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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 This last part is key, because if Costa-Hawkins were to be repealed, then theoretically every new housing unit built could be subject to price controls, which would create a massive dis-incentive to build in the first place.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.

 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.

[Proposed Amendments Under Item 59 for Reference]

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.

Sincerely,

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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