Posted on: July 16, 2026
Full Source: SF Gate
By: Angela Swartz
Gov. Gavin Newsom blasted this Bay Area city — its housing fight isn’t over
A home and community center next to the vacant 555 Kelly Ave. lot in Half Moon Bay, Calif., on June 1, 2026.
Large trees, green and magenta foliage, and a white house lined with burnt red-colored paint sit in a fenced-in vacant lot next to a community center. It’s blocks away from a cozy, flat and often misty downtown, which boasts a renovated library, a bakery known for its half-moon-shaped cookies, an independently owned bookstore and several art galleries. Visitors can pop into a historic one-room, two-cell jailhouse that was built in 1919 and operated until the 1960s. It’s within miles of fruit, vegetable and flower farms, a goat farm, and dozens of beaches.
There have been talks about turning the Half Moon Bay lot at 555 Kelly Ave. into housing since 2022 — specifically affordable housing for retired farmworkers aged 55 and older who qualify as extremely low-income and very low-income households. A 2023 mass shooting on some mushroom farms in the city exposed agricultural workers’ deplorable living conditions and spurred the move.
There have been talks about turning the But shovels haven’t broken ground yet. In fact, it appears that the five-story, 40-unit apartment complex won’t materialize for at least a few years.
Located on city-owned land, there have been disputes over the leases and size of the roughly $44 million development in the beach town, which is roughly 30 miles south of San Francisco. Building heights in Half Moon Bay are currently limited to 35 feet tall, or about three stories high, but state density bonus laws allow developers to go higher. Opponents argue the project should not qualify for density bonus, which requires a development to be within one-half mile of a major transit stop. State law defines a “major transit stop” as the intersection of two or more major bus routes, with service every 20 minutes or less during morning and afternoon peak commute hours
555 Kelly, as it’s known to locals, serves as a central example of how the city of roughly 11,000 has struggled to develop more affordable housing. In March, Gov. Gavin Newsom scolded 15 communities in California, including Half Moon Bay, for dragging their feet on development.
The 555 Kelly project did advance in May when the City Council approved a 99-year ground lease at $1 per year with the developer, Mercy Housing. Mercy is required to begin construction, which should take between 18 months and two years, by Dec. 31, 2028, Mayor Deborah Ruddock said in an email.
But developers face another challenge: a possible referendum that would require voter approval of the project. In May, under the leadership of Hal Bogner, a 33-year resident of Half Moon Bay, Let Half Moon Bay Voters Decide began tabling outside of Safeway to gather the required 800 signatures to get the measure on the November ballot. He noted that the city has a history of voter-led referendums.
“That’s a major decision that affects the character of the town going forward,” he said in a phone call with SFGATE regarding the council’s decision to approve the project lease. “Our purpose is to make sure that not just the people with strong feelings who go to the meetings are heard. There’s a lot of people who are not yet informed … and democracy says they have a voice too.”
But Belinda Hernandez-Arriaga, the executive director of Ayudando Latinos A Soñar, the local nonprofit tasked with operating an over 2,600-square-foot community space at 555 Kelly Ave., said the referendum is clearly aimed at impeding the development.
Members of the Let Half Moon Bay Voters Decide group table outside of Safeway in Half Moon Bay, Calif., on June 1, 2026.
“We turn inward to our community looking for respite and care in a space that we think embraces our farmworker community, and it’s just been an upward battle,” Hernandez-Arriaga said in a phone call with SFGATE. “We’re looking to the city and other political leaders to intervene and say, ‘This passed, let’s keep it as is,’ but I don’t think that’s where we’re at.”
Building constraints
The city faces several challenges that limit its ability to plan for more residential development — including its rare location along the ocean that’s also within 20 minutes of larger, more inland suburbs.
Half Moon Bay officials have blamed much of the delay on an extra layer of bureaucracy that the city faces. The city has to go through the California Coastal Commission for approval of any zoning changes in its state-mandated housing element (which requires the city to plan for 480 new units by 2031).
It’s also limited by Measure D, which caps residential growth in the city to between 1% and 1.5% annually.
California deemed the city out of compliance with state housing law in February. It has threatened to withhold funding, charge fines between $10,000 and $100,000 per month, and allow “builder’s remedy” proposals that enable residential projects to move forward, even if they do not comply with local development standards. This is not an empty threat. The state began charging Huntington Beach $10,000 per month and increased fines to $50,000 a month in June for defying housing laws.
“We are all well aware of the bullying by state officials in the media blitz, shaming the city and falsely blaming the city for project delays,” said Mayor Ruddock at the May 5 meeting when she voted against the lease. “… The process has been full of bullying, shaming, subterfuge, false accusations, project applicant delays and internal failure to manage for a better, more transparent and accountable process.”
Half Moon Bay has not been completely unsuccessful in opening new affordable housing developments.
According to San Mateo County Supervisor Ray Mueller, residents began moving into Stone Pine Cove, a development of more than 40 new, prefabricated modular homes, in 2025. The one-, two- and three-bedroom homes were built for San Mateo County farmworkers and are located just outside of downtown on a city-owned lot. Rents range from $698 to $2,420 per month — the county primarily funded the small homes.
Delays ‘beyond’ the city’s control
In an April 20 letter to the state, City Manager Matthew Chidester wrote that some of the housing element delays, like zoning changes, are “beyond” the city’s control. The city continues to await a letter from the state’s Department of Housing and Community Development to clarify housing element policies on Measure D, he said.
A view of Stone Pine Cove, a new affordable home community in Half Moon Bay, Calif., on June 1, 2026.
A view of Stone Pine Cove, a new affordable home community in Half Moon Bay, Calif., on June 1, 2026.
But there are other mechanisms for building housing that the city has more control over.
On May 12, the Planning Commission voted down a staff recommendation to the City Council about placing a measure on the November 2026 ballot. It would amend Measure D’s downtown map, which outlines where development can happen. The original map in the 1999 initiative includes properties that are not in the current town center designation.
On June 2, however, the City Council opted to ignore the commission’s guidance and voted to put the measure on the fall ballot.
In January, the City Council declined to follow the state’s guidance to not count accessory dwelling units in its growth quotas, which are outlined in Measure D. The council did agree to reduce ADUs and junior ADUs to count as half a unit or less of housing in its Measure D allocation, according to the San Mateo Daily Journal.
The city faced backlash in May after its council decided — in a split vote — to end a rent control measure that was put into place after the 2023 mass shooting. The cap limited rent increases to 1.23% for roughly 1,586 registered units. Tenants now go back to state law, which allows increases of up to 10%.
Realtors noted that some property owners believe rent control may affect “long-term property investment decisions or discourage property upgrades and maintenance,” according to a city staff report.
A harbor in Half Moon Bay, Calif.
Residents and housing advocates warned that the repeal could worsen housing insecurity for renters, farmworkers and seniors.
In March, resident Rocio Avila told the City Council through an interpreter that when rents can go up uncontrollably, families live in fear that their rents will increase. The average rent in Half Moon Bay for a three-bedroom apartment is $3,631 per month, according to Apartments.com.
“Children need stability. They need to know that their home will continue being their home the next year,” she said. “… Working families, people that cook in our restaurants, people that work in the hotels of this place, that attend the tourists when they come to visit, people that work in the fields and in the flower shops … people that take care of our kids, that keep our city functioning — they deserve an opportunity to continue living here.”
Resident Gernot Neumayer said he’s seen enough “McMansions” built in the city. He pointed to the Creekside Court development — just blocks from 555 Kelly Ave., the newly built and 2,000-square-foot-plus homes handily go for over $2 million.
“I think a lot of people take pride in that identity of being this small agricultural town,” he said in a phone call with SFGATE. “But then when it comes to providing housing to the people that contribute to this character, the farmworkers, then the enthusiasm is a little bit more limited, which is sad.”
Editor’s note: This story was updated at 11:30 a.m., June 8, to correct Half Moon Bay’s building height limit.
Full Source: SF Gate
More on the Project:
https://www.vmwp.com/projects/555-kelly/
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