The Palomar Building is the tallest in downtown Santa Cruz
(Kevin Painchaud / Lookout Santa Cruz)

Building boom will super-size downtown Santa Cruz — but will affordability follow?

With seven new six- and seven-story buildings planned for downtown, nobody disputes that it will alter the look of Santa Cruz. Whether it will open the housing market by lowering prices is another matter.

Decades of restrictive building rules have kept Santa Cruz a low-rise city, with the seven-story Palomar Inn on Pacific Avenue currently the tallest building downtown.

But the century-old Palomar might soon be sharing the skyline with seven new six- and seven-story buildings currently planned for the downtown area. And there’s likely much more building to come. Santa Cruz can expect a wave of high-density projects in coming years as state legislators override local slow-growth regulations and pressure cities throughout California to build more housing.

“I would call what’s happening downtown a mini-building boom,” said Sibley Simon, president of New Way Homes, an affordable housing developer headquartered in Santa Cruz. “I predict we’ll see more large buildings downtown over the next 20 years, and possibly an expansion of the densest part of downtown.”

Sibley Simon, president of New Way Homes, an affordable housing developer headquartered in Santa Cruz.
(Kevin Painchaud / Lookout Santa Cruz)

“I think the changes are going to surprise a lot of people,” Simon said.

The rush of new building has dismayed slow-growth advocates, who blame city officials for approving large projects out-of-sync with Santa Cruz’s quirky character.

But in fact, the drive to build more and denser housing comes largely from Sacramento, where pro-housing legislators have overruled local power to deny, shrink or slow-walk new housing that includes affordable units.

“It’s totally destructive of the community,” said environmental attorney Gary Patton, a former county supervisor and current lecturer at UC Santa Cruz. “It’s almost too great to get your mind around how the essence of Santa Cruz is going to be destroyed by this effort. The state has overruled local powers, which means there’s (often) not even a chance for the public to tell officials what they think.”

The median sale price for a single-family home rose to a record $1.3 million countywide in May, and the sale price of a...

A major driver of the building boom is California’s density bonus law, which allows developers to build bigger buildings in exchange for including affordable housing. In many cases, the law overrides local control of height limits, lot coverage, parking requirements and more.

Gary Patton, a former county supervisor and current lecturer at UC Santa Cruz
Gary Patton, a former county supervisor and current lecturer at UC Santa Cruz
(Kevin Painchaud / Lookout Santa Cruz)

The density bonus law has been around for decades, and has been rarely used. But since 2015, the law has been repeatedly modified with bigger incentives to build — and sharp new teeth forcing community compliance. Under the density bonus sliding scale, projects with 15% “very” affordable housing units can now be as much as 50% larger than allowed under local zoning rules, and 100% affordable projects can be 80% larger.

The City of Santa Cruz requires that all new multifamily housing contain 20% affordable units, which entitles the builder to a state density bonus of 15% to 50%. Donating land for affordable housing can also earn a density bonus.

The real-world effects of legislative changes — taller buildings, less parking, bigger footprints — are just now becoming apparent as long-planned projects reach the building stage. Housing advocates applaud the hundreds of units of affordable housing and say that new housing overall will result in a livelier downtown, shorter commutes, more public transit, and fewer people living on the street.

“A big segment of the environmental movement has pivoted from saying, ‘Don’t build anywhere’ to, ‘Let’s build the right stuff,’” said Simon. “Infill is the only way to reduce (suburban) sprawl and get people out of their cars. Development as a social equity policy is becoming a political force.”

Drawings of a project planned for 130 Center Street in Santa Cruz.
(Courtesy Swenson)

Critics predict that most of the new homes will go to wealthy outsiders, and that new buildings will not reduce homelessness.

“When you upzone property to allow more building on it, the value and price goes up, not down,” Patton said. “This is making property even more unaffordable. All those measures to increase density actually increase the price of existing parcels. This is not making housing more affordable for local workers.”

Nobody denies that density will change the city’s look. In downtown Santa Cruz, a new generation of tall, high-density housing could prove as transformative as the reconstruction following the 1989 Loma Prieta earthquake.

Six of the proposed tall buildings are slated for a run-down area bounded by Soquel Avenue, Laurel Street, Pacific Avenue and the San Lorenzo River. The six projects will offer more than 700 homes, tens of thousands of square feet of commercial space, a medical clinic and a 228-room hotel. The seventh project, located on Center Street near Depot Park, will provide another 233 small apartments.

Three additional pending projects, on Ocean Street, Water Street and West Cliff Drive, respectively, while not as tall, would add nearly 640 more homes. The hundreds of new affordable units will mostly be rentals.

Advocates hope a flood of new homes will ease local rents and open ownership opportunities to people now shut out of the local housing market. As of May 2021, the median sales price of a single-family home in the city of Santa Cruz reached an all-time high of $1.5 million — out of reach of all but a tiny percentage of local residents.

Downtown Santa Cruz, looking toward Monterey Bay
Six new tall buildings are slated for development in the southeast part of downtown Santa Cruz, in an area bounded by Soquel Avenue, the San Lorenzo River, Laurel Street and Pacific Avenue.
(Kevin Painchaud / Lookout Santa Cruz)