SACRAMENTO - California's housing shortage, which has pushed median home prices above $470,000, is spurring a variety of moves to change the state's 35-year-old environmental protection law, long considered the nation's toughest.

Attempts by the state's home building industry to change the 1970 law, signed by former Gov. Ronald Reagan, are nothing new, but this year Republican Gov. Arnold Schwarzenegger and a growing list of Democrats are joining in. Key lawmakers are pushing bills to make it easier for developers to maneuver around the law, especially to build housing in downtowns and older urban neighborhoods.

The growing momentum to change the California Environmental Quality Act sets up a clash between business and environmental interests in a state with some of the nation's highest priced homes and lowest rates of homeownership. A majority of Californians no longer can afford to buy homes, prompting some lawmakers to lament that their generation may be the state's first unable to provide a better life for its children.

Although environmental groups have given Schwarzenegger's early moves high marks, the governor is expected to unveil proposals to ease CEQA rules and make it more difficult to use the law to stop residential construction projects. A draft version of the bill would limit the ability of opponents to file some lawsuits and would streamline the regulatory process for developers in areas already planned and zoned for housing.

Earlier this year, Schwarzenegger called home ownership "part of the American dream" and promised to eliminate "regulatory and legal hurdles that delay construction and increase the costs."

His proposal also expands on recommendations made by the California Performance Review study that Schwarzenegger started last year. The review's report said CEQA creates "too many opportunities for blocking projects for non-environmental considerations" and that neighborhood opposition groups especially use it to block multifamily apartment projects.

Builders and their allies provided key input to the CPR panel and also to a 41-member Resources Agency advisory group regarding the draft legislation.

Although many of the proposals are aimed at limiting the sprawl of housing to empty farmland, environmental groups fear the proposals will change the law so much that it will actually foster more sprawl instead of more housing in urban areas. On the defensive, they're highlighting the act's success stories and preparing for battle in the Legislature.

"If builders get their way, ordinary Californians are going to be sitting in traffic even longer and living farther out and having fewer options," said Karen Douglas, attorney for the Planning and Conservation League, a lobbying coalition of environmental groups. Because the law requires detailed studies of a development's potential effects on its surroundings, it "has made the state better."

Developer groups don't argue the law's benefits. Instead, they say it's been twisted by NIMBY -- "not in my back yard" -- groups to shrink development proposals by forcing extra environmental studies. Such delays -- a new environmental impact report can cost up to $200,000 and take 18 months -- sometimes make developers just walk away.

A handful of law firms have used it to stall many of the 40 Wal-Mart Supercenters planned in California. Developers building housing subdivisions on undeveloped land also find themselves wrangling with lawsuits that allege insufficient environmental studies.

Some of the tactics led Oakland Mayor Jerry Brown, a Democrat who was a staunch defender of the law when he was governor of California from 1975 to 1983, to push for a new law to restrict opponents' ability to use it to block downtown Oakland housing projects.

The problem isn't the law but those who abuse it, said Tim Coyle, the top lobbyist for the California Building Industry Association.

Coyle said legislators, many of them former city council members, complain to him that the law "keeps getting in the way of urban revitalization projects and neighborhood restoration projects."

Last year, California developers built 211,000 new homes and apartments, and expect to reach a similar target this year. But that's still 80,000 short of demand for a two-year span, they say. As prices of existing homes reached a median price last month of $471,620 -- where half cost more and half cost less -- fewer than one in four households could afford one, the California Association of Realtors reports.

"We're killing the most fundamental goal or objective of every middle-class Californian -- owning a home," said Senate President Pro Tem Don Perata, D-Oakland.

He wants more central city and downtown housing projects declared off limits to CEQA challenges and has introduced a bill greatly expanding the acreage and number of homes that qualify. The bill is part of a package of anti-sprawl legislation that Perata said will be a top Senate priority this year.

Other lawmakers have followed suit. Bills awaiting their first hearings would allow builders to use "short form" environmental reports in areas already planned and zoned for homes, make those who file CEQA lawsuits disclose their backers and their economic or other interest in the project.

Another would exempt some downtown residential projects from traffic impact studies.

"There are plenty of situations, in Sacramento and elsewhere in the state, where smart growth, in-fill housing developments, which are designed to give people an option to live close to work and where they shop, are faced with significant traffic mitigation requirements," said its author, Assemblyman Dave Jones, D-Sacramento.

In Sacramento, opponents recently used the act to delay a 119-apartment project just blocks from a downtown light rail line and within walking distance of thousands of jobs.

Despite some of the complaints, the law's defenders said its benefits are too great to ignore.

It's not perfect, because any law that opens the way for lawsuit can be abused, said Sean Hecht, executive director of the Environmental Law Center at the UCLA School of Law.

"The fact that some people might frivolously file employment discrimination lawsuits when there's been no discrimination doesn't mean we throw out employment law. I see CEQA the same," he said. "Like any good law, it's done some really important things for our state."