With Sac State exploring downtown project, are 700 units of affordable housing scrapped?
The head of a downtown Sacramento business group announced Tuesday that Sacramento State is exploring a development along Capitol Mall that “has the potential to change our downtown forever.”
The project could occupy a site where the state had previously planned 700 new affordable housing units in three state office buildings.
Sacramento State is exploring affordable housing for students, and market-rate housing for a “diverse range of tenants,” Sacramento State President Luke Wood wrote in an Oct. 29 letter to the state’s Department of General Services, provided by a university spokesperson Wednesday.
The university is also exploring building a boutique hotel, classroom space and a performing arts venue, the letter stated.
The October letter does not appear to explicitly list affordable housing for non-students as one of the possibilities it’s exploring.
“Affordable Housing: addressing Sacramento State’s student, faculty, and staff housing affordability challenge is paramount,” the letter stated. “By including a portion of affordable units, we can provide housing options for lower-income students, contributing to a more inclusive community. Market-Rate Housing: offering market-rate housing alongside affordable units would attract a diverse range of tenants, ensuring that the project is both financially sustainable and socially inclusive.”
In its response Jan. 6, DGS summarized Sacramento State’s proposals from its October letter. It included affordable housing for lower-income students. It did not list other types of affordable housing.
University spokeswoman Lanaya Lewis said the proposals in the October letter are not finalized.
“At this time, we are not committing to anything until we have evaluated the real estate opportunities,” Lewis said Wednesday.
‘Most important state capital in the US’
Wood’s letter said the project would make Sacramento the “most important state capital in the United States.”
“The transfer of jurisdiction of these properties would represent nothing short of a transformational educational and economic development opportunity that would ensure the ongoing vibrancy in our downtown urban core next to the most important state capital in the United States,” the letter said.
In its Jan. 6 letter, DGS leaders granted Sacramento State exclusive rights to explore the proposed development at the three state buildings — 800/801 Capitol Mall, and 751 N St. The state employees who work in those buildings, for the Employment Development Department and State Personnel Board, are set to relocate to other state buildings this year.
“In reviewing your request, we find that your development proposal has merit,” the DGS letter said. “Given the proximity of the buildings to the Capitol, DGS’ objectives for redevelopment are twofold: first, that a project include needed housing, and second, that it provides an economic and revitalizing effect to Downtown Sacramento.“
In January 2023, Gov. Gavin Newsom’s office announced plans to open new affordable housing units along light rail lines. A recent DGS report to the Legislature said the number of housing units in the three buildings could be significant — close to 700.
On Wednesday, Crystal Sanchez of the Sacramento Homeless Union raised concerns that non-student affordable housing was not mentioned in the October letter. She worries the plan to open 700 new affordable units may be dead.
“Our elected officials have chosen to prioritize student housing, market-rate developments, and entertainment venues over their campaign commitment to create homeless housing,” Sanchez said. “This isn’t just a change of plans — it’s a direct abandonment of a critical campaign promise that gave hope to thousands.”
There are roughly 6,600 homeless people in Sacramento, a report last year found. Many of them have been on wait lists for affordable housing for years.
On the campaign trail last year, Sacramento Mayor Kevin McCarty frequently touted the plan to turn the state buildings into housing.
“Because of my law, the EDD building is going to have new housing on Capitol Mall,” McCarty said during a January 2024 candidate forum. The law, AB 2592, directed DGS to develop a plan to convert state buildings to housing.
McCarty on Wednesday said he supports the new project proposal.
“I am proud of the work I did in the assembly to pass legislation to open pathways for reuse projects like this,” McCarty, formerly a state assembly member, said in a statement Wednesday. “This exciting news from Sac State is the practical application of that legislation activating our downtown. Sac State is in an assessment period doing due diligence and evaluating the land and all options for it, including student housing and classroom space.”
McCarty said housing might open at a city-owned building at 9th and K streets, a few blocks from the site where Sacramento State is exploring development.
“We will put out a call for interest on the Hale building this summer to solicit proposals and see what comes in, whether that be housing, hotel space, or retail,” McCarty said in a statement Wednesday. “The type of housing is to be determined.”
The state hired a developer to undertake the renovation of the three buildings, but last year the developer withdrew from the arrangement, after identifying challenges with the buildings that would make it difficult and costly to redevelop them into apartments.
The state has provided few public updates on the buildings, including whether they could be demolished instead of redeveloped, or whether the project is still happening. DGS spokesperson Jordan Radach declined comment for this article, referring questions to Sac State.
A ‘decimated’ downtown
Wood’s letter said the state allowing many state workers to work from home has “decimated” downtown.
“Since COVID-19, downtown Sacramento has been economically decimated due to remote work and other constraints,” Wood wrote. “As a result, reimagining the downtown and urban core with economic development strategies centered around education represents a key opportunity for the downtown community.”
Following the pandemic, downtown Sacramento has recovered to only 54% of in-office employee visitation, which is lower than the national downtown average, the letter said.
City officials have said the work from home policies have also contributed to the $62 million deficit the city is facing in the fiscal year that starts July 1, due in part to drastic declines in parking revenues.
If the project moves forward, the state would transfer ownership of the buildings to Sacramento State, the letter stated.
Sacramento State is also building new on-campus housing on its campus, including a five-story building with beds for 335 students.
Also on Tuesday, DGS announced 23 underutilized state properties were available for development, including four in the Sacramento area: An apparently vacant lot along Front Street in Old Sacramento; the former home of Simon’s Bar & Cafe in midtown; a site at 16th and O streets; and one along Lamprey Way in Elk Grove.
This story was originally published February 26, 2025 at 3:03 PM.
