A housing boom is underway in Santa Cruz. Why is the rest of the county so far behind?

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Take a spin through Santa Cruz today and the transformation is impossible to miss.

Cranes rise over downtown. Large apartment buildings are replacing parking lots and familiar businesses. Hundreds of badly needed affordable apartments are moving through the development pipeline.

Some residents welcome the building boom as a long-overdue response to our housing shortage. Others worry that Santa Cruz is changing too much, too quickly, before its streets and other infrastructure are ready.

I wondered about that myself.

So I contacted planners in all five Santa Cruz County jurisdictions and compared what is actually getting built — and what is not.

What I found surprised me.

Santa Cruz is not simply building somewhat faster than the rest of the county. It is operating on an entirely different scale. The city accounts for more than half of the housing permitted or expected to be permitted countywide through 2026, despite having less than 24% of the county’s population.

That made me wonder about the other side of the equation.

If Santa Cruz is building this much, what is happening everywhere else? 

Zoning is not the whole story

Watsonville offers the clearest contrast.

Through 2026, Watsonville has reached only about 9% of its eight-year housing target. At first glance, it might be tempting to assume Watsonville simply has not made room for housing.

That is not what I found.

Watsonville’s downtown plan allows as many as 125 housing units per acre in its downtown core. It has reduced parking requirements and created a faster approval process for qualifying projects.

Yet the projects have not arrived at anything close to the pace we are seeing in Santa Cruz.

Principal Planner Matt Orbach told me the biggest obstacle is much simpler.

“Development follows demand,” he said.

Santa Cruz can support higher rents, Orbach explained. Its university, oceanfront location and arts scene attract people who can pay those rents. That makes it easier for expensive apartment projects to make financial sense.

Watsonville faces other limits, too. Airport safety zones restrict residential development in roughly 38% of the city. There is little vacant land, and an urban limit line prevents outward growth.

The economic difference between the two cities makes the contrast harder to ignore.

Watsonville’s unemployment rate averaged 12.4% in 2025. Santa Cruz’s was 4.7%, while the countywide rate was 6.3%.

The part of the county facing much greater economic hardship is also having a harder time attracting housing investment.

And the difference is not entirely about private developers.

Affordable-housing developer Vasko Yorgov of Eden Housing told me that projects in places the state considers “high” and “highest resource” areas can receive an advantage when competing for state tax credits. Much of Santa Cruz falls into those categories, while much of Watsonville is classified as “low resource,” a technical designation based on indicators of economic, educational and health opportunity. Much of Santa Cruz falls into the state’s high- or highest-resource categories. 

Yorgov emphasized that the state also has programs intended to balance those differences, but location can still affect how affordable-housing projects compete for money.

That helped clarify something for me.

For years, much of California’s housing debate has focused on zoning: Is a city allowing enough apartments? Is it permitting enough density? Is it making development too difficult?

Those questions matter.

But Watsonville shows why they are not enough.

A city can change its zoning, reduce parking requirements and welcome dense development — and still struggle to get homes built.

What Santa Cruz is doing differently

Santa Cruz has advantages no local policy can create.

It sits beside the Pacific Ocean and UC Santa Cruz. It is close to Silicon Valley. It has strong transit connections, a walkable downtown and amenities that can make housing projects more competitive for outside funding.

But geography does not explain everything.

Community Development Director Lee Butler told me the city has also supplied public land, simplified development and built-up staff expertise. City employees help affordable-housing developers navigate grants and complicated state programs.

Santa Cruz has also put serious money on the table.

Since July 2023, the city has spent more than $12 million from its affordable housing trust fund, Butler told me, using local funds to help affordable-housing projects secure additional state, federal and private funding. The city’s investment can serve as matching or gap funding that helps projects qualify for larger pools of money and close the gap between what a project costs and what other funding sources will cover.

For Pacific Station North, about $5 million from the city’s fund helped secure another $5 million from the state’s Local Housing Trust Fund.

That is one of the clearest lessons I took from this reporting: Local investment can help unlock much larger outside investment.

Another thing surprised me.

Santa Cruz’s current boom is not simply a wave of private developers racing to build expensive apartments.

Butler pointed me to only two large market-rate apartment projects on the horizon: one at 530 Ocean St. and another, the controversial Clocktower Center at 2020 N. Pacific Ave. in downtown Santa Cruz. He told me market-rate projects have been difficult to make financially workable because of interest rates, labor and material costs, land prices, expected rents and sale prices, tariffs and the cost and time involved in permitting.

Affordable projects can work differently. They can combine city-owned land, city acquisition financing, tax credits, grants, state incentives and other public support.

When people look at all the construction in Santa Cruz, they may see one big “housing boom.” 

Underneath it are very different kinds of projects, financed in a very confusing system.

But right now, Santa Cruz appears particularly good at putting together the complicated financing needed to make affordable housing happen.

That might be the most useful part of the Santa Cruz experiment for the rest of the county.

Five jurisdictions, five different problems

The rest of Santa Cruz County does not fit neatly into a simple Santa Cruz-versus-Watsonville story.

Five local governments make housing decisions: Santa Cruz, Watsonville, Capitola, Scotts Valley and the county, which oversees communities outside city limits. Each has its own housing targets, zoning rules and development challenges.

The unincorporated area, overseen by the county, might be entering a building surge of its own.

After permitting 201 homes during 2024 and 2025 combined, county officials expect to permit about 604 in 2026. Santa Cruz County’s assistant planning director, Stephanie Hansen, credits rezoning, updated development standards and an influx of state affordable-housing money.

Scotts Valley faces a different challenge.

Senior Planner Brian Froelich pointed to the lack of money available to help affordable projects through the risky early stages of development. Scotts Valley’s Town Center project – the largest in the city – could eventually add about 300 homes, including roughly 200 below-market-rate units, although Froelich told me he does not expect construction permits to be issued in 2027.

Capitola has its own problem: land. But it also has one enormous opportunity.

Capitola’s housing element identifies room for as many as 1,777 homes at the Capitola Mall site.

That is more housing than Capitola’s entire eight-year state target of 1,336 homes.

That number says something important.

Having room for 1,777 homes does not mean 1,777 homes will actually be built.

Watsonville can zone for 125 homes per acre. Capitola can identify enormous housing capacity at the mall. Scotts Valley can plan a Town Center.

Those are important steps.

But capacity on paper is not the same thing as construction. Different communities face different obstacles, and they do not start with the same advantages.

Yet we are asking five local governments with very different resources to solve what is fundamentally one regional housing crisis.

One housing market, five governments

Santa Cruz should not stop building affordable housing. Well-designed affordable housing is something this county badly needs. 

But I also do not think the only measure of regional progress should be how many more homes we can fit into one small city, especially when some corridors are already strained by parking and congestion, major projects are rising along dangerous roads, and transportation planning has not kept pace with the scale of development. 

The more useful question is this: What has Santa Cruz figured out that could help housing get built elsewhere? 

One answer might be money that can be used across jurisdictional lines.

A regional housing fund could help buy land, cover risky early planning costs or provide the final local dollars a project needs before it can compete for much larger state grants.

The idea isn’t new. The local nonprofit New Way Homes raises charitable money to help housing get built, although much of its lending has flowed to projects involving Workbench and Envision, for-profit companies connected through New Way Homes President Sibley Simon. Regional institutions, like the ones in Ventura County and San Gabriel Valley, democratize that model, by offering transparency and making financing available to an inclusive range of affordable-housing developers.

We already have evidence that this could make an impact. 

Several years ago, Watsonville committed $2 million to Eden Housing’s 53-unit Tabasa Gardens project. Half of the homes are reserved for farmworkers.

Yorgov told me that local commitment helped the completely affordable project win awards from three competitive state programs.

“It’s often easier to secure competitive funding sources from the state if you’re able to offset your request with local funding,” he said.

That is almost exactly what the City of Santa Cruz has been doing.

Put local money in first. Use it to bring in more money from somewhere else. Combine it with land, expertise and willing partners. 

Not every city will build at the same pace.

Santa Cruz, Watsonville, Capitola, Scotts Valley and the unincorporated county have different geography, different markets and different infrastructure.

But those differences are exactly why a regional approach makes sense.

Twenty miles separate Santa Cruz and Watsonville. They shouldn’t divide our county into housing haves and have-nots.

California has spent years pushing cities to make room for more housing.

My reporting left me with a different question.

Once we make room for housing, what actually gets it built?

In Santa Cruz County, the answer appears to be more than zoning.

Money is often the first ingredient. It can help secure land, support staff, attract partners and give a project the local backing it needs to unlock millions more from state and federal programs. 

Santa Cruz has become unusually good at putting those pieces together.

The next step should be figuring out how more of the county can benefit from what it has learned.

Kevin Norton lives in Santa Cruz and has a background in public health. He welcomes tips, feedback and story ideas at healthysantacruz@gmail.com.