What we did for our lifts underwater is used cable type position encoders. the encoders give us high resolution feedback on the position of the cable on a calibrated spool. The encoder sits above water and the only thing that is underwater is the stainless steel aircraft cable attached (by way of pulleys) to the lift. This gives us absolute (not realitive) feedback on position to 0.01" which we round off for error correction. We also used prox sensors mounted in the wall of a waterproof box mounted next to a magnet on a cylinder mount for "home" positioning. You could use a force home position if you need to.
