Tuesday's special meeting of the Santa Cruz City Council and staff.
Santa Cruz

Talking SB 35 & 831 Water Street: City officials address community concerns over state-mandated growth

The state passed SB 35 in September 2017 with the goal of creating more affordable housing. Now, the proposed development at 831 Water Street has become an example of how the state’s demands and a local community’s wants might not find alignment. Santa Cruz city leadership addressed the unknowns and attempted to answer questions on how SB 35 projects could affect the future of Santa Cruz County.

A special Santa Cruz City Council meeting Tuesday night sought to bring clarity to the little-understood piece of legislation known as SB 35, which the state of California says was intended to remedy the Golden State’s extreme lack of affordable housing.

In Santa Cruz, SB 35 has thus far been entangled with a single controversial development proposal: 831 Water Street. That project will continue to be debated (city council will discuss the project again Sept. 14), but Tuesday’s meeting was focused on the broader applications moving forward.

The state has made its concern clear regarding the housing crisis, placing blame primarily on local government obstacles to the lack of building going on across California. As such, the legislature aims to “curb the capability of local governments to deny, reduce the density of, or render infeasible housing development projects” by using the Housing Accountability Act and incentives for builders known as density bonuses.

Here’s a look at what we learned from the special meeting and what it might mean for 831 Water Street and future developments.

How did SB 35 come about?

The lack of new housing getting built across the state has pushed politicians in Sacramento to become more aggressive with legislation.

According to City Director of Planning and Community Development Lee Butler, California should be adding approximately 180,000 new housing units annually to accommodate its population. But since 2009, housing development has significantly dropped, leading to the supply of housing stock being 60% below what is needed.


“Going all the way back to 1954, you can see that we are really at historically low levels,” he said. “That has significant implications on our housing supply, and on the market.”

With those limitations, California now has the second-lowest homeownership rate across the United States, and many renter households are experiencing significant rent burdens. Butler is adamant that housing development regulations should change to keep up with the faltering supply.

“Given this framework, it’s no wonder the legislature responded by creating a wide range of policy changes,” Butler said.

What is the Housing Accountability Act? And what do the terms density bonus, objective standards and ministerial review mean?

Amended in 2017, the Housing Accountability Act prohibits cities from denying projects or reducing density in relation to so-called “objective standards.”

Additionally, the state has more recently increased the density bonus — an incentive-based tool that permits a developer to increase the maximum allowable development on a site — based on project scope.

With AB 1763 and AB 2345, developers can go up to a 50% density bonus or, if creating a 100% affordable project, an 80% density bonus, allowing for more units on less land.

Unsung Santa Cruz
A preliminary rendering of the development at 831 Water Street in Santa Cruz.

“The legislature is doing a lot of changes to help push housing development forward,” Butler said.

“Objective standards” are supposed to involve no personal or subjective judgment by a public official, and must be verifiable in reference to an external and uniform benchmark.

“The most obvious types of objective standards are for height, setbacks, distance from property line, how much open space is required — all those set standards,” land-use attorney Barbara Kautz said.

SB 35 projects are also subject to what’s known as “ministerial approval review,” which means the development’s approval involved little or no personal judgment by public officials in regard to the manner of the project’s development.

Is 831 Water Street the area’s only current SB 35 project?

It is — and that, in turn, has lent itself to more pushback from community members.

While 831 Water Street is the only current SB 35 project in the city of Santa Cruz, Watsonville approved plans for their own SB 35 project in Feb. 2021, at 1482 Freedom Blvd. The development, led by Eden Housing, will be 100% affordable, with their 53 units meant for people who classify as “very low income.”

Still, according to Butler, the county needs to address regional housing needs and work to adopt a housing element as part of the general plan. Since 2015, only 32% of the building permits issued locally have been issued to meet the goal of 180 affordable units.

“We’re two-thirds of the way through the reporting cycle, and we’re not even one-third of the way to achieving the very-low-income totals,” Butler said.

For the county to catch up to that need, any project that has at least 10% affordable housing is eligible for SB 35. SB 35 projects are more streamlined, Kautz explained, without a certain type of environmental review, only a ministerial review based on objective standards, and strict timelines for the city to approve.

How strictly do local governments need to follow SB 35 guidance?

Local governments have their hands tied and must follow the set timeline for SB 35 projects.

When an SB 35 proposal is submitted and qualifies for approval, the city must respond within 60 to 90 days. The city should provide a list of all inconsistencies with “objective” zoning and design review standards. Within 180 days from submission, there must be a design review/public oversight meeting with a complete review of the development.

What has the city learned from the SB 35 application in relation to the 831 Water Street project?

Mainly, the city has discovered how many concerns can arise from the local community, even if the city isn’t required to hold public meetings.

Butler noted that, while Santa Cruz’s municipal code requires public hearings in relation to density bonus hearings, state law trumps local law. Additionally, the city would be unable to go through a public hearing and the appeal process set within the SB 35 mandates.

“We are putting everything we get related to the SB 35 application on our website,” said Butler. “We’re trying to meet the intent of both — I apologize for the confusion ... there just really needs to be a determination on it, and whoever’s making that determination on SB 35 should also be making the consistency with the density bonus.”


2:25 PM, Sep. 09, 2021: This story has been updated to include information about a recent SB 35 project in Watsonville.