UCSC to Break Ground on Student Housing West Development, Regardless of Litigation 

Despite these concerns, Chancellor Cynthia Larive confirmed to City on a Hill Press that administration plans to break ground by 2024, regardless of ongoing litigation against SHW.

Matthew Waxman, a 2006 graduate of UCSC, has been an active participant in conversations surrounding campus development since his time as an undergraduate and a member of UCSC’s Alumni Council from 2014 to 2021.

While at UCSC, Waxman served as the Student Union Assembly representative in the 2005-2020’s Long Range Development Plan (LRDP) Committee. Since then, he has received a Masters in architecture from Harvard University, and has contributed to numerous building projects in higher education.

“It’s about the community of UC Santa Cruz, of alumni, of students, of faculty, of staff, of the community at large, that have expressed concern about this project,” Waxman said. “And that concern has been completely ignored.” 

Litigation interrupted the development even before Larive became Chancellor in 2019. UCSC administrators and developers involved in the project were previously stalled by lawsuits. 

“[Breaking ground while litigating] is a gamble. If the University wins the lawsuit, fine. But if the University were to lose the lawsuit, there is a real danger,” said Chancellor Emeritus George R. Blumenthal. “You will have spent a fair amount of money without getting any return. […] I was much too risk-averse to want to go down that road.”

After the Regents approved Phase 1 of SHW in March 2023, the Habitat and Watershed Caretakers (HAWC) filed their third lawsuit against SHW in an effort to preserve the progress they made with their earlier lawsuits from 2019 and 2021. HAWC attorneys filed for dismissal of the 2019 case, while the 2021 case remains in the appeals process. 

The active HAWC lawsuit claims UCSC has violated the California Environmental Quality Act (CEQA) by re-approving SHW in March without a revised Environmental Impact Report (EIR). They assert that UCSC needs to prepare a new EIR because the project has undergone significant changes in “budget, scope, design, and impacts” since the last EIR was published in 2021.

The suit also alleges that the definition of “below market rate” used for SHW’s proposed rents overestimates local market rates, driving up costs for students.

Who’s paying for SHW?

Before 2023, UCSC’s plan centered on a public-private partnership (P3) with real estate developer Capstone. The P3 model allowed the UC to avoid incurring too much debt in its name, which might raise its interest rates. But in March 2023, the UC Regents returned to a university financing model.

The Regents approved a total of $145.6 million in funding to build Phase 1 of SHW. $128.1 million will be financed externally through debt service, which means investors can buy debt bonds to be paid off by the university over 35 years. The administration’s proposed plan to the UC Regents doesn’t clarify who those investors would be. The remaining $17.5 million will be coming out of the campus’s housing auxiliary fund, which is funded by students paying for housing contracts and dining plans.

• A public-private partnership (P3) is a collaboration between a government and a private business typically involving financing, planning, and executing by the private enterprise.
• According to former Chancellor Blumenthal, this partnership was proposed by the University of California Office of the President (UCOP) to keep each of the UCs from incurring too much debt and going over their borrowing limit.
• There are limitations to the P3 model according to UCSC’s Director of Capital Planning and Construction Steve Houser: “One of the advantages of using University financing versus private financing is that if you use private financing, and there’s a lawsuit, the private financing entities will not fund [the project].”

University financing gives the project access to lower interest rates than private interest rates accessible through the P3 model. As a university-financed project, SHW can move forward even in the face of pending litigation, as the project doesn’t risk scaring off private investment. 

Yet years of delays, lawsuits, and the switch to the university-led model have already led to about $6.5 million in sunk costs, money that has already been spent that the University will not be able to get back.

“All of these delays — and the delays could be redesigning, attorney costs, construction costs — translate to a higher project cost, which then has to be paid off via housing debt service, [which is spread] over 9000 beds,” said UCSC’s Director of Capital Planning and Construction Steve Houser.

According to Houser, construction costs rose dramatically during COVID, and while he hopes they’ll slow down in the future, they might not. 

The best case scenario would be a 3 to 5 percent increase in construction costs per year, Houser said. Historically, increases hover around 5 percent, but Houser imagined a worst-case scenario of 10  to 15 percent annual increases.

With ever-rising costs looming over the project, UCSC will have three options for absorbing the cost of SHW without putting the campus in debt, according to Houser. 

First, they could cut the scope of the project by delivering fewer beds or reducing square footage to decrease construction costs. Second, they could delay future housing projects. Third, they could increase on-campus rental rates to bring in more revenue. 

Houser said that UCSC doesn’t currently plan to “spike” rental rates in the coming years. But according to Larive, there is nothing stopping this from happening.

“There’s no commitment to keeping rental rates to a specific percentage below market rate,” Larive said. “When we go for a new housing development, the Regents expect to see something that’s twenty to thirty percent below market [rate].”

But what exactly is “market rate”? The answer varies depending on who you ask. 

The University of California Office of the President (UCOP) stated that a typical two-bedroom apartment in Santa Cruz cost $3,431 in 2022. UCSC’s Community Rentals website reports an average of $4,292.83, with the lower-end being $3,017 per two-bedroom unit in 2023. Karon Properties, a local Santa Cruz brokerage firm, shared their 2023 estimate of $3,000 to $4,000 per unit with CHP. 

But in UCSC’s proposal to the UC Regents, a market rate analysis made by Jones Lang LaSalle (JLL) Real Estate estimated a private two-bedroom residence would cost $5,105 in 2025-2026. The analysis also estimated that in 2028, when SHW would be complete, the cost per room in a two-bedroom unit would be $3,136. 

JLL’s market rate estimates are nearly twice as high as the other estimates. UCSC chose to use JLL’s “market rate” comparisons to determine rental rates for SHW. 

The lawsuit from HAWC alleges that JLL conflated the cost per bedroom with the cost per student by “using an artificially magnified 26% rate of inflation”, skewing off campus rents higher. Meanwhile, the analysis skewed on campus rents lower by “using an artificially low 1.7% rate of inflation” —– below the campus’s 3% per year increase policy — to project SHW’s rent.

Rather than rely on increased rents, UCSC could further delay future housing construction if costs continue to increase, Houser said. 

“Usually what we do is […] we defer the next [housing project] out a little bit so we can catch up financially,” Houser said. “The good side to that is while there are [rental rate] increases, they’re not spiked. The downside to that is you’re not able to deliver housing […]. We’ve had a lot of years where we haven’t delivered anything.”

Groundwater Goes and Sinkholes Show? SHW’s Environmental Concerns

Since the earliest stages of the university’s development planning, the East Meadow has always been protected from development.

In the 2005 LRDP EIR, all of UCSC’s plans to accommodate future growth avoided building on the East Meadow. With SHW’s Hagar development, the university decided to build there for the first time — a decision that immediately sparked environmental concerns from the local community.  

The most serious issue with the Hagar site is the possibility of sinkholes, according to Paul Schoelhammer, a 1969 UCSC graduate and member of the East Meadow Action Committee (EMAC).

• EMAC is a group of individuals made up of former UC Regents, UCSC faculty and staff, students, alumni, and Santa Cruz community members opposed to the development of East Meadow.

SHW’s Hagar site is a “karst” landscape, meaning the rock under the planned site is soluble and at risk of dissolving, which would cause the soil above to collapse. 

“[UCSC has] had experience with these sinkholes opening up. The sinkhole that is now at the corner of Hagar and Coolidge […] was not there when I went to school,” Schoelhammer said. “It has opened up since then because the two roads that come together have some modest effect of gathering water and dumping it at that corner, and that has just dissolved the rock underneath.”

In the EIR for their most recent LRDP in 2021, UCSC administration also proposed potentially pumping water from the karst aquifer that underlies UCSC’s north and central campus to supply water to the growing university population. Storm water that is collected in this aquifer is discharged in springs at lower elevations to the east, south, and west of campus. 

Thomas Aley, a senior hydrogeologist and President of Ozark Underground Laboratory, Inc, presented his concerns about this proposition in a comment letter for the 2021 LRDP EIR. 

A 1992 groundwater tracing report by Aley was cited in UCSC’s draft 2021 LRDP EIR to suggest that pumping water from the well would not have significant negative impacts. In his letter, Aley claimed he didn’t agree with this conclusion because the original tracing was done for a greenhouse on campus that required significantly less water than what would be required for an enlarged student population.  

Some of Aley’s biggest concerns included that UCSC does not have enough data on spring flow and the groundwater in dry conditions to say they could pump water with little impact on the aquifer. With that being said, if the groundwater in the aquifer lowers, there are higher chances for sinkholes — making East Meadow particularly vulnerable.  

Houser acknowledged the risk of building on karst; in fact, SHW’s Hagar site had to be moved slightly from its originally planned location to decrease the risk of sinkholes. 

But he also pointed out that this isn’t a problem unique to SHW. With most on-campus construction projects, UCSC has worked around geological problems posed by the campus’s landscape.

“There are sinkholes in a lot of places on campus, not just there […] so I would characterize it as [not being any] more of a risk than there is on current housing,” Houser said. “It’s just a challenge with developing anything on this campus. It is one reason why it’s so expensive building on this campus.”

Nicole Wong, a recent Environmental Studies B.A. graduate and member of Enviroslug, has tracked SHW’s progress since she got to UCSC in 2019. 

Wong herself struggled to find housing in her time at UCSC. But she’s not confident that SHW will keep in line with UCSC’s commitment to sustainability. 

“I truly believe that UCSC needs to build housing, and something needs to be done immediately,” Wong said. “But it’s hard for me to believe that […] this project has students’ and the environment’s best interest in mind, when it feels like administration at UCSC are often chasing profits or accolades, and a lot of projects like this often fall flat in terms of really changing things in the long term.”

SHW and Beyond: The Future of Campus Housing at UCSC

Chancellor Larive made it clear that UCSC is not building SHW to accommodate additional enrollment growth. SHW’s purpose is to more effectively house the current student population.

“The main purpose of [SHW] is to pull students from off-campus housing to on-campus housing,” Chancellor Larive said. “It’s not about enrollment growth, […] what we want to be able to do is to take some of the lounges that are in the colleges and convert those back to lounges; some of the lounges got converted to dorm rooms, or apartments.”

Considering Santa Cruz’s housing crisis, Larive said that the administration is working on keeping enrollment “more or less flat” until more housing is ready for move-in. 

After Santa Cruz Mayor Fred Keeley expressed his support for SHW in the March UC Regents meeting, UCSC and the City of Santa Cruz started conversations on how UCSC can make enrollment growth proportional to expansion of on-campus housing. Keeley said he also hopes to discuss and settle two on-going lawsuits between the City and UCSC.

• The City of Santa Cruz is suing UC Santa Cruz over LRDP 2021, stating the school does not factor in the impact to the city by enrolling more students if housing is not built. 
• UC Santa Cruz is suing the City of Santa Cruz over the water the City provides to the school, stating that according to an agreement they signed in 1962 and 1965 the City should be providing water to all parts of campus — even in areas just outside of the city limits.

“[Litigation] is evidence of a failure, and oftentimes is not the first choice,” Keeley said. “From my way of thinking it should be your last choice.” 

Houser said he can’t predict when construction will start on Phase 1 of SHW, but construction likely won’t begin until spring or summer 2024 at the earliest. 

Even after SHW is completed, UCSC will need to continue building more housing to satisfy its students and its host city. Everyone CHP spoke to acknowledged this reality. But as controversy persists around SHW, it seems that no plan exists beyond getting this project over the line.

“I wish that there was a way to balance and meet the needs of the environment and students at the same time,” alumna Nicole Wong said. “But sometimes I feel that these housing projects aren’t really on the side of anyone, they’re just creating temporary fixes. And I think that balance can’t be struck without the involvement of student voices and these environmental groups that keep pushing back. There needs to be a collaboration with everyone.”

Waxman maintains that the opposition towards SHW is not a pushback against building student housing, but against this particular plan.

Time and time again, alumni, faculty, and community members have asked the University to look at their concerns, and time and time again these concerns have led to the courtroom.

There is no question that everyone wants to build housing, but at what cost?

“Nobody is anti-housing. The university will portray, or has portrayed folks that have been critical of this project as against housing. And it’s just untrue,” Waxman said. “We want what’s best for the university as a place that has value for the student experience, now and in the future. That means the daily lived experience of the students is extremely important.”

Ashley Glancy contributed additional reporting.

Read more City on a Hill Press coverage about Student Housing West below.