Supervisors reject neighbors’ appeal of 57-unit Capitola Road project

An appeal against a contentious housing project in Live Oak was rejected Tuesday by the Santa Cruz County Board of Supervisors, despite frustrated community members’ pleas to elected officials. 

The 57-unit apartment building planned for 841 Capitola Rd., near 7th Avenue, was originally approved in October by the county’s planning commission through a process known as the builder’s remedy mechanism, a state provision that allows developers to bypass local zoning laws if a jurisdiction is out of compliance with state housing development requirements. 

The project’s developer, local architecture firm Workbench, used the builder’s remedy to get the project approved because the county did not have its housing element — a plan to accommodate a minimum amount of new housing growth — certified by the state by the deadline of Dec. 13, 2023. Under the remedy, developers are able to bypass local requirements, even if the project does not comply with local standards.

Supervisors ordered another review of the project in December, citing concerns that the planning commission erred in its decision to approve the project despite not having all the information it was seeking. 

On Tuesday, the five-member board voted 4-1 to reject the appeal, with District 3 Supervisor Justin Cummings as the only dissenting vote. Most board members said letting the project move forward would insulate the county from the potential financial risk of pursuing clarification from a judge and ending up with a costly lawsuit and fines if the matter weren’t decided in the county’s favor. 

Mike Reis, who lives on Grey Seal Road, filed an appeal on behalf of a group of neighbors, arguing that the county’s housing element was compliant with state housing law before Workbench submitted its application. He previously told Lookout that, according to emails between county planning staff and the state department of housing that he obtained via a public records request, the county was in compliance with state law. Therefore, the builder’s remedy approval should be revoked. 

However, county staff argued Tuesday that the state certified the county’s housing element on April 12, 2024, which allowed developers to apply under builder’s remedy rules from the December 2023 deadline to that date. Workbench submitted a preliminary application for the project on April 9, 2024, and a formal application on Oct. 3, according to the county’s website. 

“It’s very frustrating to be in this position,” said Supervisor Manu Koenig. He added that the arguments made by neighbors on Tuesday were good, but that the risk of siding with the appeal ultimately influenced his decision. 

If the board of supervisors had sided with Reis’ appeal on Tuesday and sought declaratory relief — asking a judge to decide whether the county’s housing development was in compliance by the state deadline — it would risk nearly $3 million in state fines and legal fees from the general fund, according to County Counsel Jason Heath. 

“I would not recommend that,” said Heath. “I just have not seen local jurisdictions being successful with making these arguments, whether it’s before court or whether it’s before [California Department of Housing and Community Development], when they’re seeking technical advice.” 

During public comment, residents mentioned a similar case brought by the Town of Los Gatos, which asked for clarity on the state housing law, arguing that it would not cost millions. That case was dismissed by a judge last week. 

Koenig said he believes the county acted in good faith to complete its housing element on time, and blamed state bureaucracy for delaying a letter of certification to the county. 

Cummings encouraged community members in attendance to call their representatives in Sacramento to complain that the state housing department is “failing to meet their own timelines and failing to support” the county. It’s not fair that the county is doing its part to comply with state law, he said, and state housing officials placed officials in a challenging situation “because of their inaction.”

Reis and his neighbors on Grey Seal Road could challenge the board’s decision or seek clarity from a judge by filing a lawsuit. Koenig told the neighbors that they might have a better chance at winning a potential lawsuit. 

Since the project was first proposed in 2022, the development at 841 Capitola Rd. has undergone many changes, primarily due to escalating mortgage costs. It was first envisioned as 15 single-family homes, each with its own accessory dwelling unit, and intended for first-time homebuyers. 

But by 2023, as mortgage rates climbed, Workbench reimagined the project as an apartment building. Developers also added four affordable units to the project. The project was planned for 63 units but later downsized to 57. 

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