Housing numbers 101: Santa Cruz County has been told it must build 12,979 more units by 2031. Is that even possible?

No one will deny that Santa Cruz County is in dire need of more housing. But there’s endless debate about how many units need to be built, where to build them and how quickly.

A local agency in charge of such metrics, the Association of Monterey Bay Area Governments (AMBAG), recently told Monterey and Santa Cruz counties what each will be responsible for building based on what’s called the “designated estimate” from the California Department of Housing and Community Development. The CDHCD acts as a middleman between the state and the counties, with a board of directors representing the local municipalities, to ease the process of designating the regional housing needs across jurisdictions.

Santa Cruz County will need to build at a torrid pace from 2024 to 2031 to add 12,979 more units. That number is a 326% increase over the figure for the current housing cycle, which runs from 2015 to 2023. And it understandably gives numerous local leaders present and past both pause and a sense of concern.

The terms they expressed to Lookout in reaction to that math:

“Fantasy.”

“Impossible.”

“Aspirational.”

Fred Keeley, longtime local and state politician, offered that last word, emphasizing that the building goals set down by the state are just that: goals. But these numbers, called the regional housing needs allocations (RHNA), are also an important reality check for places like Santa Cruz County that have struggled for years now to keep supply in line with demand.

“If you limit the supply as much as Santa Cruz has, in a state where the supply-demand ratio is wildly out of control, then you further aggravate the pricing issue,” Keeley said, summing up the increasingly apparent state of affairs. “There’s been a wake-up call about that.”

Keeley and others say much of our local problem stems back 40-plus years to 1978, when voters passed Measure J — a piece of legislation that remains in place today. It established a moratorium on housing developments that created development barriers, leading developers to build large single-family homes without what is known as infill development, or added construction on unused and underutilized parcels.

Here’s what Lookout learned about the factors that led us to this housing deficit and how much the demands put upon local jurisdictions by the state will actually drive change.

How have we done as a county in the current 2015-23 cycle?

Most local experts are blunt about how Santa Cruz County has fared thus far: unevenly at best.

For example, the city of Santa Cruz has mostly met its current RHNA goals in the current cycle. Those called for 747 units to be built or zoned for in the city; as of Dec. 31, 2020, the city needed to build at least 123 very-low-income units by the end of 2023.

Overall, in that eight-year cycle, the entire county has met only 62.5% its goals with a year and a half to go in the cycle. Watsonville and Capitola are the furthest behind in meeting their goals.

“Most jurisdictions throughout the state do not meet the RHNA goal — some are really good at meeting components of it, but few actually implement the full number and have built the whole number of units in the planning period they’re supposed to,” said Heather Adamson, who leads the local effort as director of planning for AMBAG.

When it comes to the actual completion of construction, including for the next seven-year phase being planned for now, the percentage gets much smaller, Adamson said.

“It’s very likely that only a small percentage, maybe 25%, would actually be constructed by 2031 — that’s not just Santa Cruz County, that’s regionwide,” she said.

But as Adamson and other housing advocates across the county acknowledge, the numbers are still vital to show that the state cannot just ignore the fact that more housing is needed, and that it needs to push local jurisdictions forward to account for the discrepancies in available and affordable housing.

Where did this 12,979 number come from and how does it break down?

Santa Cruz — like many other jurisdictions across California — hasn’t been keeping up with housing needs for decades. When the most recent allocation came down from the CDHCD to AMBAG, the county was tasked with developing and/or zoning for that massive number nearing 13,000 units.

That number is further broken down among jurisdictions — the cities of Santa Cruz, Capitola, Scotts Valley and Watsonville and the unincorporated county — and unit types, ranging from very-low-income to above moderate income levels.

In AMBAG’s determinations, the state tasked Monterey County and Santa Cruz County together to develop 33,274 units in the coming cycle, beginning in December 2023. AMBAG designated 39% of that total for Santa Cruz based on its methodology, the fourth plan it attempted to finalize for the forthcoming RHNA cycle.

During its April 13 meeting to discuss and vote on the finalized numbers, the AMBAG board of directors — made up of government officials from both counties, along with representatives from San Benito County — voted 18-3 to approve the final goals.

Scotts Valley City Council Member Derek Timm was one of the three “no” votes on the proposed RHNA numbers at that meeting.

As Timm told Lookout, the city of Scotts Valley has produced only 4,600 housing units since it was incorporated back in 1966. To now have to produce 1,220 units within the next eight years — with one senior planner and the lowest development funding of any jurisdiction in the county — is nearly impossible.

“There’s this fantasy that the state has laid on jurisdictions to go produce this amount of housing, and they’re providing unrealistic goals,” he said. “I can tell you an unfunded mandate from the state is not the way to get housing built.”

What are other local leaders saying about its viability?

The numbers are more a sign of a longstanding issue statewide — a decadeslong lack of housing — and it’s understandable that these proposed allocations would raise concerns, and blood pressures.

“It’s always challenging. And always somebody less satisfied than someone else,” said Don Lane, former Santa Cruz mayor and chair of Housing Santa Cruz County.

During his time in office, most recently as mayor in 2015, Lane acknowledged how much the city of Santa Cruz had done to produce or develop needed housing units. Yet there have been years of back-and-forth to address the RHNA goals countywide, which leads to more pressure in the longer term.

These numbers are, quite frankly, impossible to reach in the next eight years. You can go through each city and ask if they meet their numbers, but the real question is, is there a willingness of good local governments to do what it needs to do when it hasn’t done that for 40-plus years? — Casey Beyer, CEO of Santa Cruz County Chamber of Commerce

“In the past the big question has been, are jurisdictions ever meeting their overall goals in production? I’m pretty sure the answer is no,” Lane said. “Some jurisdictions are really serious about [RHNA], and you can see results in different levels of that.”

Casey Beyer, CEO of the Santa Cruz County Chamber of Commerce, said that how each municipality attacks the mandate comes down to how seriously the issue is taken — whether the actual number can be reached or not.

“These numbers are, quite frankly, impossible to reach in the next eight years,” Beyer said. “You can go through each city and ask if they meet their numbers, but the real question is, is there a willingness of good local governments to do what it needs to do when it hasn’t done that for 40-plus years?”

How did Measure J change things?

Keeley says that Measure J, like other previous housing laws, changed the development structure of Santa Cruz, which has been “both a success and a failure.”

“It allows us to keep a character to our community — it’s been very positive in that regard,” he said. “But if you limit the supply as much as Santa Cruz has, in a state where the supply-demand ratio is wildly out of control, then you further aggravate the pricing issue … there’s been a wake-up about that.”

Beyer said Measure J led many developers to build large single-family homes without infill development, leading to — over 40 years later — “the state coming down like a hammer on local governments.”

What kind of support does the state offer beyond the mandate of a number?

Adamson explained to Lookout that AMBAG’s job is to wrestle with the numbers that come directly from the state, and figure out how to allocate the units within each jurisdiction.

“It’s obviously within [AMBAG’s] best interest and in our local jurisdictions’ best interest to work together, as we know them better, for a methodology that makes sense,” Adamson said.

Further, she said, local jurisdictions can officially appeal the current numbers by June 6 if there is an issue with the methodology. However, “we can’t do anything about it if they just don’t like the methodology,” she said.

What are the penalties for not meeting the goals?

Cities and counties that don’t meet the goals have received less state money – in the form of Community Development Block Grant funds – and they can continue to miss out on those funds if they continue to miss those goals.

In hindsight, Keeley believes Santa Cruz County failed in not developing and losing out on those funds over the past 40 years, leading to the current crossroads — and that even bills like Senate Bill 9 and Senate Bill 10 won’t make a dent in the issue.

“I believe that there will be an earnest effort in this next RHNA cycle to hit the numbers, but cities need to go up,” he said. “People do want to see our city stay within its bounds of being recognizable to us, but we’re at a place where we’re becoming a grown-up Santa Cruz.”

With the missed goals of RHNA cycles past, Beyer said there are just too many hurdles for Santa Cruz County and its associated cities to develop the proposed housing units. As construction costs increase and market prices follow close behind, there aren‘t a lot of viable options.

“The only way you can actually build the units to reach some level of attainment, you’d have to do infill development, you’d have to build up, and you’d have to do it on property owned by the cities,” he said. “It’s kind of like an obstacle course … how do local governments convince their own community that building more housing and more affordable housing is the right thing to do, for a constituency that doesn’t want that?”

Are there other, potentially better solutions to the problem?

Keeley believes that a $25 billion affordable housing general bond, proposed in February by State Sen. Robert Hertzberg of Van Nuys, could lead to major progress. The “Dream for All” program would aim to build wealth for Californians who aspire to be first-time homeowners, while also adding to the state’s housing supply by building as many as 500,000 new homes. The bill would be targeted toward lower- and middle-class residents, and would have to be approved by voters.

“To me, that’s what you do if you’re serious about wanting these RHNA numbers to mean anything,” Keeley said. “I’m assuming the community wants to do it, but where is the money to make that happen? I think we can solve the money problem, but it’s now a community and political issue.”

Adamson agrees, saying that there has not been enough implementation of planning dollars toward building the HCD’s housing goals, let alone making a dent in those numbers. Further, she again said that it’s going to be very difficult and highly unlikely to build the housing units needed by 2031 in this area.

“Given our lack of funding, lack of infrastructure, and water issues,” she said, “we can hopefully plan for these units, but to actually be constructed and occupied by 2031 would be a huge lift.”