A three- and four-story rental housing project is moving ahead at the site of Cantwell’s Market & Deli on the corner of State and Arrellaga streets near downtown Santa Barbara.

The 27-apartment project at 1533 State St. is still in the early stages of the planning process. Cantwell’s is open for business, and a smaller version of the neighborhood market will remain once the complex is complete.

The project calls for 15 one-bedroom apartments and 12 two-bedroom units, along with 34 parking spaces, 26 of which will be in the basement.

The housing and market development went before the Planning Commission on Thursday for a concept review. The feedback was mostly positive, despite concerns brought forward by some of the neighbors.

“This will be a very lovely project,” commissioner Lesley Wiscomb said.

Jay Blatter, a principal at Hochhauser Blatter Associates Architecture & Planning, designed the development on behalf of property owner Pradeep Shastri. The applicant is McGeever LLC.

Commissioner Devon Wardlow led the discussion, saying that she liked the project but wished it included more affordable housing.

“I do believe this is an excellent location,” she said.

Wardlow said she loves the use of the corner plaza and the outdoor dining, and that the design will enhance the neighborhood.

Still, she suggested that the developer create more below-market rate units.

“I think the project falls short in this category significantly,” Wardlow said.

She said she doesn’t want a larger building, but instead that the number of affordable units be increased within the 27 proposed.

Blatter said more units would require a bigger building and added that he wanted to be sensitive to neighborhood concerns.

“It’s gonna be 10%, sorry,” he said of the percentage of below-market units.

A few residents spoke at the meeting and expressed concerns about the project’s size.

“It dwarfs the entire neighborhood, and it even dwarfs the hotel across the street,” said Kerston Corson, an Arrellaga Street property owner, referring to the Courtyard by Marriott hotel at 1601 State St.

“This is gonna be around a long time and it will change the whole tone of that part of State Street.”

Another neighbor, Patty Ficke, said the design was “overwhelming” and “overpowering,” without consideration for the neighborhood.

“In the form that it is now, it is unlivable probably for Plaza Linda Vista residents to have a good life,” she said. “I don’t want to open my door and see three stories.”

Wardlow was sympathetic but put more focus on affordability.

“Though I do understand the neighbor’s concerns and their willingness and desire to keep the neighborhood the way that it is, I very much understand that the views will be impacted and that does sadden me,” she said.

“But I do find that this development is consistent with our need to create more housing.”