Cruz Hotel gets final green light from city, but prospect of Coastal Commission appeal looms

If the Santa Cruz City Council’s say is final, the long-awaited and debated 232-room Cruz Hotel cleared approvals on Tuesday and the developers can begin breaking ground on the Front Street hotel, bar and restaurant. 

However, whether the city council’s sale of two city-owned parking lots to developer Owen Lawlor’s SCFS Venture and approval of a bevy of construction permits is the definitive decision depends on whether anyone appeals the vote to the California Coastal Commission, and whether that state land-use agency decides to take final authority over the project’s fate.

The city council voted 5-1 to push the hotel through, with Councilmember Sandy Brown dissenting; Councilmember Sonja Brunner was absent. The city will notify the Coastal Commission of its approval this week, triggering a 10-day window for anyone to appeal the project that has drawn organized pushback since Lawlor submitted the permit application in 2021. 

At more than 150,000 square feet, the Cruz Hotel’s footprint will stretch down Front Street from the corner at Laurel Street through the parking lot next to the Sherwin-Williams Paint Store. The project will reach up to 70 feet tall and feature a restaurant and bar, as well as offering public rooftop amenities. 

The fate of the Cruz Hotel has been, indirectly, put in front of voters twice since November 2022. Measure O, which met a sound defeat in 2022, would have prohibited the city from using any of its downtown, city-owned parking lots as anything other than a parking lot or affordable housing, effectively blocking the sale of the two Front Street lots to SCFS Venture. Earlier this month, voters similarly rejected Measure M, which would have required a citywide vote for any zoning changes that sought to increase building heights dating back to at least June 2023. In October, the Santa Cruz City Council approved a zoning change to allow the Cruz Hotel to jump from 50 feet to 70 feet. 

In exchange for the two parking lots, the city receives roughly $2.6 million. The property sale money, along with about $230,000 in additional fees related to the height allowance, will go into the city’s affordable housing trust fund. Lawlor’s company also committed to providing either four off-site affordable housing units for low-income hotel employees, or paying $700,000 per unit, $2.8 million total, to the city’s affordable housing trust fund. 

The city will also receive another roughly $5.2 million from the developer to create a new low-cost visitor accommodation fund, which can be used on improvements to the Santa Cruz Hostel or put toward an in-development cabin project at Greyhound Rock County Park in Davenport. 

The relative windfall for the city in affordable housing and visitor accommodation funds is part of a chess move by Lawlor and SCFS Venture to try to preempt a Coastal Commission appeal. These upfront financial concessions and community benefits are known to be the type favored by the state agency, Santa Cruz planning director Lee Butler said.   

The money could not to convince Brown, who said the city was “accepting gentrification as an acceptable policy outcome.” She said the hotel will escalate the property values downtown and create more hurdles to building affordable housing. 

Vice Mayor Renée Golder said welcoming some more expensive options for well-to-do tourists helps diversify the city’s portfolio beyond the many motels around the beach and Boardwalk. 

“Having two or three hotels around town that charge more, I don’t see anything wrong with that,” Golder said. “If we don’t build it, [higher-income tourists] will just drive right on by and spend their money in Monterey and Carmel.”

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