Setting the record straight: It’s time to debunk false affordable housing narratives in Santa Cruz

The downtown Pacific Station South project (right side of photo) includes 70 units of affordable rental housing.
(Kevin Painchaud / Lookout Santa Cruz)

Santa Cruz city planning commissioners Pete Kennedy and Michael Polhamus respond to their colleagues Cyndi Dawson and Sean Maxwell’s contention that the city is not producing enough affordable housing. Kennedy and Polhamus believe demanding unrealistic affordable housing percentages and conditions of approval makes projects infeasible to build. This does not help alleviate the housing affordability crisis, they argue — and it is also against state law. Providing housing for all through the city’s inclusionary zoning and building 100% affordable projects yields the highest proportions of affordable housing possible and helps alleviate pressures in the market, they say.

A recent piece by Santa Cruz planning commissioners Cyndi Dawson and Sean Maxwell compels us to dispel inaccurate information, clarify policies and remind the public of the city’s accomplishments in housing development. The argument they set forth is a false narrative and its perpetuation does a disservice to our local community.

New housing growth in our city, region and state has fallen short of our needs for decades. One need look only at local rental prices and home sales data to gauge the outcome of our historic lack of progress. Several policies promoted by our colleagues in their commentary would not only net fewer affordable units — and promote the outrageously expensive status quo in the local housing market — but are also illegal.

Despite repeated explanations by our city attorney and city staff, both commissioners have chosen to disregard established legal precedent and our desperate need for more housing by consistently voting against housing projects that conform to state and local laws on the basis of insufficient affordable units. Repeating this poorly conceived notion year after year does nothing to move us forward.

One of the most common, but often unstated, reasons building projects fail to break ground is they require excessive conditions of approval or infeasible levels of affordability.

One key example of this is that we should attempt to require more deed-restricted affordable housing units than is allowed by state law in density bonus projects. While we understand the intention, we see no benefit in intentionally flouting the law. Lawsuits are expensive, time-consuming, and terrible for morale. A developer could sue over “just one” additional unit, costing us far more than it would be worth.

Requiring more affordable units from every project is not only illegal, which leaves the city vulnerable to legal challenges, but also yields less of all types of housing overall. Despite the skepticism by our colleagues, projects do have to “pencil out” financially or they don’t get built.

Let’s take a hypothetical project that consists of 100 one-bedroom units; assuming each unit is rented to a single tenant who makes the maximum income for the level of affordability, with a 20% inclusionary rate, that is a $2,800-a-month rent. If all 20 of the inclusionary units were low-income units, the minimum annual subsidy by the developer would be about $147,000. If those units were all very low-income it would be about $345,000.

So how do developers make this level of subsidy “pencil out”?

They secure density bonuses which give them more market-rate units over which to spread the subsidy without raising rents far beyond market rate, as is their right under state law. Developers can also reserve 5% of all units for Section 8 voucher holders to ease the developer’s burden at the expense of the government. This structure maintains the incentive to build more deeply affordable units as opposed to moderate-income units and allows projects to move forward.

In this scenario, without these types of provisions, this project would never be built.

Demanding more affordable units in this project, or other types of conditions of approval that make this project more expensive to build, would simply make it even less feasible. This does nothing to alleviate our local housing issues.

The current approach to housing development should not be vilified, but celebrated. As we look to the future, we will remain focused on housing production for all income levels, but especially affordable housing.

In light of our housing shortage, the state has responded to these types of actions by legally mandating that local governments approve housing projects that meet objective criteria. The state has also prohibited adding additional requirements, such as excessive parking requirements, height limits or density maximums which compromise projects or make them infeasible to build.

As such, we build a combination of market-rate developments with required inclusionary units (per our local laws) and 100% affordable projects eligible for competitive grants and tax credits. The combination of these two approaches can, and locally does, produce large proportions of affordable housing.

From 2015 to 2022, 1,177 new units broke ground within the city of Santa Cruz, of which 571 (48.5%) were affordable units. This is no small feat, and is the direct result of excellent work by our staff and rich democratic processes at both the commission and council levels. Many affordable units have been created due to state density bonus laws. In addition, many of these affordable units were city-led or partially funded by the city.

The claim that the Santa Cruz City Council has approved numerous projects with less affordable housing than allowable since 2020 is patently false.

The “prime example” cited — 126 Eucalyptus Ave. — is a memory care facility for seniors with rooms where affordability requirements cannot be legally applied. Had the city council also ignored these facts, it more than likely would have been subject to a lawsuit (which the city would lose) at significant cost to the taxpayers.

To clarify, the city council in 2019 raised the inclusionary rate from 15% to 20%, which continues to serve as the standard in determining the level of affordability in the base plans of applicable projects. That has not changed.

Ironically, by doing so, the city council encouraged the very projects Dawson and Maxwell criticized. By increasing the inclusionary rate to 20% locally, most major projects will now qualify for a density bonus of at least 35% under state law. Thus, their article criticizes the effects of the very policies which they are simultaneously advocating for.

As planning commissioners, we will continue our successes producing housing at all income levels. Far from not producing enough affordable housing, we have met our city’s housing production targets (Regional Housing Needs Allocation goals) for the fifth cycle for every income category, and exceeded the goal by more than 50%.

Santa Cruz city planning commissioners Pete Kennedy (left) and Michael Polhamus.
Santa Cruz city planning commissioners Pete Kennedy (left) and Michael Polhamus.
(Via Pete Kennedy (left); via Michael Polhamus (right))

This is a really big deal.

According to the state Department of Housing and Community Development, only 6% of cities in California have met their state-mandated housing production targets. As a result, we remain uncertain why our colleagues feel that almost every other unit in the city built as affordable is inadequate.

The current approach to housing development should not be vilified, but celebrated. As we look to the future, we will remain focused on housing production for all income levels, but especially affordable housing.

We will further fair housing through new laws and direct investments. We will ensure that we continue to take deliberate, thoughtful actions that support the well-being of our community. We all want to have a thriving community where everyone can find their needs met, know their neighbors and have some stability.

Dwelling on the failed policies promoted by Dawson and Maxwell won’t get us to where we need to be. We need to continue building housing for all.

Michael Polhamus is a social studies teacher for Santa Cruz City Schools, board member of the Democratic Women’s Club of Santa Cruz County, and current member of the City of Santa Cruz Planning Commission.

Pete Kennedy is senior project manager at Bright Green Strategies, a LEED-accredited professional, and current chair of the City of Santa Cruz Planning Commission.

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