||With the landmark signing of AB 32, the Global Warming Solutions Act,1 in 2006, California established the most comprehensive greenhouse gas (GHG) emissions reduction program in the nation's history. Combining regulatory and marketplace mechanisms, the program sets an ambitious goal of reducing the state's GHG emissions by 25 percent by 2020.2 To achieve this goal, state and local governments are designing regulations that apply to all GHG-producing industries, and a major part of this effort involves establishing programs that reduce GHG emissions attributed to the building industry.
By encouraging--and in some cases requiring--environmentally responsible "green building" practices in building design, government regulations are playing a key role in GHG reduction in California. In fact, environmentally sensitive building regulations predate the recent trend to combat GHG emissions. Strict state energy efficiency standards have been applied to new buildings as far back as 1978, when the Title 24 building codes were first implemented.3 In 2004, Executive Order S-20-04 created the Green Action Team to mandate higher efficiency measures for state-owned buildings.
In addition to state regulations, numerous municipalities in California have adopted local green building programs and ordinances that mandate application of green building standards for government-owned buildings. The city of West Hollywood has just established perhaps the most aggressive green building program in the nation, which includes significant mandatory provisions for private development projects in addition to government buildings.4 The city of Los Angeles is in the process of designing the city's first comprehensive green building program, and it too is likely to require green building features for certain private-sector projects.5
As green building regulations become more commonplace, government officials must strike the appropriate balance between market place enhancements and regulatory requirements when drafting green building regulations. Real estate and land use attorneys in government and private practice should advise their clients of new requirements and ensure that these regulations are legally enforceable. Furthermore, lawyers who are well versed in green building mandates and techniques can help real estate developers navigate through the ever-evolving maze of green building regulations.
Principles and Methods
Though definitions vary, green building, also known as sustainable building or development, is the practice of increasing the efficiency with which buildings use energy, water, and materials to reduce their impact on the environment and human health.6 There are five generally accepted principles of green building: site selection, resource efficiency, energy conservation, water conservation, and indoor environmental quality.7 Green building programs apply these principles to encourage architects, designers, builders, building owners, and tenants to pay attention to the impact of all resources used to construct and operate buildings on health and environmental quality and to foster more livable communities.
The U.S. Green Building Council (USGBC) is a private, nonprofit corporation, founded in 1993, that established the first nationwide green building rating system, Leadership in Energy and Environmental Design (LEED). The USGBC's LEED rating system is a voluntary, consensus-based national standard for developing sustainable buildings. Although other rating systems exist, the USGBC's system is by far the most widely recognized and utilized. LEED also serves as a third-party certification program for government agencies to verify that a green building conforms to its standards.
The USGBC has developed seven LEED rating systems, each geared toward specific types of projects. These include the LEED-NC (new commercial construction and major renovation projects), the LEED-EB (existing building operations), the LEED-CI (commercial interior projects), the LEED-CS (core and shell projects), the LEED-S (schools), the LEED-H (homes), and the LEED-ND (neighborhood development).8 The USGBC certifies projects as LEED compliant by obtaining written verification from project architects that design elements meet established LEED goals. The LEED system awards points for achieving certain environmental and efficiency standards, including some prerequisite green practices as well as energy-efficiency benchmarks. Points are also awarded for innovations in green technology.
Projects that obtain the highest number of points under the applicable LEED standard merit a LEED Platinum designation. Fewer points earn a LEED Gold or Silver ranking, or are referred to simply as LEED Certified. The average LEED Certified building uses 32 percent less electricity than nongreen buildings and saves 350 metric tons of CO2 emissions annually.9 The application of green building techniques is important because buildings in the United States use one-third of the nation's total energy output, including two-thirds of its electricity, and produce 30 to 40 percent of all GHG emissions--more than any other economic sector.10 Although estimates of costs to comply with LEED certification vary, California's Integrated Waste Management Board estimates that compliance would add only 2 percent to design and construction costs.11
State Green Building Regulations
Well before AB 32, California already had one of the strictest building energy codes in the country--the Energy Efficiency Standards for Residential and Nonresidential Buildings, known as Title 24.12 Established in 1978 to reduce California's energy consumption, Title 24 includes standards for energy-efficient heating and cooling systems, insulation, roofing materials, and electrical systems. These standards are updated periodically (most recently on January 1, 2008) to allow incorporation of new energy-saving technologies and methods. Title 24 applies to all new construction, alterations, or additions, excluding qualified state historic buildings.13
For each proposed new building, the California Energy Commission (CEC) establishes an energy "budget" based on a computer simulation of the building's one-year energy use. The energy budget is used to establish specific component requirements. Designers of a building can either implement the specific energy-saving features prescribed by the CEC to comply with Title 24 or they can select alternate components, as long as the new design meets or exceeds the energy-saving performance standards outlined in the energy budget.
Title 24 has many efficiency standards that are considered green standards, and the periodic development of improved building standards within Title 24 is essential to the state's efforts to reduce GHG emissions. However, to be considered a truly "green" building, as defined by LEED or other rating programs, a new building must be even more energy efficient than Title 24 requires. Of the five accepted principles of green buildings, only energy and water conservation are the primary focus of Title 24. Therefore, aggressive regulations that include green building standards not typically addressed within Title 24 must be cumulatively applied with Title 24 to achieve California's GHG reduction goals.
In recognition of the need to go beyond Title 24 to dramatically improve energy efficiency, Governor Arnold Schwarzenegger established green building as a priority with Executive Order S-20-04 in July 2004. This Green Building Initiative sets a goal of improving energy efficiency in all state-owned buildings by 20 percent by 2015 and requires state-owned facilities to be designed, constructed, operated, and renovated at LEED Silver levels or higher.14 The executive order created a cabinet-level Green Action Team, led by the State and Consumer Services Agency (SCSA), to monitor progress. The California Building Standards Commission, an independent board within the SCSA that administers Title 24, has also established a Green Building Code Advisory Committee, which includes private-sector representatives who advise the commission on matters relating to proposed green building standards.15
In the 2007 legislative session, two bills attempted to expand California's green building regulatory efforts into the private sector. AB 888 would have mandated that certain privately developed commercial buildings, including banks and car dealerships greater than 50,000 square feet, meet the equivalent of a LEED Gold rating under a standard that the state Environmental Protection Agency will develop and implement by 2013. AB 1058 would have directed the state EPA to develop, adopt, and make available a set of voluntary green building best practices for residential home construction. Citing a bias for foreign green building materials over local products and a reliance on national standards that conflict with California's programs, among other reasons, the governor vetoed these bills.16 However, additional attempts by the legislature to require statewide public sector green building standards are likely to follow in upcoming legislative sessions.
Local Green Building Programs
Local governments throughout the nation and in California have developed green building programs. The city of Austin, Texas, created the nation's first green building program in 1991, and today 113 municipalities across the country, including 32 in California, have green building programs.17 A variety of policy vehicles are used to implement these programs, including guidelines, executive orders, initiatives, ordinances, and resolutions. These vehicles determine whether green building policies are mandatory or voluntary, if they will address both new construction and remodeling projects, and the building sectors to which they apply.
Of the 113 municipal programs, 101 are based on the LEED green building rating system. Seventy-three municipalities require certification through USGBC for at least one of their building sectors (often denoted as municipal, commercial, multifamily, residential, and industrial).18 A popular approach for many communities is to require LEED certification for municipal buildings but offer voluntary programs with incentives for the private sector. Fifty-five percent of municipalities with green building programs have policies for private commercial development.19
Cities typically turn to LEED for private sector commercial and mixed-use projects but often include other rating systems for residential development. Some of the more established residential certification programs include the U.S. Environmental Protection Agency's Energy Star Home program, the National Association of Home Builders' Model Green Home Building Guidelines, and the Alameda County Waste Management Authority's New Home Green Building Guidelines.20
Although LEED certification is well established as the rating system of choice, there are some concerns with the administration and costs of the process. The LEED certification process can be time-consuming, and delays in processing applications may deter developers from pursuing a LEED project. In order to save time (and money), many local governments give their stamp of approval once a developer has registered the project with the USGBC to begin the certification process, leaving the developer to ensure receipt of final certification that the building meets LEED standards.21 An alternative is to train city staff to certify green buildings as part of the plan check process. This approach, however, would require additional resources in education and training, which may not be available to many cities.
Ordinances that implement green building programs have been enacted by 35 local governments in the United States. Some approaches are mandatory, while others implement primarily incentive-based programs. Real estate developers typically view expedited municipal processing as the most valuable incentive. However, it is sometimes difficult to receive expedited processing consistently from all municipal departments due to lack of coordination or staff. Other incentives are energy efficiency rebates, reduced permit fees, property tax reductions, density or floor area ratio bonuses, and parking reductions.22
The city of West Hollywood has recently adopted one of the most aggressive mandatory green building programs in the nation. The program--which became effective on October 1, 2007--was established by an ordinance that adds a new Green Building section to the city's zoning regulations.23 Under the new regulations, all public buildings must meet LEED Certified standards, and all new residential buildings of three or more units and all new commercial buildings must comply with a Green Building Point System. Projects must achieve at least 60 of the 160 total points available in order to comply with the city's regulations. Incentives too are provided for projects that achieve 90 points or higher. All renovations and tenant improvements must comply with baseline standards.
The West Hollywood point system resembles the LEED checklist but is unique to West Hollywood. Specifically, the point system was designed to emphasize locally available materials, encourage green elements to be incorporated early into the project design process, and provide flexibility in altering green elements as the project evolves.24 Certain green building practices are mandated, but flexibility is enhanced by allowing points to be earned in a variety of categories. Flexibility is also built into the program by awarding additional points for incremental energy performance increases beyond California's Title 24 levels.
These decisions emerged from an extensive outreach process. The city formed a Green Building Team composed of city staff and a Green Ribbon Committee composed of external stakeholders. These two groups helped to identify the goals, limitations, and priorities of the program, which was developed through a series of meetings and workshops over nine months.
In contrast to mandatory approaches, the city of Pasadena's green building program is a more modest, primarily incentive-based program. Implemented by ordinance and incorporated into the city's Municipal Code in 2005,25 the program requires new city-owned buildings that are more than 4,999 square feet to obtain LEED certification. New nonresidential buildings that are 25,000 square feet or more and mixed-use or multifamily residential buildings that are four stories or taller qualify for incentives if the buildings meet LEED certification. These incentives include a rebate from Pasadena Water and Power of $15,000 for LEED Certified projects, $20,000 for LEED Silver, $25,000 for LEED Gold, and $30,000 for those projects that achieve a LEED Platinum level. Additionally, LEED projects that include affordable housing units earn a construction tax rebate of $1,000 per unit.
Santa Monica's green building program includes a complex combination of required and incentive-based regulations and policies.26 All new construction and major renovations of city facilities are required to meet the LEED Silver standard. Additional requirements apply to privately owned commercial, light industrial, and multifamily buildings as outlined in two different city ordinances. The city's Green Building Ordinance, adopted in 1999,27 requires construction and substantial remodels of commercial and multifamily buildings to achieve energy performance levels beyond California's Title 24 standards and to use construction materials with recycled content. In addition, the Construction and Demolition Waste Ordinance28 requires projects valued over $50,000 to divert at least 60 percent of construction and demolition waste from landfills.
Santa Monica also is offering expedited plan checks as well as financial incentives for buildings registered for LEED certification. Grants for private-sector buildings start at $20,000 for a LEED Certified building and increase up to $35,000 for LEED Platinum. All new construction and major renovation projects that fall in the commercial, affordable housing, mixed-use, and multifamily residential categories are eligible. The grants help cover the additional costs of designing a LEED Certified building. The same types of projects are also eligible for the city's Innovative Technology Grants.
The city of Los Angeles does not yet have a comprehensive green building program. However, in 2004, the City Council required all new municipal facilities to meet LEED standards, and the city has constructed, or is in the process of constructing, 47 LEED Certified buildings.29 In the private sector, Los Angeles has established a priority plan checking system for green building designs meeting LEED Silver standards.30 The Department of Water and Power also offers priority service planning for electrical and water service for these buildings. Launched in December 2006, the DWP's Green Building Incentive Program also provides financial incentives for new construction and major rehabilitation projects that are LEED Certified. Payments are calculated using a simple formula on a cents per square foot basis using the number of points earned in the LEED energy category. The incentive rate increases for each additional point earned (for example, $.30 per square foot for 1 point, $.40 per square foot for 2 points, and so on) as projects save more energy. There is no cap per project. Therefore, a 1 million square foot development that earns four points in the energy category can receive $600,000 from the DWP.31
Los Angeles's green building policies are likely to expand in the near future. In May 2007, Mayor Antonio Villaraigosa announced his Green LA Action Plan, with a goal of reducing the city's GHG emissions by 2030 to 35 percent below 1990 levels. In line with SB 32, this goal will require expanded efforts to reduce GHGs associated with the building industry. Included in the mayor's plan is a strategy of setting new standards for green building and land use planning and reviewing current zoning and building codes to minimize the impact of GHG.32 As a result, Los Angeles is in the process of creating its first comprehensive green building program. In addition, a green building implementing ordinance will likely be enacted to ensure the effectiveness of the program.
On November 15, 2007, the Los Angeles City Planning Commission unanimously recommended adopting a green building ordinance that would require private sector projects exceeding 50,000 square feet of floor area or 50 residential units to meet the LEED Certified standard. The ordinance would also establish incentives for projects meeting higher levels of sustainability. The Los Angeles City Council is expected to vote on the ordinance in February 2008.33
When a local government develops a green building program, it must decide whether its guidelines and regulations will be mandatory or voluntary, or a combination of both. The main advantage of the mandatory approach is that it provides a level of certainty--for the city, regarding achievement of its goals, and for developers, regarding what they must do to gain project approval. However, if the requirements of the mandatory approach are too onerous, the real estate market may not be able to absorb the costs, or the costs will be passed on to the ultimate consumer, thus inflating real estate prices. The advantage of the incentive-based approach is that a city may be able to realize its goals without creating negative consequences for the real estate market.
City attorneys and private practitioners are often the first to test whether a municipal green building program conflicts with other state or local regulations. The California Constitution authorizes cities and counties to enact and enforce all local police, sanitary, and other ordinances and regulations, including land use regulations, as long as they are not in conflict with general state laws.34 The legal authority of the state, as the higher level of government, preempts a subordinate local government's regulatory power.35 State green building laws preempt all local conflicting laws. Consequently, a local regulation can generally impose greater requirements for green buildings than state law, but a local regulation cannot directly conflict with or reduce state requirements. Therefore, as state green building programs emerge along with local programs, it is important for practitioners who are involved in drafting local ordinances to stay up-to-date on the progress of state regulations.
To ensure that a mandatory green building ordinance is legally enforceable, ordinance drafters must demonstrate a link or nexus between the conditions imposed by the ordinance and the government policies justifying these conditions. Failure to do so could result in unlawful conditions of approval imposed on development projects. As a general rule, any exaction or condition of approval, including a requirement to comply with an applicable green building standard, must substantially advance a legitimate governmental interest.36 This first test is often called the essential nexus rule. Furthermore, the condition or exaction must be roughly proportional to the burden or impact created by the development.37
A legally defensible green building ordinance should be based on principles enunciated in the municipality's general plan.38 Goals justifying adoption of a green building ordinance, such as the improvement of energy efficiency or the reduction of GHG emissions associated with land development, may already exist as part of the general plan. The City of Los Angeles General Plan Housing Element, for example, includes Goal 2--which involves taking steps to preserve, stabilize, and enhance livability and sustainability in all neighborhoods throughout the city--and Objective 2.1--which focuses on promoting housing strategies that enhance neighborhood sustainability.39 In Los Angeles, additional policy goals would likely be necessary, however, to more effectively link a green building ordinance to the city's general plan. Once linked to the general plan, the green building ordinance would simply become a tool needed to implement the general plan's land use program. This would establish the essential nexus between the environmental policies enunciated in the general plan and the conditions imposed by the ordinance on individual projects to implement the policies.
A nexus study is an analysis that quantifies the connection between a government policy and the tools used to advance the policy.40 For green building programs, a nexus study could provide data to demonstrate how the continued construction of buildings under current policies would increase the production of GHGs that contribute to global warming. The study then would detail how the green building ordinance will reduce the emissions to acceptable levels. Nexus studies are especially valuable for programs that assess impact fees for projects that do not conform to adopted green building standards. This type of fee generally varies depending upon the amount of emissions produced by the project beyond acceptable levels. A municipality usually will complete a nexus study as part of the ordinance implementation process and publish its findings in an attached memorandum or as an appendix to the ordinance.
When a green building ordinance has not been adopted, several legally defensible methods are available to cities seeking to apply green building standards to individual projects. First, the California Environmental Quality Act (CEQA)41 compliance process for development projects can involve green building mitigation measures. This is especially true when the developer must prepare an Environmental Impact Report (EIR). CEQA requires feasible mitigation measures when a lead agency determines that a project's GHG emissions may create a significant impact on global warming, either individually or cumulatively.42
Every new building constructed will conceivably generate GHGs. The likelihood, however, that GHG emissions from one project, especially a small project, would significantly contribute to global warming is minimal. When considered cumulatively with the GHG emissions from related projects in an EIR, the possibility that the one project would contribute enough GHGs to increase global warming is more likely. This possibility is compounded further when considering the cumulative effect of all new development planned within a jurisdiction, such as a county, city, or community plan area. Recently, the California attorney general and the county of San Bernardino settled a lawsuit alleging that the county did not take global warming into consideration when it drafted its new growth plan.43 As a result, the potential impact of GHG emissions from new development on global warming must now be addressed and mitigated in the plan's EIR.
A common justification found in recent EIRs for reaching the opposite conclusion--that a project's GHG emissions should not be considered cumulatively--is that the project implements some of California's GHG reduction strategies. One strategy is to promote green building practices and design within the proposed project. Implementing this strategy as mitigation will reduce impacts on global warming. Mitigation also can apply to all new development within a geographic area when the area's growth plan EIR analyzes the potential cumulative impact of the development on global warming.
Another option for municipalities seeking to introduce green building features into the local process is to do so as part of a Development Agreement (DA),44 a Disposition and Development Agreement (DDA), or an Owner Participation Agreement (OPA).45 These agreements are feasible when a city's Community Redevelopment Agency has jurisdiction over a proposed project. A DA is essentially a contract between a city or city agency and a developer. The city or the city's agency grants a vested right to the developer to go forward with a project as proposed, irrespective of any future changes in the city's land use or zoning laws that might otherwise interfere with the project's implementation.46 A DA thus provides a level of certainty to the developer. In consideration for this certainty, the developer agrees to provide one or more "extraordinary public benefits" to the city. An extraordinary public benefit in a DA is something that cannot otherwise be required of the developer by the city as a condition of approval or a mitigation measure. One such public benefit could be to include green building practices and design into the proposed project. By agreeing to include green building features in exchange for a vested development right, the developer and the city will have mutually consented to a bargained-for term in the DA that is legally enforceable, much like an agreed-upon term in a simple contract.
Counsel for real estate developers should understand the spectrum of green building programs, including each program's unique requirements and incentives. Land use counsel should advise their clients whether green building programs applicable to a development project are mandatory or voluntary before the project design and site plan is prepared and filed with the local jurisdiction. Even when green building programs are voluntary, finding a way to include green design features could spell the difference between success and failure for a controversial project as it maneuvers through the contentious entitlement process. Interest in green building is high among local officials and government planning staff. Therefore, developers have a valuable opportunity to gain allies by including green features in their projects. Even environmental activists, a traditional enemy of real estate developers, may be mollified by the proposal of environmentally sensitive designs.
Expertise in green technologies also will allow land use counsel to advise clients appropriately regarding the costs and feasibility of different measures. Land use lawyers can deliver valuable advice about meeting applicable compliance standards. They can help clients with LEED--a quasi-legal process that involves the presentation of evidence by applicants, a compliance determination, and an internal appeals process. Attorneys who understand the process can make the difference between certification and noncertification for their developer clients.
Green development is not just a popular slogan. As government officials implement strategies and programs to combat global warming, reduce energy consumption, and preserve natural resources, green building programs will continue to be an essential component of the development process. The number of green building programs has expanded dramatically in recent years, and the inclusion of mandatory green building features in local programs is a growing trend. Land use practitioners must take the lead in understanding this unfolding new era of environmental compliance. By understanding the regulations that implement green building programs as well as the technologies that make these programs successful, government and private land use lawyers can help to ensure that these programs are legally enforceable, fair, and effective.