Barriers to Construction

Affordable housing in Santa Cruz limited by policy, law, funding

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On any given night across the state of California about 114,000 people, enough to fill the Kaiser Permanente Arena to capacity more than fifty times over, experience houselessness. While California is home to 12 percent of the nation’s population, the state disproportionately accounts for nearly one quarter of its houseless population.

The conditions creating this crisis are observable in a variety of California cities, including Santa Cruz.

“Our homeless problem was created from many different reasons: lack of housing, lack of jobs, lack of substance use disorder and mental health treatment,” said Santa Cruz principal management analyst Susie O’Hara.

In response to the statewide housing crisis, Governor Jerry Brown signed State Bill 2 (SB 2) into law last year. The legislation provides statewide funding for development of affordable housing through a $75 fee imposed on real estate transactions, estimated to generate $250 million annually.

The process for obtaining SB 2 funds will be made accessible in July, and counties such as Santa Cruz are not clear on what the parameters will be for utilizing this funding, said Carol Berg, Santa Cruz city housing and community development manager.

It’s also unclear to what extent these funds would be able to be put toward development. While additional funding for affordable housing development is helpful in the abstract, it doesn’t necessarily help communities that have limited opportunities to build like Santa Cruz.

The current paradigm for solving houselessness is to prioritize providing affordable housing to unsheltered and at-risk individuals. This approach is accepted by the state of California and the Department of Housing and Urban Development to be the most effective, research-supported method of getting people off the streets.

Local advocates and city officials alike, however, have wondered whether this approach is effective in Santa Cruz.

“I agree that housing first needs to be the big picture, unfortunately locally it’s a panacea because there is no housing being built,” said Brent Adams, director of the Santa Cruz Warming Center. “[Housing first] is a little painful for me to watch unfold without saying, what are the needs? How do we focus directly on the needs? Emergency services should be needs oriented, not funding oriented.”

Santa Cruz has historically faced several barriers in the construction of affordable housing, mostly matters of law. For instance, Santa Cruz has had a law on the books since 2007, Measure O, which requires rental developments to provide a minimum number of affordable units.

Shortly after Measure O became law in Santa Cruz, the California Court of Appeals upheld the Los Angeles Superior Court’s decision in Palmer Sixth St. Properties v. Los Angeles. In that case, the court held that affordable housing laws like Measure O violate the Costa-Hawkins Act, which places limits on rent control ordinances, when applied to rental units in the affected counties.

Consequently, despite having affordable housing requirements for over a decade, Santa Cruz was not able to apply any of those requirements to rental developments until January 2018.

The undermining of Measure O and other affordable housing requirements left Santa Cruz with limited options to pursue affordable housing. Unable to compel private developers to provide affordable units, the city itself had to come up with the means to provide them.

Cities like Santa Cruz previously looked to redevelopment agencies (RDAs) to generate otherwise lacking resources. RDAs operate by collecting marginal increases in property tax revenue to fund the redevelopment of low-income areas, through such projects as renovating existing buildings or repaving dilapidated streets and sidewalks.

A percentage of that collected revenue was required to be directed toward affordable housing development, for which RDAs generated roughly $1 billion annually.

“The inability of cities and the state to provide monies toward affordable housing projects since the dissolution of the redevelopment agencies has been the biggest hindrance to the production of affordable housing,” said Santa Cruz director of planning and community development Lee Butler. “The RDAs were a huge tool for the cities to provide that extra push […] for the affordable housing developers.”

RDAs were ultimately dissolved and disbanded by California in 2012 in the wake of controversial reports of several California cities mismanaging or misappropriating redevelopment funds, such as using funds to pay salaries of city employees and elected officials.

In Santa Cruz, a 2015 asset transfer review by California State Controller Betty T. Yee found that between 2011 and 2012, about 16 percent of the over $214 million transferred by the Santa Cruz County Redevelopment Agency to the county were unallowable transfers.

The city of Santa Cruz has instead mostly taken a treatment first approach for the past several years, focused on providing emergency and health services to the houseless. City officials and houseless advocates have said this approach is largely due to a lack of available housing. Recently, however, it has begun to adopt elements of housing first policy, with the transitional housing camp at 1220 River St. Still, the city is increasingly feeling the impact of shifting state priorities.

“The state is no longer funding emergency shelter programs, which is a significant shift, and puts a lot of its resources, and the [federal government] as well, into housing-first models,” O’Hara said, “which are wonderful for client outcomes, but not so great when you have a lack of housing in your community.”

The River Street encampment is Santa Cruz’s attempt at providing shelter for the local houseless population. However, it is limited in that it is only able to serve between 50-60 people at a time. The encampment is also largely inaccessible by foot due to a strict no walk-on or walk-off policy, necessitating a shuttle to come and go from the camp, and is located over a mile away from downtown.

Eventually Santa Cruz will move to renting a transitional shelter space. While the current site at River Street functions similarly, it isn’t conducive to year-round operations because it lacks permanent structures.

Santa Cruz City Council is considering possible locations for this transitional shelter space, which it hopes to open on July 1. While principal management analyst Suzie O’Hara previously said that the old National Guard Armory was the preferred location for such a facility, that site has since been removed from consideration.

At this time, no specific site has been chosen from the remaining proposals. The remaining sites include the public health campus at Emeline Avenue, the Pogonip and near the recycling center at Dimeo Lane.

While the city currently has an affordable housing development being constructed on Water Street, limitations in resources have largely prevented more widespread affordable housing development.

“Currently we don’t have access to any state money,” said Carol Berg, Santa Cruz city housing and community development manager. “There are some various programs that say home buyers can access, but the city doesn’t really have any projects that can access state money.”