If county supervisors deny the project, Santa Cruz-based developer Workbench may sue on the grounds that the county isn’t obeying state housing laws which allow developers to build past zoning rules in certain circumstances. Workbench sued the city of Santa Cruz in 2024 for the denial of part of its planned Food Bin redevelopment. The case was dismissed in August, and Workbench appealed. 

But neighbors say if the project’s approval is upheld by supervisors, they will sue. They said the project was not eligible for the state law that allows new housing to exceed local rules.

“Either way, this is going to court,” said Mike Reis, a neighbor who has retained a lawyer to argue against the development.

The appeal

In December 2024, the county missed a deadline to finalize their Housing Element, a state-mandated plan for more housing. That delinquency enabled developers to use “Builder’s Remedy” laws that allow builders to bypass many local rules for building size. The Builder’s Remedy was in effect until the state approved the Housing Element. But when exactly that approval happened is under debate.

Workbench submitted a pre-application for the project on April 9, 2025, three days before the California Department of Housing and Community Development certified the Housing Element. Workbench developers and county staff have concluded that the county didn’t have a valid Housing Element when the pre-application was submitted, so Builder’s Remedy rules apply.

But Reis and his neighbors argued in their appeal that the Housing Element was actually approved on March 15, when county staff received verbal confirmation from state officials that the plan would be approved. 

The appeal contends the project isn’t eligible for the Builder’s Remedy and must abide by the county’s usual rules, which would allow a maximum of eight homes on the site — instead of the proposed 57 apartments. (A separate state law would allow developers to double the size of the project to 16 units if it included affordable homes.)

Santa Cruz County Planning Commissioners discuss a proposal a five-story apartment building at 841 Capitola Road on Oct. 22. (Amaya Edwards — Santa Cruz Local/CatchLight Local)

A legal challenge could also affect proposed developments at 3500 Paul Sweet Road and on Graham Hill Road — both were proposed days before the Housing Element was formally approved. If a court rules that the Builder’s Remedy doesn’t apply to the 841 Capitola Road project, it likely would not apply to the other two proposals. 

The appeal raises other concerns by neighbors, including limited parking and increased car traffic on Grey Seal Road.

At a future board of supervisors meeting, supervisors will decide whether to hold a hearing for the appeal and potentially overturn the project’s approval.

The project

The apartment building proposal includes seven studios, 35 one-bedroom apartments and 15 two-bedroom apartments. A total of 31 parking spaces are proposed.

An application for the development proposes four below-market-rate apartments, including three priced for extremely-low-income renters and one for very-low-income renters. Income limits are set annually by the state. 

At its Oct. 22 meeting, the Santa Cruz County Planning Commission approved the project but stipulated that developers must either include a total of six affordable units or pay an affordable housing impact fee.

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