Board approves contested 57-unit Capitola Road housing project under state 22builder27s remedy22 rules, 4-1

The Santa Cruz County Board of Supervisors on Feb. 10 approved, by a 4-1 vote, a development permit for a 57-unit, five-story multifamily housing project at 841 Capitola Road after a de novo hearing that centered on whether state "builder27s remedy" law applied when the developer filed its preliminary application.

Background and legal issue: The applicant submitted a qualifying SB 330/SB 3 30 preliminary application while the county27s housing element remained under HCD review. Under state housing law, projects that meet specific timing and completeness requirements can qualify for density and waiver relief (the so-called builder27s remedy). The appellant argued HCD had effectively determined the county27s housing element was in substantial compliance by mid-March 2024 and therefore builder27s remedy was not available when the developer applied. The applicant and county staff pointed to HCD guidance and later letters, and argued the project met statutory builder27s remedy and density-bonus eligibility.

Project details and staff recommendation: Planning staff described the proposal as a five-story building with 57 units (40 base units plus 17 density-bonus units), including four affordable units (one very low-income, three extremely low-income) that produced extra credit under state rules. The project seeks concessions and waivers allowed under the Housing Accountability Act and density-bonus law; staff recommended approving the application with conditions, denied one ADU-conversion incentive as inconsistent with state law, and recommended maintaining applicability of the county27s Affordable Housing Impact Fee (AHIF) but offered refined language to record affordability controls prior to permits.

Hearing highlights: Applicant counsel argued the AHIF could not be applied because the project provides on-site affordable units and is protected under builder27s remedy/density-bonus state law, and warned of statutory penalties for wrongly imposing local requirements. Appellant counsel argued HCD communications show the county was already substantially compliant before the applicant filed and urged the board to seek a declaratory ruling from a court if doubt remained. Dozens of neighbors filed or delivered public comment opposing the project on traffic, safety, shading, parking, neighborhood character and Measure J grounds; housing advocates and some unions urged approval under state law to add housing supply.

Board action and conditions: After extensive public comment and deliberation, the board adopted staff recommendations as amended: the board approved the permit with the revised AHIF condition proposed by county counsel (requiring the developer to record an affordable-rent regulatory agreement for the four state-required affordable units prior to building permit issuance or final map recordation, and making clear those units will be subject only to state-law affordability controls), and the motion also explicitly allowed the applicant the option to provide additional ingress/egress from Capitola Road at the applicant27s choice (staff had recommended a revised traffic study before changing access). The motion passed 4-1; Supervisor Cummings voted no and said he would have preferred more time to review late-filed materials and explore declaratory relief.

Quote: "We face an uncomfortable choice between respecting local land-use processes and the real financial exposure the county faces if we act in ways the state may find inconsistent," County Counsel Jason Heath told the board while advising about litigation risk.

What happens next: Approval is subject to the conditions adopted by the board and any agency permits required for construction. Appellants and other parties signaled they may litigate the HCD timing and builder27s-remedy question; county counsel warned of potential exposure to statutory penalties and attorney27s fees if the board acts contrary to state law (county counsel recommended the staff path as the most legally defensible while acknowledging parties may litigate).