A rendering of the proposed 831 Water Street development.

‘A costly mistake’ or still moving forward? After council rejection, future of 831 Water St. remains in flux

While the fate of Santa Cruz’s first SB 35 project could be legal entanglements for the city, there are signs that the developer might be working to satisfy the concerns raised by the city council on Tuesday.

After the Santa Cruz City Council voted down the city’s first proposed SB 35 project on Tuesday, citing its violation of the city’s objective standards, on Thursday the developer submitted revisions to the planning department to address the concerns, Lookout has learned.

City Planning Director Lee Butler told Lookout on Friday that Novin Development had provided additional materials that addressed the council’s concerns. Those revisions have not yet been reviewed by the department, but looking toward the next 30 days in accordance with the SB 35 timeline, Butler believes the developer is interested in working with the city to keep the project moving forward.

The 831 Water Street project, which would have 50% of its units classified as affordable housing, is very contentious in...

“This is an option for them,” he said. “They can provide those additional materials, and we can take them into consideration for determining SB 35 eligibility.”

Whether those revisions satisfy the council’s concerns and the project moves forward remains to be seen. Others assessing the aftermath of the 831 Water Street vote believe the city has put itself in legal jeopardy with that decision. Here’s what we know and what people are saying.

What happened with Tuesday’s vote

The development would be the first in the city to utilize state law SB 35, passed in 2017 to streamline approval processes for developments with significant affordable housing elements. Proposed by Novin Development in July, the project was to have 140 units of housing, with a 50-50 split between market-rate and affordable units — the latter for those who earned less than 80% of the area median income.

On Tuesday, the city planning department presented the project’s objective standards to city councilmembers, who had named themselves the ministerial body for the project’s approval. While Butler shared analysis that showed the project met the city’s objective standards, the council disagreed, bringing up concerns including:

  • The separation of the affordable and market-rate units between two buildings instead of interspersed;
  • A lack of a traffic study regarding the proposed bike lane;
  • The lack of a noise study.

Ultimately, six of the councilmembers — Mayor Donna Meyers, Sandy Brown, Justin Cummings, Renee Golder, Shebreh Kalantari-Johnson, and Martine Watkins — voted to deny the application.

Kalantari-Johnson — who raised the motion to deny the application Tuesday — said her focus was around the project’s health and safety issues, namely the traffic impacts at the proposed site’s intersection.

“I am an advocate of affordable housing — that site is absolutely a fit for affordable housing and density housing,” she said. “How this project moved forward, the deficiencies in terms of public health and safety weren’t addressed. That doesn’t mean they can’t be addressed and we can’t continue to work together with developers, housing advocates and neighbors to develop a project that would be appropriate for that space.”

Why pro-housing advocates are concerned

Elizabeth Conlan, a lead of Santa Cruz YIMBY, was unnerved by Tuesday’s vote, saying she was shocked that the council discussion leading up to the vote largely involved opinions and subjective comments.

“This is exactly why Santa Cruz YIMBY urged council to refrain from making themselves the ministerial review body,” she said. “They are elected officials — it’s just natural they would be influenced by constituents writing in to them against the project instead of just focusing on if this application met the objective criteria that the city currently has.”

Conlan described Tuesday as “politics coming into what was supposed to be a non-political process.”

As it was designed, SB 35 is meant to remove local government oversight from the development approval process, largely due to the issues of many California jurisdictions not meeting the Regional Housing Needs Allocation. As Conlan explained, that leads to communities losing some of their discretionary abilities to analyze housing projects like 831 Water.

But because this was the first SB 35 project for the city, Kalantari-Johnson said that argument was flawed, saying, “we’re all impacted by what we see, as we should be.” Moving forward, she said it would make more sense to have a different oversight body for other SB 35 projects.

“We’re all learning how to manage and how to facilitate,” she said. “This is such an enormous project, and being the first SB 35 project, it seemed appropriate that the city council had a little more engagement than would normally be the case.”

Emily Ham, executive director of the Santa Cruz County Business Council, said the concerns brought up around the project were very familiar for “virtually every project that’s been proposed in the city of Santa Cruz.” While she believed the council brought up legitimate issues, Ham is not sure if those concerns should have dictated the council’s ultimate decision to deny the project.

“It’s very worrisome not only from a pro-housing perspective, but from a legal and monetary perspective of what this might set a precedent for going forward,” she said. “How much is this going to cost the city and taxpayers, and what does this say to potential prospective developers? ... We have to really take note of what’s happening now. This is going to be a really costly mistake.”

The future of SB 35 projects here

Conlan said she expects a lawsuit against the city for denying this project. She noted lawsuits in both San Mateo and Berkeley that have recently resulted in both cities needing to move forward with the proposed SB 35 projects, and paying heavily in the process.

“Instead of money that could be going toward housing or services for the homeless, the city will be fighting a losing lawsuit,” she said. “That’s definitely on those six members of council who voted to deny the application.”

Kalantari-Johnson believes there is a way to move forward. She views the experience as a “wake-up call” for Santa Cruz, and hopes it can be an invitation for developers, housing advocates and neighbors to work together.

“I truly want us to build housing, and build housing on that property, and I want us to be able to do it in a safe and responsible way,” she said.

Said Butler: “Regardless of the path the applicant chooses, we’ll continue to keep the public informed through the project website, as we know this is of interest to the greater community.”