Quick Take
For the third consecutive year, Santa Cruz County has been deemed the country’s most expensive rental market, and the gap between us and the No. 2 spot is even wider than the year before.
Santa Cruz County has remained atop an undesirable list as the country’s most expensive rental market, one that requires a worker to earn more than $80 an hour to comfortably afford the average rental home, according to a new report.
The Santa Cruz-Watsonville metro area, which is made up solely of Santa Cruz County, was named the most expensive rental market in the U.S. in the latest edition of “Out of Reach,” an annual report by the National Low Income Housing Coalition. The county moved up to the top spot in 2023, where it has remained for three consecutive years.
The report also says that the county is getting more expensive. This year, fair market rent for a two-bedroom rental in the county is $4,223, up from $4,054 last year, about a 4% increase. That is notably higher than in 2022, when it was $3,293, about a 28% jump over those three years. Fair market rents are estimates of what a household today could expect to pay for a decent-quality rental home.
A “housing wage” is the hourly wage that a full-time worker would have to earn in order to afford a typical rental home without spending more than 30% of their income on housing costs. In Santa Cruz County, that means renters would have to earn an average housing wage of $81.21 an hour to pay that rent, up from $77.96 last year, also about a 4% increase. A county resident making the state minimum wage of $16 would have to work five jobs to meet that amount.
Santa Cruz County also saw its gap widen over the second-least-affordable rental market, the San Jose-Sunnyvale-Santa Clara metro area — or Santa Clara County. Its housing wage was $66.27, almost $15 less than Santa Cruz. Last year, the No. 2 spot belonged to the San Francisco metro area, and was only about $13 less than Santa Cruz.
Santa Cruz County’s fair market rent of $4,223 is 22% higher than Santa Clara County’s, which is at $3,446. Santa Cruz, San Francisco and Santa Clara counties have occupied a combination of the top three spots in each of the report’s past six years.
Housing Santa Cruz County executive director Elaine Johnson said she had a feeling she would see Santa Cruz in the No. 1 spot once again this year. She said that, although UC Santa Cruz has housing development underway, and the City of Santa Cruz has gone full speed ahead on building housing units, “the more we build, the more we need.” She added that barriers like limited space and community pushback make development difficult.
“People have to understand that it costs millions of dollars every time [a project is delayed], and it’s going to cost even more to build,” she said. “Being No. 1 is not where we want to be. We need to get down to 10, 15, or 20, and that’s not happening.”
Johnson said that she thinks that “we get in our own way” when it comes to constructing more housing, and that the community needs to be more accepting of new development.
“I come from the lens that we have to see beyond a building and see people creating a community,” she said. “I’m from New York City, the Boogie Down Bronx, and we welcomed homes being built. If we want our families to stay here, we gotta allow them to build homes.”
Johnson said that the county rezoned about 40 lots in unincorporated areas over the past year to allow for housing development, which is good, but shows that the region needs to be proactive and creative in order to maximize the amount of housing it can build.
Santa Cruz YIMBY leader Rafa Sonnenfeld said the community has to accept that there will need to be changes to the area if it’s serious about solving the housing problem, as many housing proposals are met with pushback over height, density and traffic congestion. He said that larger buildings are typically more feasible financially. While it might have been viable in previous decades to build more modest projects of five to six units, those days are over.
“With the cost of land, materials and construction, economies of scale are what make these projects feasible,” he said. “If we’re going to see more housing, it tends to be larger buildings that are five or six stories and maybe even a couple hundred units. The reality is that’s what’s feasible and financeable right now.”
Don Lane, former Santa Cruz mayor and a current board member of the nonprofit Housing Matters, said he hopes the influx of new development of both market rate and affordable housing will slow the rising cost of rent, even if it won’t immediately make housing cheaper: “I’m not going to say a reduction of rents, but a real flattening of rents, because there’s so much coming on the market at all levels of rental housing.”
However, Lane said financing projects is perhaps the biggest hurdle when it comes to building enough new affordable housing in the county.
“We’re seeing so many things being built, but we also see things getting delayed because, even with approvals, they can’t make it affordable to build because the actual building costs are so high,” he said.
Lane also said he believes locals are gradually becoming less resistant to housing developments, as many people recognize that rejecting or delaying developments only exacerbates the crisis. Making true progress on housing affordability requires all of the cities within the county to commit to addressing the problem, he said: “Cities have to embrace an intention to do everything they can to address the housing needs of the community.”
Some projects in the works could prove to be complex. Johnson and Sonnenfeld pointed to Capitola’s plan to develop the mall into housing and retail. While Johnson says that will eventually provide a huge number of homes, Sonnenfeld thinks it’s a bit of a gamble. He explained that it will require compromise and cooperation among all players, including landowners and city officials, which could complicate the project. The city and the mall’s owner, San Francisco-based Merlone Geier Partners, have been unable to agree on a plan for redevelopment.
“Even if the folks who own land at the mall want to build housing on it, it’s no certainty that there’s a viable path forward,” Sonnenfeld said, adding that the city could find itself in a tough situation if the vision of turning the mall into housing never comes to fruition. “The City of Capitola has to answer some tough questions about where else in the city they can plan for the amount of housing it needs.”
Johnson added that geographical constraints pose issues for small cities like Capitola: “If Capitola had more space, they’d be building more.”
As economic uncertainty and concerns around the availability of state and federal funding for housing loom large, Johnson said that focusing on other ways to pay for affordable housing will be vital for the near future — like a housing ballot measure spearheaded by Santa Cruz Mayor Fred Keeley and backed by Housing Santa Cruz County.
The measure has raised tensions with the Santa Cruz County Association of Realtors, which has drafted an opposing measure going before voters in the city of Santa Cruz this fall with the publicly stated goal of defeating Keeley’s initiative. Generally, Keeley’s measure proposes higher and broader real estate taxes that estimates raising about $5 million each year toward affordable housing and homelessness initiatives. The realtors’ measure would introduce lower and more narrow taxes that would bring in a much smaller amount of money than the other.
“Everybody’s going to be impacted by the lack of funding, so we need to be creative,” Johnson said. “It’s important that the jurisdiction looks at other ways of bringing funding in so that developers can continue to develop and that people can stay housed.”
And Sonnenfeld said that changing a growth-resistant culture in the community is a must if Santa Cruz County is to become a more affordable place to rent.
“I think there has been years of anti-growth sentiment in our politics, and that’s even filtered into the culture of the planning departments within our cities and county,” he said. “If we’re serious about the need to accommodate more housing, we need to start at the top and look at changing our culture so that we can reduce some of the barriers it takes to build in this county.”
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