Housing. Homelessness. Just saying the words gives many Californians a heavy feeling in their gut.

We are in crisis. The realities in San Francisco and Silicon Valley set the very bleak stage.

Analysis of housing, transportation, taxes, and other daily costs pins cost of living in San Francisco is 62.6% higher than the US average. Recent census data ranks Sunnyvale, Mountain View, and Palo Alto as cities with the median highest rent levels in California, even above San Francisco (referring to 2017 data). While figures for true median rent in SF vary per source due to methodology variations, most agree that it’s somewhere around $3,000 for a one-bedroom. The median home price for buyers in San Francisco (easier to calculate, even more shocking to see) comes in at about $1.7 million as of June of this year. Yes, that’s median.

While the overall cost of living index in Santa Cruz is “only” 39.9% higher than the national average, housing realities in Santa Cruz aren’t much brighter. The percentage of homes on the market that are affordable to families earning a median local income dropped from 20% in 2008 to just 12% in 2018 (according to the Housing Opportunity Index from National Association of Home Builders). The percentage of residents who are severely and moderately burdened by the cost of their rent is significantly higher in Santa Cruz than in San Francisco.

Graphs from an in-depth report on Bay Area and Santa Cruz market trends by CoStar Market Analytics illustrate just how much residential rents have increased since the last real estate market peak:

How did California get so deep into a housing crisis? This article won’t be a place to examine the causes of the housing crisis, because that is a task well beyond the scope of what we’re after here. But it’s worthwhile to briefly remember that California simply didn’t build enough housing for its booming population over the past three decades. Then a recession-battered economy continually lost funding for affordable housing and state housing bond money dried up. 

Unsurprisingly, low-income Californians suffered the most, and continue to be most acutely impacted by the shrinking availability and rising costs of housing. 

The importance of high-density housing cannot be overlooked (nor can the impact of community opposition to denser housing projects, which some blame for the initiation of the housing crisis in the first place). Across the board, developers, housing advocates, and many lawmakers argue that it makes the most sense to build higher-density housing to accommodate more people, prevent sprawl, and protect environmental areas. 

There are so many brilliant articles, books, and other resources that deeply examine how the heck this all happened—but what does it all mean for the future of living and doing business our hometown?

No Place to Call Home

It’s not surprising that homelessness skyrocketed along with the housing shortage.

Of course, there are many contributing factors to why any individual or family becomes homeless, but, increasingly, the dominant factor is the cost of housing. California (and the whole nation) has seen people becoming homeless who never were before, especially seniors, including many people who do have income from employment—just not enough.

According to a report prepared by the firm Focus Strategies for the County this year, Santa Cruz County saw a 10% increase in the total number of people experiencing homelessness this year. In San Francisco, homelessness was up 17.6%; in Santa Clara County, that number went up by 31%.**

But wait: that Point-In-Time (PIT) methodology may not be as accurate as we hope, notes Sibley Simon, President of New Way Homes and long-time housing advocate. Due to complexities of homelessness and downfalls of PIT counts, we only get a limited understanding of population dynamics from the data.

PIT counts have been widely disputed as accurate statistical methodology, and for good reason. (What if it’s raining that day? How many volunteers were sent out to count? What about people who are living in a vehicle? What about homeless children who are in school?)

Simon doesn’t see a big difference in the homelessness crisis between the San Francisco Bay Area and Santa Cruz—but it’s very clear that California is doing way worse than the rest of the country. Other states have taken more coordinated approaches to addressing long-term solutions, with an emphasis on prevention. That’s been happening across the country, but only recently began happening in Santa Cruz.

One thing is for sure: the crisis is urgent, and so the solutions must be, too.

What can be done?

“Timing is everything,” Economic Development Director Bonnie Lipscomb reminded the guests of the Santa Cruz Works New Tech event on November 6. (The slides from Lipscomb’s presentation are available here.) 

With the Housing and Urban Development’s matching program for local housing trusts, Santa Cruz has the opportunity to double the invest in its Affordable Housing Trust Fund. If Santa Cruz raises $1.5 million more in funds over the next year, that investment will grow into $10 million through the State Local Housing Trust program. Lipscomb urged people with connections to tech companies to get involved, become advocates.

At last, the County and City are looking for long-term solutions, note Kara Meyberg Guzman and Stephen Baxter on their podcast Santa Cruz Local (of which you should become a member if you haven’t already). Coordinating research-backed efforts is a huge boon to solving housing and homelessness issues. A Community Advisory Committee on Homelessness was formed in June 2019, with three subcommittees to tackle Santa Cruz’s challenge.

Residents and local lawmakers are taking action. In their October 29 meeting, Santa Cruz City Council unanimously approved immediate enactment of the new eviction rules of State Law AB 1482 that goes into effect January 1, 2020.** On the table now is the contentious question of whether to raise inclusionary housing requirements from 15% to 20%, meaning that 20% of a project’s total units would have to be affordable units. Opponents argue that developers simply won’t build if 20% of housing units must be low-income—the return on investment is just too low. Supporters of this change believe developers will continue to build even with 20%.

“Both sides are right,” Sibley Simon told me. Affordable housing is essential and we need it. But at the same time, the margins of development projects are already small, and a 20% inclusionary requirement would make them miniscule.

In fact, according to a consultant hired by the City in 2017 to analyze data around inclusionary requirements, a total of 15% affordable units is the threshold for a project’s viability. Moreover, many analysts foresee an economic downturn that could hurt the State’s budget even more—and therefore, hit the development market.

More changes are stirring in the City and the County. A new project in Live Oak will include 57 affordable units—a huge increase to the affordable housing units in the unincorporated County. Santa Cruz Economic Development continues to dedicate a great deal of effort to designing, executing, and promoting new opportunities to make headway in the housing and homelessness crisis. 

Leveraging Local Spirit

To be honest, I practically begged Simon for good news. 

“I’m optimistic,” he told me. “I think we can solve this, but it’s going to get worse before it gets better.”

He noted Santa Cruz’s strong volunteer spirit, plus a broadening coalition in support of developing affordable housing and services to help people get out and stay out of homelessness. Residents are turning out to support proven strategies for solving this crisis. When people see rational solutions proposed, they’re emerging with support—that wasn’t necessarily true in the decades leading up to now, when there was stiffer opposition to inclusionary housing and homelessness services. 

Locally, the tech sector has been largely silent—a stark contrast to Silicon Valley and San Francisco. Apple made waves by committing $2.5 billion to help build affordable housing, much of it going to vulnerable populations and the Bay Area housing fund. Google invested $1 billion. (Just for some perspective, Google spent $2.8 billion buying land in Sunnyvale, Mountain View, and Palo Alto between 2016 and 2018.) Facebook and Amazon made their matches, too.

Sadly, these investments won’t come to Santa Cruz County, which is not technically part of the San Francisco Bay Area, despite the fact that a huge chunk of Santa Cruz residents are contributing to the Silicon Valley workforce.

Local Santa Cruz tech isn’t coming under attack by residents for causing the housing shortage and crisis—not yet. Unlike in San Francisco, Berkeley, and Oakland, tensions haven’t risen quite that high. That means the time is ripe for big local economic players to step up and become deeply involved in the conversation and the solutions (read: attending City Council meetings and funding investments). 

Little by little, local tech companies and other high-profit companies are starting to get engaged, growing their input. But Santa Cruz needs more. 

Lipscomb voiced a strong call to action at the November 6 event, speaking to a room packed with entrepreneurs and non-profit leaders, investors and inventors, start-up founders and tech pioneers. It’s very clear that there is no lack of ingenuity, inspiration, and energy in this town.

And there’s one more glimmer of hope: because Santa Cruz is a smaller city with less people, the size of the challenges can feel more solvable (though, of course, is not proportionally smaller). A less vast population makes this issue more “tackle-able.”

“Just one big service or building can make a huge difference,” Simon said. 

Can small, tight-knit community be Santa Cruz’s signature for success? Can Santa Cruz leverage its legendary community spirit into action in order to solve this crisis?

Part 1: Lifestyle + Business Sense

Part 2: Room to Grow: Office Space and Wages

Part 3: Housing and Homelessness

Part 4: A Unique Tech Ecosystem

Part 5: Where Do We Go from Here

**The Santa Cruz Local podcast hosts look into this thoroughly in their October 30 episode, and again in this piece.