The unwanted top spot: Santa Cruz County remains most expensive rental market

Santa Cruz has once again claimed a top ranking it would rather leave behind.

For the fourth year in a row, the Santa Cruz-Watsonville metro area is the most expensive rental market in the nation, according to the National Low Income Housing Coalition’s latest “Out of Reach” report. The county first took the top spot in 2023.

To afford a decent, non-luxury rental home without spending more than 30% of their income on housing, a full-time worker in Santa Cruz County now needs to earn $81.04 an hour — the report’s calculation for a local “housing wage.” That means a county resident making the state minimum wage of $16.90 would need to work five jobs to meet that amount.

While Santa Cruz County remains far ahead of the second-place San Francisco metro area, its “housing wage” was actually higher last year — $81.21 compared to $81.04. The “housing wage” in the San Francisco metro area is $69.31 this year, nearly $12 less than in Santa Cruz County.

The report also uses a metric called “fair market rent,” which estimates what a household today could expect to pay for a decent-quality rental home. This year, fair market rent for a two-bedroom unit in the county is $4,214, down slightly from $4,223 from last year. The San Francisco metro area’s fair market rent is just $3,604, 14% lower than Santa Cruz County.

The Central Coast and Bay Area are frequently featured near the top of this list each year. Santa Cruz County, Santa Clara County and the San Francisco metropolitan area have held a combination of the top three spots in each of the past four years.

Santa Cruz County’s ranking comes as no surprise to housing advocates and policymakers.

“Families in our community experience this reality every day as they struggle to find housing they can afford or make increasingly difficult choices to remain in our community,” said Jenny Panetta, executive director of the Housing Authority of Santa Cruz County.

“It would be a surprise if we weren’t still expensive, considering that we are only building a meager amount countywide,” said Rafa Sonnenfeld, a leader with Santa Cruz YIMBY, an organization focused on pushing for legislation to build more affordable housing faster. “The City of Santa Cruz is doing OK, but everywhere else is struggling to build their fair share.”

Although Panetta said that the Housing Authority is “seeing affordable housing in the pipeline countywide, in each city and in the unincorporated area,” Sonnenfeld believes that there are larger changes that need to happen — particularly with what he calls “a culture of ‘no’” — before the county sees significant, tangible improvement.

“The City of Santa Cruz is the place where people feel like the city will actually work with them to build housing, and everywhere else, it’s a bit more of a challenge,” he said. “The county has recognized that they need a culture change, and they’re working on making progress to improve the amount of time that it takes for the permitting process.”

Sonnenfeld said that he thought the county civil grand jury “has some really good perspective” on housing in its recent report, which said that the county was lagging behind on its housing goals. The county is more than a quarter of the way through the current Regional Housing Needs Allocation (RHNA) cycle, and as of late June had issued just 279 permits for the 4,634 units the county is on the hook for in unincorporated areas this cycle, which ends in 2031. The group argued that the county should have permitted more than 1,100 by this point.

County spokesperson Jason Hoppin previously told Lookout that it was too early to be judging progress, and that the county still expects to meet its 2031 goal. Panetta also said she’s encouraged by more affordable housing coming online over the past year and more projects moving through the pipeline.

Sonnenfeld, however, says that “the proof is in the pudding,” adding that while both market-rate and affordable housing developments face barriers, market-rate developments don’t often get access to assistance such as tax credit subsidies, and also deal with high cost of permitting, labor and more.

“This is a problem that we have taken decades to build and we’re not going to solve it overnight,” he said.

Panetta said the county and its cities are already focusing on increasing housing production, but can do more.

“We would benefit from a local source of funds dedicated to affordable housing to help us leverage other funding sources and stimulate housing production,” she said. “There isn’t a single solution to a problem this complex, but by protecting existing housing stability and steadily increasing our housing supply, we can make meaningful progress toward a Santa Cruz County where more people can afford to live, work, and thrive.”

Sonnenfeld said the YIMBY movement has seen some success recently in trying to improve things via state law, and pointed to the Starter Home Revitalization Act, which seeks to streamline approval for small-scale residential projects of 10 or fewer units on urban lots under 5 acres zoned for multifamily residential use. He also noted the slow but steady march to make accessory dwelling units easier and more affordable to build.

But the most vital thing, he said, is political courage. Santa Cruz, for example, has previously stated a commitment to implementing an affordable housing overlay, which has yet to come to fruition.

“There’s been a lot of NIMBY pushback from people and neighborhood groups who just don’t want the city to carry out this commitment that they made that benefits housing, and in this case, 100% affordable housing,” he said. “When city hall takes NIMBY voices seriously enough that they have delayed moving forward with that program for over seven months now, it shows that there is a lack of political will from current electeds.”

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