rendering of 831 Water St in Santa Cruz

The Santa Cruz City Council denied the 831 Water St. housing proposal in a 6-1 vote Tuesday. (Rendering: Novin Development and Lowney Architecture)

SANTA CRUZ >> The Santa Cruz City Council on Tuesday denied a controversial 140-unit housing project proposed on Water Street at Branciforte Avenue.

Developers of the 831 Water St. project were the first in the city to try to use state law SB 35. That law limits cities’ ability to deny housing proposals and forces city leaders to evaluate projects on objective standards. 

The law also allows housing proposals that meet requirements to get fast-tracked approval without environmental review. Proposals must designate at least half of the units as below market-rate rentals, among other requirements.

A two-building, four- and five-story complex was proposed to replace a one-story strip mall at Branciforte Avenue and Water Street. 

  • The project includes 140 units, 71 of which would be offered at affordable rents to people who earn less than 80% of area median income. Those affordable units would include 60 studios, seven one-bedroom units and four two-bedroom units. All of the affordable units were proposed in one building.
  • One hundred forty-three parking spaces were proposed, including a 136-space underground garage.
  • Many neighbors criticized the project’s size. Others supported the project’s affordable units. 

Last week, the developer Novin Development submitted new plans that addressed changes requested by city staff. A city staff analysis published Monday stated that the proposal met the city’s objective standards.

The council did not agree with that analysis. The council decided that the project was in violation or potential violation of these standards:

  • City law states that affordable units must be distributed throughout the project. The proposal called for all 71 affordable units in one building and the market-rate units in the other.
  • A regulation that projects can not be within 20 feet of a 30% slope without permission of the council or city staff
  • A requirement for completed plans for stormwater management or drainage
  • A requirement for traffic and noise studies

From left to right, Santa Cruz City Council members Sandy Brown, Shebreh Kalantari-Johnson, Justin Cummings, Renee Golder, Sonja Brunner, Martine Watkins and Donna Meyers discuss the 831 Water St. housing proposal in an online meeting Tuesday. (Zoom screenshot)

Council members explain their votes

The vote was 6-1 to deny the project with Vice Mayor Sonja Brunner as the sole vote in favor of the project. Brunner, a board member of the Housing Authority of Santa Cruz County, agreed with the city staff’s analysis that the project met the city’s objective standards. 

Councilmember Shebreh Kalantari-Johnson made the motion to deny the project. Councilmember Martine Watkins seconded it. In a friendly amendment, Councilmember Justin Cummings offered a list of the project’s objective design standard violations. 

Kalantari-Johnson and Cummings recently announced bids in the June 7, 2022 primary election for Third District Santa Cruz County Supervisor. Tuesday, Kalantari-Johnson and Cummings said they were proponents of affordable housing but believed that the project did not meet objective standards.

Before her vote, Mayor Donna Meyers said she hoped “this is a learning moment” and that a housing project at the site could still be possible.

“One of the most important things is that we want affordable units to be integrated amongst all housing types. We do not want to separate out buildings because that is now a stated mandate by the state of California,” Meyers said. “Sometimes as an elected official, you have to speak for your community and not just get pushed around by the state of California, frankly.”

Separate affordable units

The majority of council members and several residents Tuesday said that they were opposed to the developer’s plan to group the affordable units in one building and the market-rate units in the other.

In an Oct. 11 letter to the council, a lawyer from the Aptos law firm Wittwer Parkin LLP urged the council to reject the project due to that separation. “Segregating residents of affordable housing units from market-rate units weakens the community fabric,” lawyer William Parkin wrote. His firm represents the group 831 Responsible Development, an opponent of the project.

Grounds for denial

State density bonus law allows a development to be taller than normally allowed and bypass other city rules if the project contains a number of affordable housing units. The law allows developers to request three “concessions,” essentially a waiver of a city rule, if it reduces costs to allow affordable units. The point of the concession is to reduce a developer’s costs to allow the production of affordable units.

In the density bonus application, the developer requested that city leaders waive the city requirement to spread affordable units throughout the project. 

  • The developer said that they were applying for state affordable housing tax credits to finance the 100% affordable housing building. 
  • Those tax credits require a deed restriction on the parcel with the affordable units, the developer wrote. 
  • Spreading the units across the two buildings would render the project ineligible for $23 million of funding toward the project’s $41 million cost, the developer wrote.
  • For approval of SB 35 projects, California’s guidelines state that “affordable units shall be distributed throughout the development, unless otherwise necessary for state or local funding programs.”

To deny the developer’s request, state law requires city leaders to prove that the concession does not reduce the developer’s costs to build affordable units. City leaders could also reject the concession if they prove that the concession would create an unavoidable and “specific adverse impact” on health and safety, according to state law. 

City Attorney Tony Condotti said at Tuesday’s meeting that state law “defines ‘specific adverse impact’ to mean a significant, quantifiable, direct and unavoidable impact based on objective, identified, written public health or safety standards, policies or conditions as they existed on the date that the application was deemed complete.” 

Condotti said that the “general notion of a potential public health or safety impact” would not be enough to deny the developer’s request.

In a report for Tuesday’s meeting, city staff wrote that they could not “carry its burden of proof” to deny the developer’s request, and that city leaders were required to grant the concession.

At the start of the discussion Tuesday, Condotti said that under state law, the developer, a housing organization or a prospective tenant could file a lawsuit against the city to enforce the state law. If the court rules that city leaders denied a project that complied with the objective standards or forced the project to reduce density without an adequate proof of health and safety impacts, then the court is required to compel compliance within 60 days and award legal fees to the plaintiff.  

Next steps

By Thursday, city staff are required to write a letter to the developer with further explanation of the grounds for denial.

In an interview after the council’s vote Tuesday, Santa Cruz Principal Planner Samantha Haschert said more research is required.

“I think some of the things we’re going to have to go back and review and see what exactly it is that we’re missing with the things that the council identified,” Haschert said. “Obviously, our recommendation was for approval, so we’re just going to have to go back and see if there were things that we missed.”

Haschert shared some preliminary thoughts:

  • Requirement for a noise study: For typical projects that do not fall under streamlined review, a noise study would be required before a design permit, Haschert said. Noise studies are “fairly minor,” Haschert said, and city staff thought it would be appropriate to list a study as a condition of approval at a later stage. “I think we’re going to have to look at it more. I think that could be an objective standard, and the council certainly identified it as much,” Haschert said.
  • The regulation that projects can not be within 20 feet of a 30% slope without permission of city leaders: Haschert said that city staff believed the site was flat and adjacent to a wall that went down to the Water Street hill. Haschert said that city staff will look at the maps in the General Plan to see if the site was identified as a slope.

In the staff presentation before the vote, Transportation Project Manager Nathan Nguyen said that the developer was not required to submit a traffic study because the city did not have an objective standard requiring one for this type of development. The city has hired consultant Kimley Horn to perform a traffic study. Part of the goal of that study was to evaluate the project’s driveway locations and suggest changes as conditions for approval at a later phase of the project.

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Kara Meyberg Guzman is the CEO and co-founder of Santa Cruz Local. ​Prior to Santa Cruz Local, she served as the Santa Cruz Sentinel’s managing editor. She has a biology degree from Stanford University and lives in Santa Cruz.