Quick Take
The Santa Cruz City Council endorsed a plan on Tuesday that would offer developers incentives to limit building height to 12 stories in the South of Laurel neighborhood, including reducing the number of units developers are required to offer to very low-income renters.
The politics of building height have taken center stage over the past year in Santa Cruz, where proposals to prohibit tall buildings and proposals for 16-story downtown towers ignite similarly frenzied debates.
On Tuesday, the Santa Cruz City Council gave a nod to a new policy direction that aims to incentivize developers to limit the height of buildings to 12 stories in the city’s downtown expansion area, also known as the South of Laurel neighborhood, or SoLa, in exchange for incentives including eliminating a requirement for developers to build on-site units for very low-income renters.
The city has been pressing forward with its vision to redevelop the area into a new entertainment district, replete with bars, restaurants, a new Santa Cruz Warriors basketball arena and nearly 2,000 new housing units. Concerns over runaway development led the city council in 2023 to set a policy capping building heights at 12 stories, and allowing only up to 1,600 new housing units, 20% of which must be reserved for low-income tenants.
However, in recent years, California’s rapidly evolving housing policies have made it difficult for cities to place hard and fast restrictions on development, especially projects that propose affordable housing. Through state programs like the density bonus, developers proposing projects with affordable housing are able to increase their unit counts by 50 to 100% over their initial proposal and eliminate restrictions on height and setbacks.
The task before the city’s planning staff was as simple as it was complicated: make a local development incentive that requires commitments on height and affordability that is more attractive than the state density bonus program. On Tuesday, staff played policy contortionist, cramming the city council’s desire for specific control over SoLa’s height and affordability into the increasingly narrow lane California affords its cities for local development control.
The city’s new Downtown Density Bonus program will attempt to entice developers to stay within the 12-story height limit and commit 20% of new units as affordable in two main ways: allowing bigger, not taller, buildings, and less intense levels of affordability.
The density bonus comes in two main flavors depending on height: the eight-story, 85-foot version, and the 12-story, 145-foot version. In both, the developer would commit to a height restriction, reserving 21.3% of the new on-site housing as below-market-rate units, and agreeing to submit the project to a newly formed architectural review board and planning commission subcommittee that oversees building materials.
In return, the developer doesn’t have to subsidize its affordable units as deeply as the state’s density bonus requires. In order to qualify for the state’s density bonus and increase the unit count by 50-100%, the original proposal has to include 20% of units as affordable: 15% of very low-income tenants (those who make around 50% of median area income) and 5% for low-income tenants (those who make 80% of the area’s median income). The city’s downtown density bonus requires 21.3% of the total units to be affordable: 13.3% offered to low-income tenants, and 8% offered to moderate-income tenants (those who make 110% of the median area income).
The other entitlement comes in the form of floor-to-area ratio (FAR), which measures the building’s area to the parcel’s area. Typical city FAR rules require taller buildings to be more narrow. The developer who commits to the 85-foot height limits gets unlimited FAR, which means its eight-story building can be as broad as the parcel’s boundaries. The developer that commits to the 12-story height limit will receive a 75% increase in FAR, allowing greater building volume that works to accommodate more units without going taller.
Sarah Neuse, a senior city planner, acknowledged that the city will be trading requirements for very low-income housing for the ability to control building height.
“If you want to have design control through incentives, then the only tool you have left is around the depth of the affordability,” Neuse told Lookout. She said the FAR boost also allows developers to build more units without going taller. “We typically regulate buildings through height, volume and location on the parcel. We’re now saying that if you let us limit height, then you can fill the parcel however you want.”
Mayor Fred Keeley applauded the new program for its potential to bring more income-restricted units to the SoLa neighborhood than the state density bonus would have, but acknowledged that it prioritizes capping building height over deeply affordable housing. He said the city council had to do its best to fulfill the community’s wishes.
“Learned a long time ago that efforts to find a perfect solution to a problem is a fool’s errand,” Keeley said. “Every solution comes with the kind of trade-off the city council made today. And we’ll do that because we’re trying to keep faith, and function in a way that brings about what we interpret to be the voters’ hopes and desires in a rapidly changing environment.”
The policy, however, is not set in stone. The city council’s unanimous vote on Tuesday was to direct staff to incorporate the new density bonus program into the slowly developing Downtown Plan Expansion project, which will overhaul the land-use rules for the neighborhood. City staff expects to release an environmental impact report on the redevelopment plan in November, and is eying the new land-use rules to take effect by summer or fall 2025.
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