Santa Cruz County Business Council’s own Sibley Simon from Envision Housing and the Monterey Bay Economic Partnership (MBEP) worked on a project aimed at the local housing Crisis. The Paper “What Realistic Policy Changes Could Improve Housing Affordability in the Monterey Bay Region?” discusses restructuring the current per square foot fee along with several other realistic local policy changes throughout our region.
The issue of affordable housing in Santa Cruz has grown to become near unavoidable. From college students cramming more and more peoples into single bedrooms, to illegal garage units and add ons, to those who are forced out of their homes altogether and on to the streets–the evidence is everywhere. For those seeking to find a place to rent, or even to a more difficult degree, to purchase a home–there are increasingly few options. The problems of housing availability and affordability in Santa Cruz are not going anywhere. In fact as Silicon Valley expands and as more students enroll at UC Santa Cruz the problem will only continue to grow.
So where does this leave us?
Faced with what seems to be an increasingly dire situation many are once again considering a concept called inclusionary zoning. Inclusionary zoning is the process through which all developers must provide a certain proportion of deed restricted affordable units for every market rate residential unit created. Basically, for every market rate unit developers create they must make a percentage of affordable units to prevent all middle and lower income consumers from being driven out of specific areas.
This policy protects individuals with occupations that are indispensable to communities such as educators, law enforcement, mechanics, and many other paths that come with incomes that are relatively fixed. These are career paths that are considered not only admirable but are skills that are sought after in every area. And, as anyone who lives in Santa Cruz is probably aware, having a fixed income is not advantageous when the cost of living is anything but fixed. So by mandating inclusionary zoning these individuals are given some opportunity to live in units they would otherwise not be able to afford while their communities are able to continue to benefit from their skill set.
As far as Santa Cruz is concerned, the first inclusionary zoning ordinance was passed in the unincorporated area of the County as a voter-approved initiative under Measure J in 1978. It was later passed in the City of Santa Cruz as Measure O, becoming effective in its first resolution on January 15th of 2007 (each City has their owner version of an ownership inclusionary ordinance). Under Measure O 15 percent of units must be sold at a cost that is attainable to the median or below the median total income of Santa Cruz County–and must be the principal place of residence of the buyer. This maximum total income of potential buyers is designated through a formula and monitored by the local government.
Given that inclusionary zoning has been practice locally for close to 4 decades, why is housing still so unaffordable? Like most policies, while inclusionary zoning is a clever and helpful practice, it does come with its own set of pitfalls.
Primarily that developers do not want to take a mandated loss on the residential units they create, construction and development is afterall a business. For the developers who do choose to proceed, they feel compelled to raise the prices of other units within their project to cover the costs. This has been shown to create a net increase the price of housing on the open market and make things more difficult for other young families and skilled workers–as only a lucky few will be allotted a space within the limited inclusionary zoning restricted units.
This all becomes very sticky because without the practice of inclusionary zoning not only will even more individuals be driven out by the high cost of housing, but developers and policy makers will be hamstrung in what they can do, thus making them more likely to inadvertently create concentrated areas where more lower income people live–instances that can lead to gentrification and an even larger socio-economic divides.
Is there a way to balance the pros and cons of this policy approach?
The answer is yes, and there is already a growing body of research and some relevant case studies from which to build on. For instance, in San Diego, they chose to implement an incentives based, voluntary inclusionary policy, rather than simply mandating the units. The way this works in practice is that developers can choose to build a certain percentage of their units as deed restricted affordable on site, in exchange for other concessions like waiving parking requirements or getting added density.
Let’s say a hypothetical developer wants to build 100 units. If they elect to restrict 15 of those units to be sold to those earning below the median income, the local government will allow them to build 25 more units total. If they build 30 units of deed restricted affordable units they will be allowed to build 25 more units, and have the required number of parking spaces be reduced from 1 per bedroom to .75 per bedroom. This not only makes the project more financially feasible from the development side of things, but also generates more housing, both affordable and market rate(!).
The San Diego program has proven to be so successful that they have seen a 900 percent increase in the number of projects applying to build on site units, and a near 500 percent increase in the number of on site units actually being built.
This is important to keep in mind because both the County of Santa Cruz and the City of Santa Cruz are considering amendments to their program in 2018 and beyond. This presents housing advocates and members of the business community with a real opportunity to work together to implement a more balanced ordinance, one that could end up producing more units of housing, of all types, to meet the broad housing needs of our community.
If you have been following the issue of housing in the California State legislature for any significant period of time then you have probably heard of the Costa-Hawkins Act, otherwise known as the Rental Housing Act, or “Rent Control” Act. Costa-Hawkins is a piece of legislation enacted in 1995 that regulates how local jurisdictions (Cities and Counties) can implement rent control. It specifically does 3 things:
- It Exempts all Single Family Homes from rent control
- It Exempts all Apartments built after 1995 from rent control–specifically because the bill author’s didn’t want to discourage the development of new rental housing.
- Vacancy Control: when a tenant leaves a rent controlled unit the landlord can “reset” the rent to the market rate.
The whole purpose of Costa-Hawkins was to allow for rent control in the areas of the State that have an economic case for it (mainly the larger metro areas where rents have been shown to skyrocket during economic booms and busts), and mitigate the potential impact that rent control might have on specific types of housing, and in particular, new development. This last part is key, because if Costa-Hawkins were to be repealed, then theoretically every new housing unit built could be subject to price controls, which would create a massive dis-incentive to build in the first place.
Think of it this way, if you were planning on investing tens of millions of dollars to build a new apartment building, the last thing you would want to hear is that the local government can dictate what you can charge for those units–perhaps indefinitely, if vacancy control is also removed. That risk alone would deter you, and more specifically your lenders, from moving forward.
That is why AB1506 – a direct repeal of Costa-Hawkins, which was introduced at the beginning of this year, was so controversial. Proponents had mixed messaging, varying from “it’s just about empowering local jurisdictions and local control” to the more honest “we want to be able to apply rent control to more units” message.
Now there can be no doubt that the intentions behind the bill were, in theory, good. Our state is in the worst housing supply crisis in its history, and rents are skyrocketing, everywhere. Thus many activists’ first reaction was to try and stop the rent from rising, directly and bluntly. However, as has been shown time and time again through countless studies, rent control is a demand focused policy, with the unintended consequences of limiting supply. If the real solution to the supply problem, which is undoubtedly build more housing, then anything that deters new investment in more supply is inherently problematic.
Thankfully AB1506 died last week in Committee, thanks to the caution employed by many of our more moderate legislators, and supporters from the California Apartment Association, who showed up en mass to protest the bill. Supporters have now indicated that they will instead try to put a ballot initiative to repeal Costa-Hawkins before voters in November, a move that will be much more expensive to fight.
Yet what is truly surprising about the attempt to get AB1506 passed is the poor political tactics employed by its supporters. Rather than amending Costa-Hawkins, to perhaps change the dates of exempted apartment units, or the type of units, or even to just address the vacancy control provision; they instead chose the scorched earth strategy of complete repeal. The move drew easily identifiable lines in the sand, and immediately alienated any moderate support they may have been able to court for smaller amendments. This leads even the casual political observer to the conclusion that they are either not very well organized, and thus unlikely to get the signatures needed to get it on the ballot; or that they had no faith in the efficacy of their initial push for the legislation anyway–meaning that they don’t actually believe a repeal to be good for rental housing. If they did, then surely they would have attempted to negotiate incremental changes in good faith.
Jan 15, 2018
Contact Jim Coffis
The Future of Cannabis in the County of Santa Cruz
A public meeting on the future of cannabis in the County of Santa Cruz will be held Wednesday
evening, January 24 at the Resource Center for Nonviolence, 612 Ocean Street in Santa Cruz
beginning at 7 pm.
Hosted by a coalition of cannabis advocates representing consumers, patients, caregivers,
environmentalists, small growers and others involved in the local cannabis trade, the meeting is
open to the public.
The imminent release of the million dollar, year long, Environmental Impact Report on
commercial cannabis is expected to renew the debate on the shape of local regulations. The
Board of Supervisors is expected to take up the issue in early February.
Learn about your existing rights, current and proposed state and local regulations, and the
economic viability and impact of cannabis in our community.
Hear about the short and long term future and how it will affect access, availability, cost,
production and the environment.
Advocates supporting improved access to medical and adult use products and licenses; best
farming practices; environmental improvement and social justice will share their insights.
Experts will be on hand for one on one advice on the regulatory process, consumer rights, and
best practices. Leaders and luminaries from the local cannabis community will speak on the
current state of affairs and the next steps that need to be taken.
All interested stakeholders are invited to explore available options to ensure the preservation of
our unique and rich cannabis heritage in this new era of legalization.
After sitting as a vacant lot for over 27 years Park Pacific, the property located adjacent to Lulu Carpenter’s, has finally broken ground! After a moving speech by President Case Swenson, and some words of encouragement from Senior Vice President of Construction and Development Jesse Nickell, the group of builders joined with Santa Cruz Mayor David Terrazas to perform the ceremonial shovel lifting. Construction is expected to continue throughout 2018 and beyond, with the first much needed housing units coming online shortly thereafter.
The project, which had been approved under previous ownership years ago, constitutes the final lot to be re-developed after the 1989 Loma Prieta earthquake. The 70+ units will be rented out at market rate levels initially, but will still adhere to the City’s Measure O inclusionary zoning program for affordability once the first unit is sold. At that point 15 percent of the units will be deed restricted and set aside for those making lower incomes.
The following is letter written in part by Business Council staff, in concert with other housing and community leaders, regarding the County’s proposed amendments to it Inclusionary Zoning Ordinance. The current list of signatories may not reflect the final number of people who have signed in support of the letter.
RE: Proposed Amendments to Santa Cruz County Code Chapter 17.10 – Affordable Housing
Dear Santa Cruz County Board of Supervisors,
We are a consortium of housing advocates, business and development industry representatives, and community leaders that together represent more than 40 individuals, companies, and organizations that do work in Santa Cruz County (attached is our list of signers). Together we have a shared interest in the creation of more housing units, of all types, to address the housing affordability gap and supply shortfall that our community currently faces.
Given this goal, we would like to request that the Board continue this item to ensure a more robust community discussion before the adoption of the policy changes being put before your Board under Item 59 – 4585 Amendments to Santa Cruz County Code Chapter 17.10. We believe such changes would be premature, given the ongoing work on the Sustainable Santa Cruz County Plan, the potential passage of a 2018 Countywide Housing Funding Measure, and the Vision Santa Cruz County Strategic Planning Process. Specifically, we feel the policy approach being considered needs greater assessment within the context of a more robust and transparent community input process–which has not taken place thus far; and that any new policy changes must work in concert with the principles and values being considered in the above mentioned planning processes already underway.
Our perspective has been greatly informed by our formal discussions with members of your Board and County Staff. Our concerns have less to do with the objective efficacy of policies themselves, and more to do with the context that surrounds their implementation–namely the dysfunctional marketplace that exists in the unincorporated areas of Santa Cruz County.
Under normal market conditions the costs of having strong inclusionary requirements can be incorporated into projects that work for both the developer and the community. Our championing of a stronger density bonus ordinance in our conversations with you is a prime example of how these costs could be offset through incentives. However, given the exceptionally high cost of land in Santa Cruz County, and the lack of appropriately zoned sites for density, as well as the absence of a balanced mixed use zoning designation, the added burden of having to meet these restrictions can prove financially insurmountable where very little to no housing gets built.
The ultimate result of these policies, which have been born out over the decades long lifespan of Measure J, is that too few housing units are built overall, which means that the total number of deed restricted affordable units is also insufficient to meet the needs of our community.
We respectfully request that you continue this item at this time so the community can participate in a more thorough, open, and holistic discussion about our policy goals, which will include a solutions oriented affordable housing program that balances outcomes with potential impacts on the development process.
Robert Singleton, Executive Director, Santa Cruz County Business Council
Sibley Simon, President, New Way Homes
Casey Beyer, CEO, Santa Cruz Area Chamber of Commerce
Santa Cruz County Business Executive Committee
Owen Lawlor, Principal, Lawlor Land Use
Bud Colligan, CEO, South Swell Ventures
Kate Roberts, President, Monterey Bay Economic Partnership
John Swift, Principal, Swift Consulting Services, Inc.
Jon Lee, Senior Development Project Manager, Swenson
Beth Monthaven, Development Manager
Tom Honig, Santa Cruz County Housing Advisory Commission
Fred Antaki, Broker, Main Street Realtors
Rick Moe, Santa Cruz County Resident
On Tuesday night the Santa Cruz City Council passed the latest iteration of the Downtown Plan, increasing the zoning densities along lower Pacific Avenue and Front Street, and clearing the way for potentially up to 800 new units of housing. It was the single largest increase in zoning density within the City since the 1989 earthquake, and one that has been over 28 years in the making.
The evening hearing marked the 21st public hearing on the plan, which saw an overwhelming turnout at Council in favor of the project. Yes you read that correctly. Thanks to the organizing capacity of local housing advocates, the business community, and a wide sampling of concerned citizens, the Downtown Plan received the kind of demonstrated public support that that a lifetime achievement award given to a senior staff member might receive. The number of supporters who spoke outnumbered the voices against by a 4 to1 margin, and ultimately the plan passed unimpeded with the exception of the the 2 political sympathy votes cast by the regressive members of the Council.
It didn’t go unnoticed either. Both the Mayor and many of the Council members commented on how appreciative they were that such a large and diverse group of community members came out to offer their support, or wrote letters. This is the true takeaway from the hearing last night. We always talk about how the most effective way to advocate for new housing is to just show up, since the voices in the room tend to always swing negative, but last night laid the groundwork for what can be the result for many more hearings to come.
Not only did Santa Cruz show up in favor of housing, but they proved they can stay on message, address opposition concerns, and ultimately participate in a way thats give our elected leaders the confidence to know that there is a silent majority of people who understand the need and the true severity of the crisis we are in.
SCCBC Member Owen Lawlor summed up the issue perfectly “Too often people conflate housing with growth” he said. “My daughter is 9 years old, and I want her to stay 9 forever, but if I don’t buy her new clothes she is still going to be 21 some day. Housing is a response to growth, not the cause of it.”
When the public hearing closed Vice Mayor Terrazas quickly jumped in and made his motion, as if he could barely hold back because he was so excited that he was the one able to make the potentially historic motion. You don’t see that exuberance often, and it goes to show that if you turn out enough people, housing is no longer a political liability, it actually becomes a political boon.
Special thanks to the folks at Santa Cruz YIMBY (Yes In My Back Yard), the Monterey Bay Economic Partnership, the Santa Cruz Area Chamber of Commerce, Looker, and the Downtown Association–all of who showed up to speak and encouraged their members/employees to support the project as well.
MBoSC recently presented at the joint committee meeting of the SCCBC, sharing topics such as the current state of mountain biking locally, upcoming projects, land use planning opportunities, and more. If you weren’t at the meeting, you can check out their presentations:
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