Capitola leaders have discussed redevelopment of the Capitola Mall since 2010. (Jesse Kathan — Santa Cruz Local file)

The zoning changes proposed by city staff would allow the 75-foot buildings developers requested in 2024, and would allow for less below-market-rate housing.

Under the rules to be considered, the development would be mandated to provide:

• At least 15% of apartments, or 266 units, priced for lower income renters.
• At least 5% either priced below-market rate for moderate-income renters or market-rate studios. 

Income limits for below-market-rate apartments are set annually by the state. Merlone Geier has not submitted a specific project with details about the design of the redevelopment or the number of apartments.

In a letter to the commission, representatives for Geier requested an 85-foot height limit. On Thursday, commissioners said they would consider allowing 85-foot buildings on part of the development further from streets.

But commissioners did not agree with a request from the developer to eliminate the requirement for shops in favor of a development with restaurants, housing and a hotel. They also pushed back on a request for lower parking requirements.

A development without shopping could greatly reduce the city’s sales tax income, city staff wrote in a report. They recommended that Geier be required to prepare a report on the development’s potential financial impact to the city. 

The mall’s redevelopment into hundreds of new homes is part of the city’s state-mandated Housing Element of the city’s General Plan. Capitola must permit 1,336 new housing units by 2031, and more than half of those units are to be rented below market rate for very-low and low-income residents.

The city planned for 266 of the required 282 low-income units to come from the Capitola Mall redevelopment.

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