How Santa Cruz’s affordable housing bond got stuck

The ambition to publicly compose a ballot measure to raise critically needed financing for affordable housing has been as fickle among city of Santa Cruz leaders as a California spring. 

What at the outset was framed as an urgent, transparent and public process has sputtered out over the last year. The group leading the effort has not met since February. Outside of some who initially showed an interest, the broader public has been largely kept out of the conversation since the city held three open meetings more than a year ago. 

Now, as the mid-summer heat settles over the city, the long-iced pursuit of the housing measure is beginning to thaw. Leaders close to the discussions say they are set to pick up in July. The broader community will be brought back into the fold sometime this fall, they say, and voters could be voting on an affordable housing financing measure sometime in 2025. 

Or, possibly, 2026. 

Those leading the conversation around the measure still don’t know for sure when voters will see the question on a ballot. What kind of tax the measure will attempt to impose remains a mystery, as does how, exactly, the city will use the money. More than a year since the community conversation around the housing measure began in earnest, the most important questions still have no concrete answers.  

How we got here

The idea began in the fall of 2022 with Fred Keeley on the mayoral campaign trail. 

If elected, Keeley told Lookout, he wanted to “publicly negotiate” an affordable housing and homelessness bond onto the 2024 ballot. The city’s perennial affordability issues were feeding a growing crisis of people living on the street, while new pressure came down from the state to build more than 2,100 income-restricted housing units by 2031. In Keeley’s mind, answering the community’s two most pressing challenges would first require a crucial step: money. 

By spring of 2023, the conversation evolved from a bond — essentially, a major municipal loan — into a special tax on local property owners. Keeley remained steadfast in his vision for an open and public process. Recent ballot measures, he said, seemed to be drummed up by a select group of people around a kitchen table, shielded from broader public view. He wanted this affordable housing measure to stand in sharp relief. Keeley then decided it was best for the public, not the mayor, to lead the process of getting the question on the March 2024 ballot. 

In May 2023, the city council directed staff to hire a polling firm with tax dollars and put together a community engagement plan to bring forward an affordable housing bond measure for March 2024. A council subcommittee of Keeley and Councilmembers Sandy Brown and Scott Newsome would help guide the conversation. Three publicly posted meetings followed in May and June, but the wide open, come-one-come-all nature of the meetings posed challenges to reaching consensus. 

The city council eventually voted in June 2023 to formally hand off the process to the public. Though not immediately, Housing Santa Cruz County eventually took the torch, with executive director Elaine Johnson leading the process. The open public meetings narrowed to more intimate Zoom meetings with a group of 25 to 30 people who said they wanted to stay involved. 

That group, Johnson said, then selected a steering committee of about 10 people to tune the measure’s compass. The smaller meetings offered a more nimble environment to grind out the nitty gritty of a new housing tax before bringing it back for broader public input, Johnson told Lookout. Yet, by nature, these meetings, although casting a broad net of interests, contrasted from the early tenor of the public and transparent ones. 

That smaller group leading the conversation has included Johnson and Housing Santa Cruz County board members Don Lane and Jane Barr, Democratic Central Committee chair Andrew Goldenkranz, Monterey Bay Economic Partnership’s community development director Matt Huerta, CEO of Community Bridges Foundation Ray Cancino, Santa Cruz YIMBY lead Janine Roeth, Monterey Bay Central Labor Council vice president Casey Van Den Huevel, Barbara Meister with Communities Organized for Relational Power and Action (COPA), Walter Miller with UC Santa Cruz’s Student Housing Coalition, and Brad Brereton, a local attorney tied who has worked with Santa Cruz Together, a powerful political organization in town.

However nimble, the group could not work quickly enough. The original vision of a March primary soon turned to a June special election. Then, largely silence.

Johnson said the lead committee never really considered the busy November 2024 election as an option — 10 statewide measures have already qualified for the ballot. So, after missing the window for a June 2024 special election, the group agreed to go on hiatus in February. 

“The clock was ticking faster than we anticipated [for March or June 2024] and we still had questions we needed to answer,” Johnson told Lookout. “We didn’t want to force something. When you force something, it doesn’t work. This has to work, so timing is everything.” 

Still more questions than answers

In June of last year, Lookout reported that after three public meetings and a push to shape the measure, major question marks lingered over the process. 

Almost all of those questions plaguing the measure more than a year ago remain unanswered today. Johnson would only say “it’s a possibility” that voters see a ballot measure in 2025. 

Yet, a more immediate question for this steering committee is not timing, but content. Johnson said the group remains unsure whether the measure will propose a parcel tax or a real estate transfer tax. A parcel tax would levy a flat, annual tax on all lots throughout the city, regardless of assessed property value. A real estate transfer tax would establish a new fee on property sales, in proportion to the property’s value. 

During the initial public hearings in May 2023, city staff estimated that a real estate transfer tax could produce millions of dollars more than a regressive parcel tax. But a real estate transfer tax would need meticulous crafting to avoid the fate suffered by Los Angeles. In 2022, that city passed a similar tax on homes sold for over $5 million; however, the added costs pushed the high-end real estate market off a cliff. A predicted $900 million in annual revenue shrank to $150 million. 

“We have to be smart in how we design these things to encourage the outcomes we want and not have unintended consequences,” said Rafa Sonnenfeld, policy director for YIMBY Law. 

Sonnenfeld said people should not expect the new affordable housing revenue stream to finance new projects on its own. Even a small local cash investment in affordable housing projects could be the difference in unlocking the significant state and federal grants needed to propel a development from schematics to construction. Behind every affordable housing development is a complex financing package that often includes as many as five or six competitively awarded loans and grants. 

“A funding commitment from a local agency or local matching dollars are the threshold for being competitive at all in many of these grants and loans,” Sonnenfeld said. “Just having some skin in the game, for a city, is a huge amount.” 

However, the group has not offered any clarity on how exactly the money would be used. 

The slow genesis of this measure could also end up impacting the mechanism by which it reaches the ballot. 

In earlier visions for the housing measure, the steering committee would also lead a petition process, collecting enough signatures of support to put the question on a ballot. A measure proposing a special tax that reaches the ballot through a citizen-led petition process only needs a simple majority, 50% plus one vote, to pass. That’s one of the reasons Keeley proposed that process 

By contrast, if the city council voted on its own to put the measure on the ballot, it would require a 66.7% supermajority support to pass. 

That could change in November. A statewide proposition on the general election ballot asks voters whether a special tax measure, specifically aimed at raising affordable housing money, should only require 55% support. 

Johnson said she imagines Santa Cruz’s housing measure would still go through a citizen-led petition process, but said she wasn’t sure.