A rendering of the 831 Water Street development.

Santa Cruz City Council rescinds denial, set to reevaluate 831 Water St. project

The What: After the city received threats of litigation and pressure to act, the Santa Cruz City Council rescinded an earlier denial of the 831 Water Street development on Tuesday, saying updates from the developer would be considered at the Dec. 14 meeting.

The Background: The 4-2 vote — Councilmember Martine Watkins was absent — followed an Oct. 12 denial of the project including affordable housing. During that earlier vote, the council said it felt the fact that one of the two halves of the development would be affordable housing while the other would be market rate was a stigmatization of lower-income people.

The developer of the project, however, said that the state law that governed projects like this one — Senate Bill 35 — did not allow a denial based on that reasoning. State officials agreed, sending a letter on Nov. 9 saying the city was potentially liable if it did not reverse course.

The So What? The project would assist with Santa Cruz’s larger housing needs, as determined by the Regional Housing Needs Allocation. Every eight years, California determines the number of housing units needed, and the Association of Monterey Bay Area Governments devises how to allocate those units across the region.

Currently, the city needs to produce an additional 123 very-low-income units by the end of 2023. It is unclear how many units in the 831 Water Street proposal would meet that requirement.

What is SB 35? Passed in 2017, the state law reduces certain barriers to approval for affordable housing projects. This was done to address the fact that California has a significantly higher demand for housing than available affordable units — a metric calculated by the average median income for each county.

The development would be the first SB 35 project in Santa Cruz. This project — proposed for a lot at North Branciforte Avenue and Water Street by Novin Development — was submitted as an SB 35 proposal to the city in July, with its most recent iteration including a 50-50 split of 140 market-rate and affordable units.

The city’s first SB-35 project proposal has spurred much contentious debate over community input for mixed-use...

The project has met with opposition from some neighbors, who claim it would lead to issues of traffic congestion, increased noise and environmental concerns. Yet project proponents believe those concerns don’t address the larger benefits of the project, including 70 affordable units for those making 80% of AMI.

Because Santa Cruz has not met its RHNA goals, the city is required to streamline the review and approval processes of certain qualifying affordable housing projects.

What’s Next? In addition to reviewing the updates to the 831 Water Street development, the city council will also discuss its overall role in reviewing future SB 35 projects during its Dec. 14 meeting.