Santa Cruz City Council Denies 831 Water Street Application

By Linda Kerner

On Tuesday, October 12, the Santa Cruz City Council voted to deny the 831 Water Street project application. Because the project had a significant amount of affordable housing, the developer was using SB 35 which exempts it from some local approval steps. Under SB 35, jurisdictions have limited ability to deny housing applications if they are in compliance with the jurisdiction's objective standards. City staff recommended approval of the project based on a determination that the developer had met all of the city's objective standards.  Council members disagreed with staff's analysis and decided that the project was in violation of the following standards:

• A city law stating that affordable units should be distributed throughout a project and all of the affordable units for the Water Street project are included in one building.

• A regulation that projects cannot be within 20 feet of a 30% slope without permission of the council or city staff.

• A requirement for completed plans for storm water management or drainage.

• A requirement for traffic and noise studies.

The two-building project included a total of 140 housing units. Seventy-one units would have affordable rents to people who earn less that 80% of area median income. The affordable units would include 60 studios, seven one-bedroom and four two-bedroom units.  One building would include market rate units and the other would have 100% affordable units.

Density Bonus Law

The state density bonus law allows developers to request three concessions if it reduces costs to allow affordable units. The developer requested a waiver for the requirement to spread affordable units throughout the project so that state affordable housing tax credits could be used to finance the 100% affordable housing building which require a deed restriction on the parcel with the affordable units. Spreading the units across both buildings makes the project ineligible for $23 million of funding.

Traffic and Noise Study Requirement

City staff did not believe a traffic study was required because the city did not have an objective standard for this type of development and staff thought it would be appropriate for a noise study to be a condition of approval at a later stage of the project.

30% Slope Regulation

City staff did not believe that the project was in violation of the regulation that states projects cannot be within 20 feet of a 30% slope. Staff will review General Plan maps to see if the site is identified as a slope. 

So What's Next?

Under state law, the developer could file a lawsuit against the city to enforce the state law. If the court rules that the Council denied a project that complied with the objective standards or forced the project to reduce density without an adequate proof of health and safety impacts, then the court is required to compel compliance within 60 days and award legal fees to the plaintiff.  By October 14th, the city was required to write a letter to the developer with an  explanation of the grounds for denial. Stay tuned for further developments!  HSCC has actively supported this project and will continue to seek its approval and completion.