State putting pressure on Santa Cruz to push forward on 831 Water Street project

Even though Santa Cruz’s first SB-35 development was voted down by the city council last month, the controversial 831 Water Street project might still become a reality.

On Tuesday, the city planning department received a letter from the state’s Department of Housing and Community Development regarding the Oct. 12 vote against the project by city council, stating its reasons for the denial were not permitted by state law.

While the city is required to give its approval or denial of the project within 90 days — which, according to the timeline, is Friday — confusion about the implications of certain decisions will stretch the window out by at least 11 days.

As the Planning Department informed Lookout, the department has worked under the assumption that the project at the corner of Water Street and Branciforte Avenue had already been denied based on the Oct. 12 vote. The city council is scheduled to meet on it again Nov. 23. What happens between now and then — a possible extension agreed upon between the developer and city, for instance — isn’t yet known.

Confusion over the council’s vote

The project — a 140-unit building proposed by Novin Development in July, with a 50-50 split between market-rate and affordable units — is the first SB-35 project in the city, intending to make use of the law’s streamlined approval processes for developments with significant affordable housing elements.

Yet, as the project developed, so too did community pushback, leading to multiple contentious, hours-long oversight meetings, the city council naming itself the ministerial body for the project, and — ultimately — to a 6-1 vote denying the project.

The letter from the state Department of Housing and Community Development stated that the city council’s objections were not valid in the scope of what are considered “objective standards.” Specifically, the city council denied the project due to perceived segregation, as the plan isolated affordable and market-rate units. However, the state noted that AB 491 — a law that requires mixed developments to have shared common areas and amenities — does not preclude the units being separated into two distinct buildings.

“HCD supports the city’s approval of housing during this critical housing crisis, including the 831 Water Street Housing Project, and hopes for a speedy resolution of this matter,” the letter said.

Is it the planning department’s call?

Developer Iman Novin said that the state’s letter proves one thing: The city should have approved the application in October, in line with recommendations from the planning department.

“It was not the council’s role to approve or deny the application — the [planning department] staff already has the authority,” he said. “We’re trying to figure it out right now, but we are open to [providing] more time to staff to process the application — we’re just not open to city council having more oversight hearings and things of that nature that continue to introduce politics into the discussion.”

Novin said that, while this process has been trickier due to it being the first SB-35 proposal in the city, it should demonstrate that a ministerial review body is required — and that the planning department can operate as such for future developers.

Since the project was rejected by city council on Oct. 12, Novin and his team have worked with the planning department to revise certain minor points of the proposal, all allowable in the SB-35 timeline. Yet, he wants to ensure that this process moves forward, and doesn’t hinder other developers from attempting to build affordable housing in the city.

“What is the city council sending in terms of messaging...will they wind down on some of these mistakes they’ve made?” he asked. “The staff can reinterpret the council’s action and make a consistency determination now and we could extend some time to deal with any minor issues...we believe this is all within staff’s ability and authority at this point.”

‘Likelihood of challenges’ foreseen

While Novin has provided revisions to the project over the last 30 days with the city, Principal Planner Samantha Haschert says the planning department had not reviewed any of those materials.

“Our understanding was that the project was denied on Oct. 12 — we’re also now aware that the status may change,” she said, noting that city council will convene on Nov. 23 to discuss rescinding its earlier dismissal of the project.

As such, the planning department began reviewing the newly submitted materials this week. If there is a motion by the city council to rescind its denial on Nov. 23, Haschert feels her department will then have a better understanding of what it can do in regard to the project.

“We’ve always been very aware of the likelihood of challenges from all sides on this review,” she said. “I don’t think this letter was really a surprise for us, and we’ve been continuing to discuss it and review potential challenges around this project.”

With this being the first SB-35 project in the city, Haschert believes that the city should expect better coordination between the developer and the community regarding the project proposals.

“As new information and interpretations come out from the state, I think that will all help us guide our processes and recommendations for projects like this in the future,” she said.