Quick Take
Affordable housing isn't a matter of opinion — it's math, writes Doug Erickson, founder of Santa Cruz Works. Here, he explains why developers of new market-rate housing aren't the villains they're often made out to be, and why affordable and market-rate homes play different but complementary roles. Understanding the economics behind both will help us navigate Santa Cruz's housing crisis, he writes.
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Affordable housing isn’t a vibe — it’s a formula. Here’s how the 30% rule, hidden $1,160 studios and a slow-motion machine called filtering actually decide who gets to live here in Santa Cruz.
OK, so. “Affordable housing” sounds like an opinion. It’s actually arithmetic. The government calculates Santa Cruz County’s median income ($132,800 for a family of four), sorts everyone into tiers — very low, low, moderate — and declares housing “affordable” if it eats no more than 30% of your paycheck. That’s the whole formula. A “very low income” single person here earns about $69,000 (yes, really — welcome to coastal California), which pencils out to roughly $1,160/month for a studio.
“But the new studios downtown are $3,150!”
Correct!
Here’s the magic trick: Both prices exist in the same building.
RiverRow‘s 175 units include 20 deed-restricted apartments renting at those regulated caps, invisible on any listing site, right next door to identical units going for triple.
And Anton Pacific — the building many people assume has affordable units — has none on-site. Instead, its developers dedicated nearby land to the city for Pacific Station South, an 85-unit, 100%-affordable housing project. From the sidewalk, it’s not obvious which building is doing what.
That’s kind of the point.
“Fine, but why build luxury towers at all?”
Because of a machine called filtering. Housing depreciates like a very slow car — today’s rooftop-deck tower is 2075’s naturally affordable complex.
And it has a fast mode: moving chains. Every high earner absorbed by a new tower vacates an older unit, which someone else grabs, vacating theirs. Economist Evan Mast tracked actual movers: 100 new market-rate units open 45 to 70 vacancies in below-median-income neighborhoods within five years.
The tower is a magnet pulling rich renters out of the used-housing market so they stop outbidding your barista for a 1980s fourplex.
Here’s the catch.
The machine runs in reverse when you starve it. Block new construction for decades and high earners don’t leave; they buy the old bungalow that was supposed to filter down, renovate it and flip “cheap old house” into “$1.5 million coastal farmhouse.”
Santa Cruz has been running this experiment since bell-bottoms were new.
“But the storefronts are empty — nobody actually lives in these buildings!”
Nope: Anton Pacific hit about 85% leased in Year 1, according to city statistics, and retail always lags behind residents by a few years (restaurants sign leases after the foot traffic exists, not on faith). It’s now 98% occupied.
Dark windows measure the economics of retail in 2026, not the humans upstairs.
The takeaway: Market-rate towers and deed-restricted units aren’t rivals — they’re a two-part system. New supply absorbs high earners today; subsidized units protect the people who can’t wait 50 years for a building to age into affordability. Run only one, and the other fails. Run both, and Santa Cruz might finally look like a town where the people who work here can live here.
Doug Erickson is the executive director of Santa Cruz Works, a regional nonprofit that empowers local businesses and entrepreneurs through skills-building, funding, jobs, networking and events. Erickson worked in tech for 35 years and founded Fleetwood/Surftech – a windsurf company – that grew to No. 2 in the world. Erickson is a UC Santa Cruz graduate.
