The pictured home, which is only modestly attractive, in my view, has three bedrooms and two baths, and is 1,500 square feet in size. As of August 11, 2016, this home was listed for sale at just under $2,000,000. The actual listing price was $1,988,000, to be exact. My bet is that the link will probably not work for long, since the way homes are selling, this home will probably not be on the market for more than a week or so.
The pictured home is NOT located in Santa Cruz, my home town. It's in Palo Alto (my former home town). This listing, however, spells bad news for Santa Cruz, as was made evident in an August 11, 2016 news article in the San Jose Mercury News. The Mercury News article documented the woes of Kate Downing, who has just resigned from the Palo Alto Planning Commission. Downing, I gather, is a tech lawyer. Her husband is a software engineer. In her resignation letter, Downing says that even this family, comprised of two highly-paid professionals, can't find a way to buy a home in Palo Alto. Therefore, Downing and her husband are moving....
And they're moving to Santa Cruz.
I say that this is "bad news" for Santa Cruz, not because it won't be great to welcome this attractive young family to the community, but because this phenomenon - Silicon Valley exporting its housing demand to the Santa Cruz County side of the hill - is driving out current members of our own community. Most people currently living in Santa Cruz are finding it ever more difficult to find housing they can afford, and they just can't win the competition for housing when they are pitted against families who have two high-paying, high-tech jobs to support their own need to find a place to live.
The only actual solution to unaffordable housing prices in a place like Santa Cruz County is price control. Those who think that the community can somehow "build its way out" of the current situation, and that lots of small, high-density units will somehow lower the price of housing to affordable levels (by increasing the supply of housing) are not calculating correctly. The "demand" for housing in Santa Cruz County (witness the example of the Palo Alto Planning Commissioner and her husband) is not limited to those who live here already. If nobody new showed up, then increasing supply should, of course, lower prices. But the "market" for Santa Cruz real estate not only includes high-tech lawyers and software engineers from the Silicon Valley; it includes people with money from all over the world.
Since there's a City Council election in Santa Cruz this November, and affordable housing is undoubtedly going to be mentioned frequently by the candidates, I suggest that voters heavily discount any inclination to support candidates who suggest that just building more units will do anything more than overcommit our very tenuous water supply and continue to discharge more traffic into our inadequate street system.
The solution for affordable housing, ultimately, has to be provided with more money from the federal level, tied to permanent price controls, to take housing out of the speculative market. At the local level, rent control and a very large requirement for permanently price controlled inclusionary units (say something like 50% of all new units approved) is the only way to make any progress.
The pictured home is NOT located in Santa Cruz, my home town. It's in Palo Alto (my former home town). This listing, however, spells bad news for Santa Cruz, as was made evident in an August 11, 2016 news article in the San Jose Mercury News. The Mercury News article documented the woes of Kate Downing, who has just resigned from the Palo Alto Planning Commission. Downing, I gather, is a tech lawyer. Her husband is a software engineer. In her resignation letter, Downing says that even this family, comprised of two highly-paid professionals, can't find a way to buy a home in Palo Alto. Therefore, Downing and her husband are moving....
And they're moving to Santa Cruz.
I say that this is "bad news" for Santa Cruz, not because it won't be great to welcome this attractive young family to the community, but because this phenomenon - Silicon Valley exporting its housing demand to the Santa Cruz County side of the hill - is driving out current members of our own community. Most people currently living in Santa Cruz are finding it ever more difficult to find housing they can afford, and they just can't win the competition for housing when they are pitted against families who have two high-paying, high-tech jobs to support their own need to find a place to live.
The only actual solution to unaffordable housing prices in a place like Santa Cruz County is price control. Those who think that the community can somehow "build its way out" of the current situation, and that lots of small, high-density units will somehow lower the price of housing to affordable levels (by increasing the supply of housing) are not calculating correctly. The "demand" for housing in Santa Cruz County (witness the example of the Palo Alto Planning Commissioner and her husband) is not limited to those who live here already. If nobody new showed up, then increasing supply should, of course, lower prices. But the "market" for Santa Cruz real estate not only includes high-tech lawyers and software engineers from the Silicon Valley; it includes people with money from all over the world.
Since there's a City Council election in Santa Cruz this November, and affordable housing is undoubtedly going to be mentioned frequently by the candidates, I suggest that voters heavily discount any inclination to support candidates who suggest that just building more units will do anything more than overcommit our very tenuous water supply and continue to discharge more traffic into our inadequate street system.
The solution for affordable housing, ultimately, has to be provided with more money from the federal level, tied to permanent price controls, to take housing out of the speculative market. At the local level, rent control and a very large requirement for permanently price controlled inclusionary units (say something like 50% of all new units approved) is the only way to make any progress.
Image Credit:
http://www.zillow.com/homes/for_sale/Midtown-Palo-Alto-CA/pmf,pf_pt/343608_rid/37.451336,-122.102051,37.41835,-122.148271_rect/14_zm/
ReplyDeleteI am wondering how someone could run and be elected if they chose to mention this in their campaign and is this happening is other communities where and how has it worked thus far I am interested If the community could instigate this and have voters who would support it In This community it seems that Rental and Housing is the big business not high tech or farming but HOUSING AND REAL ESTATE what with the ocean and the selling of homes that are shown using expensive STAGING and pulling rentals off the market to suddenly be a landlord dealing in the exclusive market of vacation rentals This has taken so many housing situations away from people who were on HUD housing support that Santa Cruz is quickly becoming the vacation home BNB business capital of the north coast
We don't oversee these spaces and we collect very little taxes and the support for rental housing by section 8 is so much lower than the schedules use for santa clara that landlords are no longer renting to lower income tenants but changing their units into vacation cottages SO we are a beautiful Ocean town with the board walk and not much business Agriculture and clean air we have it all and everyone wants to buy housing here I am wondering how would you propose to create the price controls for housing sales I am thinking you wouldn't want to do this and run for office not in this arena JUST wondering
When the majority of the voters want something, they can (usually) get it. In other words, I am here to tell you that politics works. However, if no one runs on the platform calling for price controls, then they will not be elected on such a platform, and it will never happen. There IS a big problem, way beyond political courage, however. You cannot, legally, prevent owners from selling their existing properties at whatever the market will bear. Thus, price controls need to be imposed on new housing, the price limits being given in return for the "permit" that gives permission for the construction. This is usually called an "inclusionary" program. Current elected officials have dismantled the inclusionary requirements that previously existed, and let developers pay money, which isn't the same as requiring the developers actually to build price-restricted housing. What is actually needed is a massive infusion of money (the federal government is the only government that can really do it).
DeleteRead Gary's last paragraph. That's the policy prescription he's offering. I agree. If it were up to me, I'd put a moratorium on any new "market rate" housing units. We don't need any more million-dollar houses. Working class people can't afford even the lowest-priced units on the market - nowhere near. We don't need $500,000 "affordable housing" for purchase. We need rental housing that ordinary working people can afford - not trendy digs for high tech hipsters and platinum-plated professionals. And we need housing for the many who are flat-out poverty stricken.
ReplyDeleteThis comment has been removed by a blog administrator.
ReplyDeleteI am against rent control, not because I am a greedy property manager or owner but because of the opposite. Rent control would make me HAVE to raise rents on properties I manage which are way below market value. For example, I rent out a 3 bedroom house 3 blocks from WestCliff for only $1650. If rent control is even seriously considered in Santa Cruz, then to not get caught in a cycle of low yield, which I do because it works for the property owner at this time but at some future point could not, to ethically be a good property manager I would have to raise the rent to market value. Also- freedom. But when it comes to rent control, it may seem counter intuitive but the first effect would be a dramatic increase in rents, because otherwise owners will get stuck with the consequences.
ReplyDeleteThe kind of rent control ordinance I suggest would establish only an UPPER limit on legal rents. Anything below that limit should be fine, so rent control would NOT require you to raise rents to the limit. I do understand the point. An ordinance that limited increases to a certain percentage of the existing rent could put landlords now charging less than the market rent in a disadvantageous situation. However, that is not a necessary approach. A well designed ordinance could provide an opportunity to raise rents on whatever principle the landlord wanted, as long as the limit set in the ordinance was not exceeded.
DeleteMany years ago I was participating in a grass roots group just forming, it was called the Trust Fund. One of the ideas they have was to get all parties involved in the housing situation and but land as it became available. Build moderate to high density housing and sale it, only the housing.
ReplyDeleteThe buyer has the building in perpetuity but if s/he wants to sale it has to be sold to the back to the trust.
At the time my family couldn't afford to live in Santa Cruz and our first exodus brought us to Arizona, and I lost track of the organization.
Now this idea may seem radical, but I believe we as community, needs to become creative in our solutions, if we're serious on finding a solution.
I have the fortune to live in a low income housing owned by the Housing Authority, so I want to believe I'm safely housed until the end of my days, but I wonder if our neighbors around become displaced (I live fairly close to the East Cliff), would them approve of a low income complex next to them? If people like the young couple in the article and their friends move in our block, what would be the economic power they are going to wield?
Two years ago a run down empty house was next to our apartments, it received a massive make up and a for sale sign was placed in the front. On weekends you could see a fair amount of people checking it out, but it didn't sale. A second make up and a different real state sign on front was placed, the amount of people visiting it diminished and finally after almost two years in the market it was sold. The new owners gave it a third substantial make up that included three masive poles from where they hung sails as courtains. First I thought "it's for privacy" now their sight bother me, its a way to say we're not equal, its a way to separate our wealthy neighbors from us. That and the two dogs loose in their grounds and the powered gate in the middle of a neighborhood surrounded by two Housing Authority complex and one other managed by a different non profit.
How long will be allowed to stay?
Big fingers in a small screen, sorry for the misspelling. I meant to say how long will we be allowed to stay?
DeleteThe "Housing Trust" idea is one creative way to impose housing price control, and has been successful. The key, of course, is to find the money, in an inflated housing market, to buy or construct the housing in the first place. No private investor will do that; it would have to be "public" money of some kind. As to how long rich neighbors will allow persons with lower incomes to stay in their neighborhood, it's hard, actually, to make less affluent people leave, if they have an ownership position in their housing (or, as in your case, if there is a public agency involved that has as its reason for being the provision of affordable housing). So, I wouldn't worry too much about your personal situation. But "gentrification" is a truly powerful force which does drive less affluent people out of the communities in which they live - and this is exactly what is happening in Santa Cruz.
DeleteGreat article Gary. Want to be on the GeekSpeak podcast to talk about housing?
ReplyDeleteHow nice. What a great invitation. I'm going to be gone until September 20th, so sometime after that would be great.
DeleteIt's always a "heads up" when the "gentrifiers" get out-gentrified. When it's no longer statistics, but individual people.
ReplyDeleteAmen!
DeleteThen there is the carbon cost of these two people driving over the hill twice a day, probably alone as their schedules are likely dissimilar and unpredictable. Will BART build a new line to SC? Would SC allow that? Probably not as that would increase housing demand even more. So why aren't cities required to meet the housing demands of their own workers?
ReplyDeleteClearly, the current system is leading to the over the hill commute (with its negative global warming impacts) but that is probably pretty much next to inevitable. There really isn't any way, constitutionally, to require a person to live in the community in which he or she works. Santa Cruz is a more desirable place to live (for many people) than the Silicon Valley, so Santa Cruz is now being asked to accommodate the housing needs not only of the people who work in this County, but of the people who work elsewhere. Absent some form of effective price control, the demand for Santa Cruz housing from persons who work elsewhere, will inevitably drive the price of Santa Cruz housing beyond the ability of local workers to afford it.
DeleteDayton, Ohio had a residency requirement for city employees that was reversed by popular vote about 10 years ago. I want to say it was instituted in the 1970s to stem the exodus of white families when the city's school system was forced to adopt federal desegregation measures, but I am not sure.
DeleteThe problems Dayton faces are quite the opposite of those in Santa Cruz; the population and tax base have been shrinking for decades and large tracts within the city limits are starting to rival Detroit's level of urban decay and desertification. Ending the residency requirement pulled the rug out of what was left of the local economy as working and middle class residents abandoned ship. The grocery stores, gas stations, restaurants and retail outlets went with them.
My question to you is this: is Santa Cruz experiencing a similar decline in businesses providing basic services to the residents? If a young professional couple can't afford housing there, where are the people who make your pizza and stock the grocery store shelves going to live? How are businesses going to stay afloat as their rents and operating costs skyrocket? Is there a similar desertification in progress leading to a population without local access to purveyors of its basic needs? From here it seems that places like Santa Cruz and San Francisco are analogous to the great estates of Europe, resting on the backs of peasants and serfs toiling at the perimeter, out of sight, starving while they provide an embarrassment of riches to the prosperous few.
Then, the French Revolution. Perhaps the Bernie Revolution will be a bloodless, or at least less bloody rebalancing of the social scales.
I didn't intend this comment to stretch from urban decline to the guillotine. Thanks for indulging my ramblings.
It's important, I believe, to understand the point embedded in Gary's case here that this is NOT a "local problem". The pressure on housing stock, and thus costs, is regional (and not even confined to our region -- other major metros around the country are struggling under similar burdens).
ReplyDeleteAsk renters in San Francisco, many from families which have called the City home for generations, how well rent control is helping them continue to live in their home town.
I agree, this will require massive economic support, possibly from the state but more likely at a federal level. And frankly, I'm not at all sure how that would work, let along how we could sell any approach to a GOP dominated legislative branch that seems dead set on preserving institutional mean-spiritedness.
But indeed, the effort is going to have to begin right down here on the ground to build pressure up the political ladder. And it's gonna require folks committed to the long haul. Not going to be many quick, easy victories in this one.
Amen twice!
DeleteThe only truly affordable housing in Santa Cruz County is in mobile home parks, which are protected by the County's rent control ordinance.
ReplyDeleteThough park owners have sought for many years to end rent control, the County has successfully defended our ordinance and kept mobile home park rents affordable.
The exception is De Anza Mobilehome Park in the City of Santa Cruz. When the City gave up its rent control ordinance, rents in De Anza soared 300 to 500%. Space rents are so high in De Anza that homes sell for less than $10,000, if they sell at all, since buyers can't afford a mortgage in addition to $1500 per month space rents.
It is inevitable that housing in Santa Cruz will become increasingly unaffordable for those who live and work here, as long as houses are viewed as investments rather than homes by those whose income is not dependent on the local economy.
Totally on target!
ReplyDeleteReality is that most people are mobile and eventually have to sell their house and move. It would but people in Santa Cruz at a huge disadvantage to have price controls when it came time to relocate. In my mind this would a confiscation of my assets. I worked my entire life and lived in some less than desirable neighborhoods to move to our beautiful county. It is not an entitlement to live on the coast, but a privilege. People have many other options where housing is more affordable. Such a proposal would never stand up in Court and you can be assured there would be multiple challenges, probably in a class action.
ReplyDeleteThank you for your excellent article Gary. I also appreciate the quality of the comments.
ReplyDeleteThe rising value of my nice home in Santa Cruz, built and paid for over long years of work and love, is bad for our community, I believe. A few of my reasons are expressed above.
Who will stand for public office and speak for community action on the cost of housing? Here and nationally? Courage, energy, youth, love, intelligence - let us pray.
One answer is, as you point out Gary, found in requirements about new construction. Another is rent control - creatively done.
From my perspective the best place to live is in a mixed economy community.
If the family of the people working at low wages can not live amongst the families of the higher paid and or endowed all of the families have less than they could - of good life, I believe.
I've only just dipped into to this debate, but it seems to me that it's important to distinguish between "affordable" housing and "low-income" or subsidized housing. I've noticed people using the terms interchangeably. Of course with regard to "affordable," we have to ask "affordable" by whom! Your term--"permanently price-controlled units"--is way more useful. Both are desperately needed: in calling the list of subsidized housing for a friend with a disability, I haven't found one yet that has an open waiting list (much less an opening!). I understand the "build it and they will come" argument about highway-widening and market-rate housing; I think it may be a different dynamic around subsidized housing--perhaps because people can't pour in from elsewhere to wait for a waiting list to open.
ReplyDeleteYour point is right on target. Usually, local governmental and/or state programs aimed at providing "affordable" housing, means housing that is affordable by families with an average (median) income. Sometimes tiers are established, usually setting income levels between 80% and 120% of the median income. "Low income" housing needs to be subsidized to make it affordable to persons with incomes significantly below the median. Resale restrictions, which I advocate, restrict the resale of a home to another individual or family in the same income bracket. In other words, a person cannot buy a home at a below market price, that a median income person can afford, and then resell it later at a market price that a median income person cannot afford. This takes housing out of the "investment" category, and is highly resisted by those who think they should be able to profit personally from speculative increases in housing, even if they were able to purchase their home only because it was sold to them at a below market price. A huge fight about this principle is now underway in Monterey County, where farmworker families in the Moro Cojo subdivision want to make personal profits from the sale of their homes, although they were able to buy their homes, at a below market price, only because they agreed to the resale restrictions then in force.
DeleteI am against rent control. Why doesn't anyone talk about the impact UCSC has on local housing? I read this week that they are admitting 650 more freshmen than last year when they admitted more than the previous year and on it goes. See http://www.santacruzsentinel.com/article/NE/20160706/NEWS/160709844
ReplyDeleteSince they admit the only house 54% of their students, doesn't it stand to reason that this impacts local housing as more students must seek off campus housing? Why don't we insist they house more of their students?
UCSC growth (plus exported housing demand from the Silicon Valley) are the two main reasons for rising rental and housing prices. You are right on target with your comment. However, while the City Council could use its bully pulpit to draw attention to the impacts that UCSC is having on the community (some of them quite adverse), the City has no direct control over UCSC enrollment decisions. The City CAN deny any extension of City Water to undeveloped portions of the UCSC Campus, but the current City Council, in fact, is trying to give the campus new water, even as current residents are facing a genuine water supply emergency.
DeleteRent control? Even Paul Krugman thinks that's stupid:
ReplyDeletehttp://www.nytimes.com/2000/06/07/opinion/reckonings-a-rent-affair.html
And let me quote the most salient paragraph for the TLDR demographic:
ReplyDeleteThe analysis of rent control is among the best-understood issues in all of economics, and -- among economists, anyway -- one of the least controversial. In 1992 a poll of the American Economic Association found 93 percent of its members agreeing that ''a ceiling on rents reduces the quality and quantity of housing.'' Almost every freshman-level textbook contains a case study on rent control, using its known adverse side effects to illustrate the principles of supply and demand. Sky-high rents on uncontrolled apartments, because desperate renters have nowhere to go -- and the absence of new apartment construction, despite those high rents, because landlords fear that controls will be extended? Predictable. Bitter relations between tenants and landlords, with an arms race between ever-more ingenious strategies to force tenants out -- what yesterday's article oddly described as ''free-market horror stories'' -- and constantly proliferating regulations designed to block those strategies? Predictable. "