Housing: Our Local, Regional and Statewide Crisis

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Proposed development with housing units for 1549 Pacific Ave.

Few people are aware, but Santa Cruz County is on the verge of making the most substantial changes to local housing policy since the 1970s. And given the state of housing in the Bay Area, and across the state, you can bet other communities will be quick to take notice. Given this audience we have either a tremendous burden, or an incredible opportunity.

Now it’s no secret that we are in a crisis, both locally and regionally. If you have any ties to the Bay Area it’s extremely likely that you are at least somewhat aware of what has been going on in San Francisco. With all of the Google Bus protests and cries of gentrification, or the huge increases in the number of evictions to bypass local rent control, it would have taken some serious effort to not hear about it. And, as you can imagine, this crisis has also affected all of the surrounding areas, especially Silicon Valley, with its own surging tech economy luring people from all over the world, thus putting tremendous strain on the local housing market. But here on the Central Coast, surprisingly, the problem may actually be worse. Because while we have definitely experienced some of the peripheral effects from the neighboring tech boom, our own local economy is largely stagnant, albeit with plenty of future promise. At a recent meeting the County’s Housing Advisory Commission, a sitting commissioner really hit the nail on the head:

“Our rents are just as high as over the hill, but our incomes are half that.” 

And this really gets at why this problem is so unique, and so nuanced, because it’s not just about housing in terms of total stock, but housing in terms of affordability. Put another way, it’s housing in terms of how, and for who?

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Seaview Ave, Santa Cruz CA – some of our multi-family housing stock.

Before we can begin to answer these important questions, (and trust that there are no easy answers), we need to understand how we got here. Anyone who has been here for more than a few decades will tell you that we have always had a housing problem in Santa Cruz, and they’d be right. Our community is as bountiful as it is beautiful, with scenic views, mild weather, premier recreational opportunities, a vibrant research university, and an eclectic culture that draws people in waves, literally. But it hasn’t always been this bad, and just to put it in perspective, the Santa Cruz-Watsonville Metro Area was recently ranked as the least affordable place live with less than 500,000 people in the country, by the National HomeBuilders Association. So what’s really going on here?

In short, it comes down to one thing: our population has more than doubled since 1970 (120,000 to roughly 260,000), while the number of newly developed housing units has woefully failed to keep pace. However, this was done on purpose. With the no growth policies of the 1970s came Measure J, a policy whose stated reason, ironically, is to promote affordable housing through restrictions on new development. The primary way Measure J does this is through mandated inclusionary requirements, that is forcing developers to provide a certain percentage of their newly developed units (up to 40 percent in some cases) to those earning 100 percent or less of the Area Median Income, or AMI. The problem is that this creates a huge disincentive to build, which again, was kind of the point. Since Measure J’s adoption in the late 70s fewer than 500 of these affordable units have been built, or roughly 14 a year, making this policy an absolute failure in terms of providing affordable housing, but a windfall success at halting new growth… Oh wait, no it failed in that regard too because the population more than doubled, leaving those of us who live here now with inadequate housing stock, that is in extremely high demand, meaning that it’s really really expensive.

Furthermore, the County and City programs that actually worked to provide affordable housing through direct subsidies, Redevelopment Agencies, were raided as part of the 2012 “we got to balance the state budget at all costs” bonanza, meaning that local jurisdictions have very few options for financing new affordable projects. Hence the state, regional and local problem of no-one-can-afford-to-live-anywhere-anymore.

So here we are, prompted by a recent court ruling that basically says mandatory inclusionary requirements on rental property are illegal, so the county needs to update its housing element. So what did the County do? Well they took the opportunity to go above and beyond the call of coming into compliance, and instead proposed a slew of changes designed to recoup the lost funding of redevelopment, mainly by imposing fees on new development. As part of the package, they want to charge $15.00 per square foot on all new ownership properties, as an alternative to providing inclusionary units, which while proving greater flexibility, still imposes a substantial burden on developers (to the tune of $40-45,000 a unit!). Additionally, they want to start imposing a nominal fee of $2.00 per square foot on all new commercial and rental properties, despite full well admitting that new rental development is already financially infeasible. (Source)

And this is really the crux of the problem, rather than address the elephant in the room – our drastic need for more housing stock – the County has moved forward with what is essentially a piecemeal attempt at maintaining the existing policies of making it really really hard to build, while trying to get back at some lost funding. The focus, conscious or not, is dependent upon increasing demand, meaning that the how and who of this discussion is laughably one-sided. If the County actually wants to make a dent in our affordability gap then it will need to take steps to actually encourage the development of new housing. This isn’t San Francisco or Santa Clara where the demand is so high that people will pay just about anything because they work in the area and have a median income of $92,000.

This begs the question, if we as a community made the conscious decision to increase our housing supply, what would that look like? Well, the first step is collaboration. A Strategic Housing Plan that brings all of the incorporated cities to the table to take a regional approach would be a great start. Another great step would be to follow through with a number of the recommendations in the Sustainable Santa Cruz Plan and County Economic Vitality Strategy, and rezone a number of key areas near transportation corridors to provide for higher density and taller buildings. You would be amazed at how restrictive height limitations are. Third, assess the impact of all existing fees and taxes on new development, and waive some in exchange for developer concessions. For example, if a developer is willing to build in an area that already has ample services (police and fire) and doesn’t require the expansion of the service area, waive some associated fees or property taxes (example). If a developer wants to build a live/work space or a senior living complex, both of which require less on site parking, then reduce the parking restrictions. Fourth, rather than take the inclusionary requirement approach, provide a greater incentive for density, ah la density bonuses. If a developer voluntarily makes 15 percent of their proposed units affordable to those making 100 percent or less of Average Median Income (AMI), then allow them to build 33 percent more units. Or why not 40 percent? Or maybe allow them to pay cash instead of providing on-site units. The point here is flexibility. The common thread amongst all of these potential solutions is that they will encourage the building of more housing stock, and directly help to solve our problem. (Also, because I know I am going to get a comment on it, steps can be taken to offset all new water use and then some, in the form of water demand offsets.)

So at this critical juncture we have a genuine opportunity to do something new, and deal with a problem that has been generations in the making. Or we could do what we have always done and kick the can down the road a bit further. This problem is not going away and it will only get worse. New fees alone don’t come anywhere close to what redevelopment had, and even those didn’t make a dent. Whatever we decide to do, rest assured, other communities are watching. We can either be the future model of forward thinking solutions, or take another turn in the back of the bus doing the same thing over and over again, expecting different results.

 

3 Comments

  1. Bill Ford says:

    Good thinking, good start. Continuing to kick the can down the road will deliver a community only 1%ers will be able to afford … of course maybe this was the plan all along?!

  2. Steve Pleich says:

    Creation of Affordable Housing in the New Economy

    When we talk about affordable housing we must first understand that jobs creation and affordable housing are two sides of the same development coin. If we cannot live where we work, the creation of truly affordable housing is a Pyrrhic victory at best. As our economy and employment markets recover, I believe that there are several key elements to a workable and sustainable low and modest income-housing plan.
    • First, we need to support the continued application of the city’s Inclusionary Housing Unit requirement.
    • Secondly, we must work for the passage of an ordinance assessing a modest tax on all transfers of real property, both residential and commercial.
    • Thirdly, the city must adopt an ordinance that imposes an incremental tax on all realtor commissions.
    • Fourth, we must support all programs and policies that maintain the affordability of existing housing stock in Santa Cruz.
    • Fifth, we must support the continuing enforcement of the policy against condominium conversions.
    • Sixth, we must strongly advocate for the establishment of mutually beneficial affordable housing partnerships between the City of Santa Cruz and non-profit agencies such as Habitat for Humanity.
    • And finally, we must lobby for new legislation on the state level to provide permanent funding for local affordable housing development.

    Santa Cruz faces the challenge of forging new public and private partnerships that will drive the creation of affordable housing. As we consider the additional issues of environmental sustainability, higher density development and the modest growth envision by our new General Plan, we must redefine the meaning of “affordable housing” and reaffirm our commitment to this most fundamental part of the American Dream.

    Steve Pleich is a Santa Cruz resident and advocate for low and moderate-income housing development.

    • Chris Nunez says:

      Your third point really caught my eye Steve! Back in the late 60s and 70s I was commuting by bike from SJSU to the East Side, and for years I kept seeing an empty house on the corner (good neighborhood area by the college) empty, but the real estate signs in front of it kept changing. I knew something was fishy, and sure enough, years later the term ‘flipping’ came into our jargon. Real estate brokers were flipping houses to each other, and the price of the property kept getting inflated. So, a tax on these transactions is a good idea.

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