle argued before a California appeals court in San Diego on Thursday that Imperial County failed to adequately review the environmental and cultural impacts of Controlled Thermal Resources' Hell's Kitchen lithium project. The project would extract lithium from geothermal brine and require 6,500 acre-feet of fresh water annually. 

Governor Newsom signed Assembly Bill 179, a new housing affordability law aiming to reduce the per-unit cost of affordable housing by $60,000 to $70,000, remove red tape and boost housing construction. The law features a major reduction in impact fees, or one-time charges local governments impose on developers to support municipal services including schools, public parks and sewage for residents in new affordable housing units. Gov. Newsom characterized the current fee structure as "comical" and prohibitive toward the construction of affordable units. 

The Riverside City Council adopted a new planning framework aimed at transforming the area around a downtown Metrolink station into a mixed-use hub with housing, jobs and transit access. The item updates preparation of a Transit Oriented Development Action Plan and adopts a resolution required under Regional Early Action Planning 2.0 grant guidelines. It does not approve construction, rezone land or commit city funding, but officials say it lays groundwork for future investment.

The Prebys Foundation and Downtown San Diego Partnership are planning to formally ask the city to create a joint powers authority (JPA) with the San Diego Community College District and San Diego Unified School District to redevelop the Civic Center, San Diego's four-block municipal compound plus two adjacent blocks. Modeled after the Bay Area's Transbay Joint Powers Authority, the JPA would have broad legal powers though the city would still need to separately transfer the Civic Center land before the entity could exercise land-use authority. 

Bay Area transit ridership patterns have shifted significantly by income over the past decade. In 2014 both the poorest and richest workers rode transit at higher rates than middle-income workers; wealthier riders often lived near transit corridors in cities like San Francisco and Palo Alto and commuted to downtown offices. By 2019, as gentrification pushed lower-income residents out of transit-rich neighborhoods, wealthier commuters increasingly turned to BART and Caltrain. That trend reversed again by 2024, as remote and hybrid work drew affluent workers, leaving lower-income workers making up a larger share of transit riders relative to the overall workforce.

The Los Angeles City Council approved Fourth & Central, a $2 billion mixed-use development that will replace cold storage facilities, parking lots and warehouses on Skid Row near Little Tokyo and the Arts District. The project, first proposed in 2021, calls for 10 buildings including a 30-story residential tower with 572 condominiums and 949 apartments, including at least 262 affordable units.

Real estate firms Jamison and Kennedy Wilson will attempt  a $200 million conversion of the L.A. World Trade Center into Sky Castle, a 512-unit affordable housing complex as part of a broader campaign to build 4,000 affordable apartments across Los Angeles. The office will be Jamison's 15th office-to-housing conversion, with work set to begin in August and completion expected by early 2028. Rents are expected to start at $937 for one-bedroom units, with two- and three-bedroom units renting for $1,100 and $1,300 respectively, and the complex will include amenities like a fitness center, co-working space and rooftop tennis or pickleball courts. Eligible tenants must earn between 30% and 80% of the area median income.

San Diego City Council, acting as the Housing Authority of the City of San Diego, approved the creation of an $8.5 million Affordable Housing Preservation Fund to slow the loss of affordable rental housing and keep rents low for individuals, families and seniors. The fund is intended to help preserve "naturally occurring affordable housing" by combining its resources with other funding sources and establishing long-term affordability requirements for those units; specific proposals for using the fund will come before the council or Housing Authority in the future. 

A Contra Costa County Grand Jury issued a report on the City of Martinez's deteriorating waterfront and marina, which spans 67.3 acres along the Carquinez Strait and has fallen into disrepair since being built in the 1960s. The city currently lacks funding to repair the crumbling seawall and docks, dredge the marina, or build a higher seawall to address projected sea level rise, and cannot continue subsidizing the marina without harming core services. 

The Sierra Club and three other environmental nonprofits filed a petition Wednesday in San Bernardino County Superior Court seeking to invalidate Barstow's approval of the Barstow International Gateway, a $4 billion, 4,500-acre BNSF Railway facility that would become the nation's largest rail yard. The groups argue the city's environmental review was inadequate, citing projections that the project will emit over 550 tons of nitrogen oxide and 134,471 metric tons of carbon dioxide equivalent annually while burning more than 18 million gallons of diesel a year, and that it failed to properly assess impacts on species including the Mojave desert tortoise and western burrowing owl.

El Segundo City Council declined to move forward with a plan to ask voters to make the city a charter city, after two of four council members present at the July 7 meeting voiced opposition, falling short of the three votes needed to place the measure on the November ballot. The proposal was aimed at giving the city more control over land zoning amid state housing mandates.