‘Mentally, physically, financially exhausting’: Santa Cruz County now the most expensive rental market in the U.S.

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Liz Guthrie knows her family’s time in Santa Cruz will come to an end as soon as her son graduates from Santa Cruz High School.

The single mother of two teens has been forced to move twice in the past two years amid a hot rental market. Having been pushed out of rental homes costing nearly $3,000 and then $3,800 a month, the family has downgraded to a two-bedroom apartment that costs $4,500. Now Guthrie says her family is ready to leave the city as soon as she can to escape the escalating rents.

“The only reason I’m here is to get my son through high school,” said Guthrie. “We’re only here for three more years, and then I’m moving to Florida.”

What Guthrie and her children are experiencing is a growing problem in Santa Cruz County — the region’s soaring cost of living. Santa Cruz County was named the most expensive rental market in the country, according to a new report.

The Santa Cruz-Watsonville metro area, which is made up solely of Santa Cruz County, moved into the top spot in the rankings of costliest rental markets in the U.S. in the latest edition of “Out Of Reach,’’ an annual report by the National Low Income Housing Coalition. Last year, the county ranked No. 2, behind the San Francisco metro area comprised of San Francisco, San Mateo and Marin counties.

“This should surprise no one,” said Santa Cruz Mayor Fred Keeley. “We can’t call ourselves a progressive community anymore if we’re the least affordable rental market in the United States.”

According to the report, the fair market rent of a two-bedroom rental in the county is $3,293. Renters would have to earn an average “housing wage” of $63.33 an hour to be able to afford that rent, the report says.

A housing wage is the hourly wage a full-time worker must earn to afford a modest rental home without spending more than 30% of their income on housing costs. A person making the state minimum wage of $15.50 would have to work four such jobs to meet that amount.

The county surpassed the San Francisco metro area, whose housing wage was $61.31, nearly $2 less than Santa Cruz. Santa Cruz, San Francisco and the San Jose-Sunnyvale-Santa Clara metro area have held the top three spots every year in the annual report since 2019.

Guthrie, who works as an event planner, says she’s currently spending 78% of her take-home pay on rent.

Elaine Johnson, executive director of Housing Santa Cruz County, says the news that the county is the most expensive rental market in the country isn’t a surprise given the imbalance between the area’s supply and demand for housing.

“We have people that are born and raised here, and we have students, and all of them need a safe, stable place to call home,” she said. “We’ve been struggling for years to accommodate that.”

Johnson, who moved to Santa Cruz County from New York City in the early 2000s, said she was surprised at the prices of rentals even then. Though she ended up with a one-bedroom studio for around $800, she remembers people saying she was lucky to find it.

“People used to say to me all the time that they could only imagine what prices were like in New York City, and I would say, ‘Actually, it’s not like Santa Cruz,’” she said.

Guthrie, her daughter, Stella, 18, and son, Liam, 15, moved to Santa Cruz from San Jose in 2017. They came for a relaxed coastal lifestyle in a smaller community. But while the Guthries love the community they’ve found, the stress of housing is forcing them out.

The Guthries found a three-bedroom home in Santa Cruz for $2,950 when they moved here in 2017 and they lived there without any rent increases until September 2021, when their landlord gave them 60 days to move out.

“We got lucky and found a place right away,” Liz Guthrie said.

Guthrie spent more than $10,000 to move into another three-bedroom home for $3,800. That included moving expenses, a $5,500 security deposit and first month’s rent. She said she was able to come up with that money only because of an inheritance she received from her parents, who had passed away.

“Otherwise, I would have been, I guess, on the street,” said Guthrie.

She got a notice from that homeowner on April 1 of this year saying the family had to move once again. Their landlord died and the heirs decided they wanted to sell the property. It’s currently on the market for $1.6 million.

“I said, forget that, I’m not going to rent a private house anymore. I can’t get kicked out again,” she said. “It’s mentally exhausting, physically exhausting, financially exhausting — every time we have to come up with that much money to move.”

That’s how she decided to move into the apartment complex — a two-bedroom apartment that costs $4,500.

Her daughter, Stella, who recently graduated from Santa Cruz High, said she’s heard of about 15 people who have left Santa Cruz in the past seven years or so for more affordable areas in other states. Stella herself is heading off to school in New York and says she is disappointed that she can’t imagine ever coming back to live here because of the housing crisis.

“It’s very detrimental seeing your [social network] slowly die off because everyone has to move away because it’s so expensive to live here,” she said. “It’s a bummer it’s affecting so many young people.”

Santa Cruz County Supervisor Justin Cummings said he regularly hears of renters whose landlords have opted not to raise their rents — until the landlord dies.

“And when those landlords have passed, and the children have inherited those homes, [the renters] oftentimes have gotten kicked out,” he said. “And we’re going to be seeing that happening more over time.”

Keely said he thinks the most effective way to address affordability at the city level is to build the nearly 4,000 units required by the state by 2031. The state-mandated Regional Housing Needs Allocation (RHNA) is intended to address the low inventory and affordability challenges.

Johnson said she remains hopeful that building more units can begin “moving the needle” toward a more affordable county, along with legislative factors such as the city’s prospective housing bond, or rent controls.

“It’s important that we keep our eye on the bigger picture, whether it’s one unit, 20 units, or 150 units, they’re all a win,” she said. “Building nothing is not going to help any of us.”

However, Cummings says the region needs to do more than just build additional affordable housing units. It also has to address issues like real estate speculation. Rising rents entice more buyers, including investors, into the housing market because they believe homes will be worth even more in the future and that rents will continue to go up. That, in turn, puts even more pressure on home prices.

“What that does, ultimately, is it drives up the value of the home, which is beneficial for the real estate agent because [they] want to make the highest profit they can off the sale of the home,” Cummings said. “It’s also beneficial for the local jurisdictions, because we get property tax — and the higher the sale price, the higher the property tax. So there’s a lot of factors that really work against affordable housing and really incentivize and encourage housing that’s unaffordable.”

He added that local elected officials have proposed policies like rent control but they’ve often been shot down, though that changed during COVID when government agencies implemented temporary eviction protections and rental assistance programs.

“Many people in this community have been trying to address this for years, and anytime we try to bring forward new programs or propose things like rent control, we always get significant pushback,” he said.

Keeley placed part of the blame on himself and other past local political leaders for the region’s current rental crisis. As a county supervisor in the 1980s and ‘90s, when elected officials were focused on managing growth, he was part of the efforts to curb what he calls “unbridled levels of growth.” Now, he says he feels an added responsibility to fix the housing affordability challenges in Santa Cruz.

“So when managing our growth was the highest priority, elected officials, including myself, did that,” he said. “But that is one of the major contributing causes to why housing is so unaffordable now and why, at least for me, I feel an obligation to help correct that problem.”