Planning commission upholds approvals for 225‑unit Ocean Street project after contested appeal

The Santa Cruz Planning Commission on May 1 denied an appeal and upheld the zoning administrator’s approvals for a six‑story, 225‑unit mixed‑use development at 535, 542 and 548 Ocean Street, voting unanimously to reject arguments that the project should face further environmental review or different conditions before permits are issued.

The project — proposed by Oakland‑based Riaz Capital and described in staff materials as a mixed‑use building with 225 residential units and ground‑floor commercial space — would replace four commercial buildings, combine three lots into one parcel, remove several heritage‑sized trees and add a courtyard and 84 parking spaces. Staff said 39 units would be deed‑restricted as affordable (including 17 very‑low, five low and 17 moderate units) and that the plan relies on state density bonus provisions. Commissioners voted 5‑0 to deny the appeal and uphold the approvals granted by the zoning administrator.

The decision matters because the project sits adjacent to Branson 40 Creek and abuts low‑density single‑family homes on May Avenue, where neighbors raised concerns about hazardous soils, creek setbacks, tree removal, privacy, shadows and parking. Appellant Eric Rabiel told the commission he believed the site had contamination he said exceeded residential screening levels and urged the commission to require an initial study and an environmental impact report. Project planner Bridal told the commission staff was aware of contamination and added two new conditions that require the developer to obtain Department of Toxic Substances Control (DTSC) approval of remediation activity and site management before demolition or building permits are issued.

Staff presentation and legal context

Project planner Bridal summarized the project and the approvals at issue: a nonresidential demolition authorization, lot line adjustment, watercourse development permit, design permit, heritage tree removal permit, density bonus requests and a sign permit. She told commissioners the project qualifies for a CEQA Class 32 categorical exemption (infill development) and noted state laws that apply, including state density bonus law, the Housing Accountability Act and AB 2097 (parking). Bridal said the city treats the request for reduced setbacks near the creek as a watercourse development permit matter and that staff had circulated revised conditions after learning the applicant had withdrawn a voluntary DTSC cleanup application following additional soil testing.

Bridal said staff learned the applicant withdrew the DTSC voluntary cleanup application after consultants concluded contamination levels on the site were not high enough to require DTSC oversight. Because staff had already learned of contamination, she said, staff proposed two new conditions that require the applicant to obtain DTSC approval of remediation activity and of a site management plan prior to any demolition or building permits. Bridal told the commission that DTSC methods and oversight would be used to avoid impacts to the creek and adjacent properties.

Appellant’s claims

Appellant Eric Rabiel, a May Avenue resident, urged denial of the zoning administrator’s approvals and called for a full CEQA initial study and an environmental impact report. Rabiel said the project would increase density from what the current zoning envisioned, raise heights from three to six stories and bring the new building as little as 13 inches from existing backyard property lines. He argued the site contains contaminated soils and cited a report in his materials that he said showed arsenic and chlorinated solvent levels above residential screening values. "The arsenic on‑site is more than 270 times the amount deemed safe for residential areas," Rabiel said during his presentation, and he asked the commission to reverse the infill exemption, deny the watercourse setback waiver and require additional parking.

Applicant and design response

Lisa Vilhauer, Riaz Capital’s head of design and entitlements, and Omar Hassan, the project architect, presented the developer’s case and described design changes made during review. Vilhauer said Riaz focuses on transit‑oriented, attainable housing and said the 225 units include 51 flexible dwelling units (studios), 4 one‑bedrooms and additional two‑bedrooms, with 39 units deed‑restricted as affordable. She said the project will add a 12–15‑foot sidewalk, about 84 parking spaces, 283 bicycle stalls, about 3,400 square feet of ground‑floor commercial space, rooftop solar and roughly $1.5 million in development impact fees. Hassan described facades, a raised courtyard and landscaping intended to improve the public realm along Ocean Street.

On contamination, project counsel and a consultant described the on‑site and off‑site conditions as typical "brownfield" issues that can be addressed with modest excavation and modern vapor mitigation systems. Counsel said a submitted consultant report estimated roughly 800 cubic feet of soil requiring removal and that the material could be disposed of at a Class II landfill. Counsel also noted the applicant previously coordinated with DTSC and that staff’s new conditions formalize oversight and approval by DTSC prior to site disturbance.

Heritage trees and design revisions

Neighbors raised particular concern about removal of heritage‑sized trees on or near adjacent lots. Bridal said the project arborist evaluated an adjacent Leland cypress and that staff required the applicant to obtain written consent from adjacent property owners before removing trees on private lots; if consent is not obtained, the project must either be redesigned to preserve trees or the applicant must seek a court order. Riaz presented a redesign option to retain the Leland cypress by increasing a setback at the back of the building and requested a corresponding objective‑standard waiver for rear‑façade modulation because the redesign altered the ground‑floor modulation standard.

Traffic, parking and transit

Staff told commissioners that the project is within a half‑mile of a major transit stop and that AB 2097 allows reduced parking for projects located within that distance. Riaz and staff said there are multiple transit stops within a half‑mile and that the temporary Riverfront transit stop and the planned downtown transit center both place the site within the half‑mile standard as measured by the statutes the city applies. The applicant proposed 84 parking spaces on site and agreed that building residents would not be eligible for May Avenue parking permits.

Public comment and positions

Public comment drew both opposition and support. Neighbors voiced concerns about scale, loss of privacy, shadows, tree removal and potential health risks from on‑site contamination. Several speakers asked the commission to require a full CEQA study and to deny the watercourse setback approval. Supporters—including housing advocates and representatives of Building Trades and the nonprofit Housing Santa Cruz County—urged the commission to allow the project, stressing the county’s housing shortage and the need for transit‑oriented, higher‑density housing with deed‑restricted units. In the meeting record, Housing Santa Cruz County’s executive director Elaine Johnson said the organization “is encouraged by [the developer’s] willingness to engage with the community” and urged the commission to deny the appeal. A speaker for the NorCal Carpenters and others urged enforcement of prevailing wage and local hiring practices on future projects.

Commission action and conditions

Commissioner Thompson moved to deny the appeal and uphold the zoning administrator’s environmental determination and permits; the motion was seconded and passed on a roll‑call vote of 5‑0 (Dan: yes; Kelly: yes; McKelvey: yes; Thompson: yes; Chair Paul Hammes: yes). The commission’s action upheld the zoning administrator’s approvals but the staff presentation and the record show additional conditions staff proposed (and the applicant accepted in concept) that will be part of the permit language: DTSC approval of remediation activities and DTSC approval of the site management plan prior to issuance of any demolition or building permits; options to preserve adjacent heritage trees (written consent, redesign, or court order to address roots and limbs); payment of a fair‑share contribution (not to exceed $100,000) toward an existing bike pathway extension; and other standard conditions for watercourse protection, stormwater management and compliance with building and noise codes.

What the commission did not do

The commission did not require a full environmental impact report. It accepted staff’s analysis that the project qualified for a CEQA Class 32 infill exemption while adding conditions that require DTSC oversight of remediation and a site management plan before site disturbance. Commissioners also did not reverse the density bonus findings or the zoning administrator’s interpretation about waivers under state density bonus law.

Next steps and context

Because the commission denied the appeal, the zoning administrator’s approvals stand, subject to the revised conditions. The applicant indicated a construction start of December 2026 and an estimated 24‑month build period. Staff noted the project will return at the building permit stage for more detailed plan review; DTSC reviews and required remediation approvals would need to be completed before building permits are issued.

Votes at a glance: motion to deny appeal — passed 5‑0 (Dan: yes; Kelly: yes; McKelvey: yes; Thompson: yes; Chair Paul Hammes: yes).

The commission moved on to general business and a discussion of bylaws for meeting start times after the vote.