CUPERTINO — In a critical test of a controversial state law intended to fight California’s crippling housing shortage, this small city is just days from being forced to approve a massive residential, office and retail development that some residents fear will destroy their quality of life.

Council members are hoping for compromise. A slow-growth community group called Better Cupertino is threatening a lawsuit and a voter referendum. But under SB 35, the developer that bought the rundown Vallco Mall holds most of the cards — and appears likely to build more than 2,000 badly needed homes on the site, whether the community likes it or not.

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Developers, academics and advocates throughout the Bay Area and beyond are rapt as they watch the confrontation that has turned Cupertino into a microcosm of the forces at play in the housing crisis — and a potential precursor for development battles across the state.

The project is the first major test case of SB 35, a state law passed last year that forces cities to green light residential and mixed-use projects that meet certain requirements.

The Vallco application will be “precedent setting” for other cities with potential SB 35 development sites, said Chris Calott, a development and architecture professor at UC Berkeley.

“It’s important to see if the statute really holds, or works,” he said.

The city now has three plans before it — the SB 35 application and two alternatives. Better Cupertino objects to all of them, citing worries of overcrowding. Nearly everyone has concerns about traffic.

But advocates say Cupertino, like almost every city in the Bay Area, desperately needs residential development to ease the region’s crippling housing shortage.

“For Cupertino and the West Valley, on a 10-point scale, the Vallco plans are an 11,” Carl Guardino, president and CEO of the Silicon Valley Leadership Group, said of the project’s importance.

Under the SB 35 proposal, the developer, Sand Hill Property Company, wants to build 2,402 homes, 1.8 million square feet of office space and 400,000 square feet of retail. The deadline for Cupertino to approve that proposal, which the city has already said meets the requirements of the state law, is Sept. 23.

A rendering shows what the proposed Vallco Town Center project in Cupertino

would look like. The plan to redevelop the failing Vallco Mall includes

2,402 housing units, 400,000 square feet of retail space, 1.8 million

square feet of office space and a 30-acre rooftop park. Developers

submitted the proposal to Cupertino city officials Tuesday, March 27, 2018.

(Courtesy of Sand Hill Property Company)

The City Council has two alternative plans, created by Opticos Design, Inc., that are set for debate and a possible vote Tuesday. One calls for more retail, slightly fewer homes, and reduces the amount of office space by more than half; a second calls for more homes, slightly more retail and a bit less office space. The council also could agree on a compromise between the two alternatives.

Sand Hill said it would consider building the second plan, instead of its SB 35 proposal, but not the first.

“We’re in this process because we hope to have a community-driven project at the end of the day,” said Sand Hill managing director Reed Moulds. “Our goal is to not simply propose a project that is conceived under state law on this site.”

But some residents still worry the development will cost them the Cupertino they know and love. Better Cupertino, which helped quash prior plans to redevelop Vallco in 2016 by placing a measure on the November ballot, is taking up arms against all of the new proposals.

“People choose to live in Cupertino, not San Francisco, not San Jose, not other cities, because they love the way Cupertino is,” said Better Cupertino co-founder Liang Chao, who has lived in the city 20 years and is running for City Council. “Of course we need to grow. But it doesn’t mean we have to change Cupertino into another city.”

Better Cupertino and its allies have laid out a two-pronged approach to stop the three proposed plans. If the city council approves the alternative plans this week, the group has threatened to challenge that approval with a ballot referendum, which, though too late to appear in November, could be put before voters in a future special election.

If that happens, Sand Hill is free to go full speed ahead with its SB 35 proposal instead. To combat that plan of action, Friends of Better Cupertino has sued the city, asking the court to block the SB 35 proposal on the grounds that the project is not eligible for fast-track treatment under the state law.

Better Cupertino has collected nearly 1,200 signatures on an online petition to halt the “unwarranted increase of office and residential density” at Vallco. And Friends of Better Cupertino last month said it had raised more than $8,000 from over 50 donors to pay for its potential legal battle with the city.

Sand Hill isn’t backing off.

“We are not going to slow down,” Moulds said. “If there is further litigation or challenges, we will be 100 percent committed to moving SB 35 forward.”

There may not be much Better Cupertino can do to thwart the Vallco plans subject to that state law signed last year. Under SB 35, cities that aren’t meeting their state-mandated housing development goals — virtually all cities in California — must approve residential or mixed use projects that meet certain qualifications within 180 days. And those projects are largely exempt from the community pressures and lawsuits that often stall housing construction.

Vallco would be the first major project to test SB 35. In May, San Francisco officials approved a smaller affordable housing development proposed by the Mission Economic Development Agency. Four other applications are pending approval under SB 35, according to the San Francisco Planning Department. Earlier this month, Berkeley rejected a proposal to build 260 apartments and 27,500 square feet of commercial space at 1900 4th St., saying it didn’t qualify for the SB 35 fast-track.

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Cupertino offers up its own plan for defunct Vallco Shopping Mall The question of what to build at Vallco has divided Cupertino, and colored everything from residents’ small talk to city politics. Three council seats will be up for grabs this November, and Better Cupertino is hoping to fill them with its supporters. Meanwhile, former mayor Richard Lowenthal, who has been involved in efforts to renovate Vallco for 20 years, emailed residents Sept. 8 urging them to “help take back our city from Better Cupertino” by voting for another slate of candidates.

“It’s getting cast as sort of pro-developer, anti-developer,” Lowenthal said. “I hate the fact that it’s so politicized, so polarized, but that’s the way it is.”