ARTICLE
Why Housing IS a Crisis The Chamber will be neither prosecutor nor apologist for Council Member Micah Posner’s construction of an accessory dwelling unit (ADU) without permits. But this now very-public story is stimulus for thinking about the lasting impacts of public policy choices made over the past 40 years. These choices have made housing in Santa Cruz and throughout California unaffordable. As with much that is dysfunctional in California public policy, our trail to unaffordable housing began with the adoption of Proposition 13. It has been compounded by failures of promises we made to ourselves to implement environmental protection’s “urbanization” elements including increased density and modernized transportation infrastructure and, ultimately, by our local (and national) failure to sustain an effective “middle” class. This path begins with Proposition 13. In 1978 voters angry about constantly escalating property taxes, overwhelmingly adopted this amendment to the California constitution. Prop 13 limits annual real estate taxes to 1% of a property’s assessed value and limits the taxes’ annual increases to 2% per year. (This tax basis valuation is reset to the actual sale price upon change of ownership and the tax adjusted to 1% of that value in the year following the sale of the property.) One of the most significant effects of Prop 13 was to eviscerate funding for local governments, schools, water districts and other public services providers. The remedy for this shortfall has been to shift the source of revenues necessary to pay for many of these services to “fees.” This has been particularly true for real estate development. Development of real property was once seen as a public good. Helping to sustain and grow local businesses and industries by providing the governmental services and infrastructure necessary to build and maintain the stores, offices, and plants in which they did business and the homes necessary for local residents was worth the entire community’s investment. So each community paid for the creation of general plans, the review of construction drawings, and the supervision of the construction itself. Communities also paid for the streets and roads, retail-area parking, schools, water, and other public services that served those businesses and their employers. It is no longer so. Many of these costs and others, previously paid for by community-wide taxes, are now borne by each new project. For instance to build a new housing unit – say, an ADU in your back yard – requires the payment of an array of planning and impact fees – fees that would likely exceed the cost of the materials and that could be as expensive as the entire construction. It is more so for larger housing projects. To create even a relatively small apartment complex, the government fees, assessments, and exactions are likely to exceed the cost of the (very expensive) land upon which the apartments are built. What are these fees for? Here are a few of them: Planning fees for a design permit and fees assessed by and paid to each of the following reviewers: building, energy, fire, green building, planning, public works, storm water, water conservation, and water engineering. Impact fees for schools, water, sewer, affordable housing, and traffic. Additional fees paid for computer upgrades at the planning department, the cost of preparing the general plan. Then building inspection fees. And, sometimes, “exactions,” customized costs required by the community for public improvements such as nearby intersections or traffic signals. A few of these did exist before 1978, but the list of fees has grown exponentially over the last four decades. Today’s real estate development fees are vastly greater… more than daunting for homeowners who would like to build “low-cost” housing in their back yard. The effect has been to shift the costs of “creating our communities” to the people and projects who are trying to do just that. The result has been to discourage them from doing so. To increase the rate at which we are creating housing and jobs we will have to take on more of the cost of creating those houses and jobs. The Importance of Neighborhoods The effect of these increased real estate development costs has been compounded by our failure to carry out the “urbanization” element of the environmental promises we have made to ourselves. We knew that creating an “urban services line” that would protect the natural environment that lies outside of that line required a commitment to a more “urban” environment inside of that line. In the simplest terms this is a commitment to two things. Increased housing density and creating neighborhoods that are safe and attractive. To succeed within our environmental boundaries requires more housing within those boundaries. Our general plans reflect this promise. But, dozens of neighbors routinely show up to complain about every housing project. What do they complain about? They don’t just talk about their fears of what the added housing and new residents will do to their neighborhoods. Almost without exception, they talk about how their neighborhood is already unaccommodating. They talk about feeling unsafe, about traffic and parking, about noise, and about the lack of recreation resources and safe access to schools. As a community we have talked a good game about creating affordable housing and increasing density. But we have not invested in the public and private services and resources that make for desirable denser neighborhoods. This begins with a feeling of safety, from the “look and feel” of neighborhoods to visible and effective law enforcement. It addresses transportation, schools, parks, and parking. It includes alternative transportation routes for bikes and pedestrians. And, its encourages “neighborhood retail.” It is no wonder that creating an affordable unit in your back yard might make your neighbors nervous. They are already nervous. Also necessary to making many of these housing areas attractive to developers and prospective residents are safe and efficient streets and highway systems and efficient public transportation resources. A ten to fifteen minute commute to work is a reasonable expectation… whether this is by walking, by bicycle, via public transportation, or by car. But for many general plan housing sites throughout the county the commute times are 20, 30, even 45 minutes. Without effective transportation investment, development of these properties will not be effective contributions to our housing stock. To succeed with ADUs and an array of other housing solutions we have to recreate a consensus that supports denser neighborhoods, the willing development of land planned for increased housing, and the increased public resources necessary to make them safe, comfortable, and accessible. The Importance of the Middle Class The phenomenon of the shrinking middle class has national and international origins over which we have no control. But our dedication to creating and retaining jobs that provide a range of compensation within our industry segments and especially housing that is sufficient and affordable to those working in local industry segments is particularly important to the future of Santa Cruz County. The availability and affordability of housing are pivot points by which the economic and political future of Santa Cruz County is likely to be determined. We believe that a majority of the current electorate values Santa Cruz as an “independent” community, not dependent upon wealth and income from outside of the county. In our collective imagination this is a place where there is a jobs-housing balance, where families live, and a community in which children can hope to grow-up to live and work as adults. Today, as an electorate we are willing to invest in environmental stewardship, in schools and libraries, in parks and public resources. We do not imagine ourselves as an enclave of the retired, of owners of second homes and vacationers – a haven in which wealth is a condition of participation and “community” is reduced to service workers who live in lower-income communities. To retain this vision requires a community dedication to building environments that are attractive to that middle class. It requires commitment to more middle class jobs, which will require university growth, the development of local businesses, and continuing emphasis on entrepreneurship and local business development. It requires more housing that is attractive and priced at levels affordable to those jobs. And, it requires rethinking how we have adapted to Prop 13, urbanization, transportation, and our commitment to the retention and development of local jobs. Do we wish for more ADUs? Yes, we do. Do we hope for those and other living units to be unregulated, unplanned, unsanitary, unsafe… or, unbuilt? No, we do not. Do we believe …in a concentrated effort to address public costs and processes; …in public investment in neighborhoods, transportation, and schools; …in the growth and reinvestment of employers and industries… Do we really believe that we could create the living units and local jobs we need? ABSOLUTELY!