Large woody debris (LWD) is an important ecological element in rivers and streams. Despite its importance, LWD is often removed from urban stream channels for flood control or road maintenance purposes, an approach with high economic and ecological costs and one that is largely unsuccessful. We propose an approach to conserve LWD in channels by modifying infrastructure (culverts and bridges) to allow LWD passage, maintaining aquatic habitat and reducing flooding and road maintenance costs. In Soquel Creek (California, USA), which has a history of LWD-related flooding, we compared long-term LWD management costs of historical, current and a LWD-passing approach whereby infrastructure is enlarged to accommodate LWD passage downstream. We estimated costs of infrastructure replacement, programmatic flood control (LWD removal), LWD-related flood damage and lost aquatic habitat. The amount of lost aquatic habitat was determined by comparing LWD loading (pieces m−1) in Soquel Creek (0.007 pieces m−1) to nearby unmanaged streams (0.054 to 0.106 pieces m−1). Estimated costs of infrastructure able to pass LWD were nearly double that of historical costs but comparable to current costs. The LWD-passing approach was comparable to removal approaches in the short term (1 to 50 years) but much less in the long term (51 to 100 years), as expenditures in infrastructure replacement to accommodate LWD yielded reductions in flooding costs and habitat loss. Given the urgency to maintain and restore aquatic habitat, the proposed approach may be broadly applicable. Copyright © 2011 John Wiley & Sons, Ltd.