Blog UPDATE To HCD: Santa Cruz YIMBY Comments on City of Capitola Draft Housing Element (August 2023)

Letter sent to HCD on September 1, 2023

Sept. 1, 2023

Santa Cruz YIMBY (1) advocates for abundant housing at all levels of affordability to meet the needs of a growing population in Santa Cruz County.

Thank you for the discussion about the City of Capitola Draft Housing Element (August 2023).  We appreciate that Capitola made some modifications in response to our earlier comments, however major issues remain. What follows is a summary of what we shared with you regarding this updated submitted draft.

Capitola Mall

The Capitola Mall (“Mall”) is critical to Capitola’s current plan to meet its 6th cycle goals. Capitola is counting on this redevelopment for nearly half of their RHNA and ⅔ of their affordable housing.  

Merlone Geier, a market-rate developer “[p]rimarily focused on community and neighborhood shopping centers” (2), would do the redevelopment of the mall.  We are also sending you their letter that goes deeper into concerns with the Housing Element.

  • The six (6) Capitola Mall parcels are non-vacant. Capitola has not described the realistic development potential of the site. Government Code section 65583.2(g)(1)  
    • They do not indicate the likelihood of development during the 6th cycle, including feasibility, which uses will remain and timing. 
    • Capitola does not have a trend of doing similar redevelopment on non-vacant sites. 
    • The Capitola Mall parcels highlighted on the site inventory include all smaller commercial stores and interior of the mall which are integral to Mall operation. Capitola has not provided an “analysis that demonstrates the extent to which existing uses constitute an impediment to residential development.” (3)
  • Capitola indicates the overall minimum residential density of 29 dwelling units/acre.  Discussions with the developer suggest that the potential realized density of this site falls well short of the 50-70 du/acre at which development would be feasible. Merlone Geier’s letter calculates that this site needs 80 du/acre to meet the numbers of the HE.
  • Capitola’s mixed-use zoning requires first floor commercial uses. (4) This reduces the density of housing when coupled with other development constraints (height, FAR, etc.). 
  • Through the Incentives for Community Benefits (5), Capitola offers the modest incentives of increased FAR (2.0) and height (50’) in exchange for public benefits of significant cost.
    • The public benefits are subject to discretionary review by the Planning Commission and City Council.
  • Any redevelopment at the Mall still requires a “Development Agreement” and after that, “various entitlements would be required for residential development.” which are additional unnecessary hurdles to Mall development.
  • Capitola is assigning ⅔ of their TOTAL affordable (Low and Moderate) housing to the Mall project. If the City misses their affordable target in the Mall redevelopment, the City has a daunting task to identify other sites under the No Net Loss law.
  • The projected affordability of 50% low income for the Mall project is unrealistic. The contiguous parcels total over 25 acres. 
    • Capitola does not provide support for the level of affordability they estimate for this site and discussions with the developer confirm this is unrealistic.
    • Capitola has not provided the analysis which demonstrates the feasibility of development on this large site.
    • Capitola does not have any successfully developed sites of equivalent size. 
  • Capitola added Program 1.7 to focus on the Mall redevelopment. This new program does not commit to addressing the significant development constraints (increased height, FAR, commercial on first floor) that impede development. It references general policies and standards “ facilitate shopping center redevelopment” which is vague.
    • Capitola can strengthen this Program with more specific density goals, e.g. to “develop land use policies to facilitate shopping center redevelopment with residential density of at least 80 du/acre”. This can be accompanied with an economic analysis to support the residential development at this density.
    • Capitola must replace the phrase “...with a strong sense of urban design cohesion” with a reference to their recently adopted Objective Standards for multifamily and mixed-use residential developments.
  • Capitola recently completed an Affordable Housing Fee Feasibility Assessment (6) which concluded that with current conditions, NO rental development pencils out: “Even without any inclusionary requirements or in-lieu/impact fee obligations, rental development appears to fall somewhat short of industry-standard return thresholds.”

(2) Merlone Geier - About Us
(3) HCD Site Inventory Guidebook, page 25
(5) Capitola Municipal Code Chapter 17.88 INCENTIVES FOR COMMUNITY BENEFITS
(6) Affordable Housing Fee Feasibility Assessment, 2021

Site Inventory

  • Capitola is relying on non vacant sites for most of their RHNA. 
    • Capitola does not describe the realistic development potential of each site within the planning period. “Specifically, the analysis must consider the extent that the nonvacant site’s existing use impedes additional residential development, the jurisdiction's past experience converting existing uses to higher density residential development, market trends and conditions, and regulatory or other incentives or standards that encourage additional housing development on the nonvacant sites.” (7)
  • Capitola is relying on non vacant sites for >50% of their Lower income RHNA.
    • Capitola does not include sufficient findings by site that “the nonvacant site’s existing use is presumed to impede additional residential development, unless the housing element describes findings based on substantial evidence that the use will likely be discontinued during the planning period”(8)
    • The City is also using “recent development trends within Capitola” (9) to identify future affordable housing potential. The City has little development history to trend. Less than 12% of permitted units in the 5th cycle were very low income (VLI) or low income (LI) units. Six of these units were non-deed restricted ADUs and the other was a non-deed restricted single family home. The few sites with actual densities over 20 du in Table 4-2 “Actual Residential Densities” were built many years ago.
  • Capitola recently modified their Site Inventory to raise the buffer for Low Income units from 4.7% to over 20%. This was done by moving all units from Moderate and Above Moderate to Low; see parcels 42 and 54 on Sites Inventory, Appendix D:3.
  • The City also has assigned 34 units of lower-income housing to state land which the city has no land use authority over, and for which there is no state program that allows housing development to occur.
    • Site #78, (036-021-03) is assigned ten (10) lower income housing and is part of the state park.
    • Sites #37 and #38  (034-111-46, 034-111-40) are the current DMV and its parking lot.
  • The City has identified sites #43 (034-551-02) and #74 (036-151-01), which are part of schools, for 12 low-income units. They have not included any indication that the school districts wish to build housing and in fact, indicate “No” in developer interest.
  • Many of the parcels in the Site Inventory are too small, too big or have a realistic density that falls below Mullen density that supports feasible affordable housing. 
    • Sites 71-76 do not meet the minimum required 20du/acre density for Lower income housing, so the City cannot count these 24 lower income units.
    • Sites 20-22, 46, 58 on their own do not meet the minimum 0.5 acre size presumed to be suitable for lower income development and are indicated as “consolidated sites”. However these individual parcels in the consolidated sites have separate owners. These sites represent land which the City has not demonstrated is suitable for lower income housing, and as such at least ten units of lower income housing should not be allocated to these parcels. 
    • The City’s consolidated sites program does not provide adequate incentives to encourage consolidation. The City should consider a more robust consolidation program that incentivises consolidation via policies like increased height, FAR, or temporary tax abatements for consolidated parcels.

(7) HCD Site Inventory Guidebook, page 24
(8) HCD Site Inventory Guidebook, page 27
(9) Draft Housing Element, Page 4-25

Affirmatively Furthering Fair Housing (AFFH) 

  • The City’s site inventory is heavily concentrated in the western portion of Capitola. The east side of Capitola has a large amount of R1 zoning and contains several schools and parks. 
  • Because all of Capitola is a high (or highest) resource area according to the 2023 TCAC map(10), AFFH goes beyond the site inventory to include housing programs and plans that enhance housing mobility and encourage development of new affordable housing. 
  • On Page 5-36 AFFH Action: Missing Middle Housing, Capitola lists homebuyer assistance, the Mall and rehab as their actions to facilitate development of missing middle Housing.  This is not sufficient to enable development of naturally affordable missing middle housing throughout the City, including the east side with large amounts of R1 zoning.
  • Capitola has added language to the very large Program 1.1. Adequate Housing Sites and Monitoring of No Net Loss  to “develop strategies to provide for missing middle housing” which is a vague commitment.
  • We urge the City to adopt more specific and rigorous programs for missing middle housing which would include:
    • If it is legal to build a 5000 square foot house for one family it should also be legal to build two 2000 square foot homes or three 1300 square foot homes in the same building envelope throughout Capitola. Consider amending zoning to permit 5 DUA on all parcels. This can be achieved without an EIR thanks to Senate Bill 10. (11)
    • Expand Program 1.3 Accessory Dwelling Units (ADU) beyond website updates and one intra-cycle review, including an ADU bonus program to incentivize more affordable ADUs. 
    • Update the City’s SB9 ordinance(12), including allowable square footage in alignment with underlying zoning rather than a limit of 800 sq ft each
    • Capitola should review the missing middle approaches of other California cities such as Pleasanton (Program 7.6 of certified Housing Element (13)) and San Ramon (Program 18 of certified Housing Element (14))

(10) 2023 CTCAC HCD Opportunity Map
(11) SB 10 - California YIMBY
(12) Capitola Municipal Code 17.75
(13) Pleasanton Certified Housing Element
(14) San Ramon Certified Housing Element