Liz Kroft, a local realtor, presented on the challenges facing the Santa Cruz County housing market. She discussed how high housing prices, low inventory, and a lack of affordable housing are being driven by population growth, the past housing crash, homeowners not selling, and vacation rentals. This is limiting economic growth and changing the county's demographics. Possible solutions discussed included updating plans and codes to allow for more density and housing types, incentives for developers, and involvement from the community, non-profits, and UCSC to increase housing supply. However, roadblocks like resources, perceptions, and infrastructure need to be addressed.
1. Leadership Santa Cruz County
October 2nd, 2015
Liz Kroft | Realtor | Mainstream Real Estate Group
Santa Cruz County Housing
Building For A Sustainable Future
2. today we are covering
THE
MARKET
THE
CAUSES
THE
IMPACTS
THE
SOLUTIONS
THE
ROADBLOCKS
4. bill said it best
“I am here to encourage
you to consider the vision of
what we want to become
as a community and how
housing is a core driver of
those outcomes.”
Bill Tysseling
Executive Director
Santa Cruz Chamber Of Commerce
14. what is
AFFORDABLE?
According to HUD:
Families who pay
more than 30% of
their income for
housing are
considered cost
burdened and may
have difficulty
affording necessities.
20. WE ARE THE
3RD LEAST
AFFORDABLE
COUNTY IN THE
COUNTRY
the worst US
rental market in
36 yrs
need to earn
$34/hr to afford
2br median rent
…yet
unemployment is
the lowest in 8 yrs
23. POPULATION GROWTH
• 2010-2014 population rose 3.5%, housing only grew by 0.5%
• AMBAG expects 37,000 more in the next 20 years
• UCSC added 700 more freshman than expected fall 2014
• Growing families
• Priced out of neighboring counties
24. MARKET CRASH
• Foreclosed owners became renters
• Put the brakes on new construction
• Waylaid building projects
• Rising fees discouraged
developers
25. HOMEOWNERS AREN’T SELLING
• Economic uncertainty
• Unable to move up
• Capital gains tax bills
• New property tax bills
• Renting instead of selling
• Retiring & aging in place
26. VACATION RENTALS
• More rental income from short-term rentals than long
• Ability to use their home when desired
• Appeal of homes vs hotel/motel
• Importance of tourism industry to Santa Cruz
27. LACK OF LAND
• Much of the mountains & coastline are protected
• Public & land trust ownership has increased in the last 10 yrs
• Natural capital & stewardship provide incredible revenue
• Natural constraints & site characteristics
“Buy land, they ain’t making any
more of the stuff.” – Will Rogers
28. OUR OWN PAST
• Long ago adopted principles of slow growth
• Measure J in 1978
29. Also…
• Code & permitting restrictions
• Fees and timelines
• Elimination of Redevelopment Agencies
• Funding for Section 8
• County staffing
30. What Else Drives Prices Up?
• Silicon Valley business growth
• Prices in SF and Santa Clara Counties
• Wages aren’t keeping pace
• Money from overseas
• Uneven market recovery
• Low interest rates
32. Limits Economic Growth Impacts On Families
Effects On Students Forced To Move Away
Limits Personal Savings Changes Demographics
Hardship For Seniors Rise In Homelessness
43. “The path upon which we are traveling
will lead us in the not-too-distant future to
a tipping point at which we become
predominantly an out-commuter,
retirement, and 2nd home community,
predominantly wealthy and politically
uninterested in jobs-housing balance.”
Bill Tysseling
45. but stay in touch!
LIZ KROFT
Mainstream Real Estate Group
liz@mainstreamre.com | 831.854.7489 | www.lizkroft.com
46. additional resources
• Monthly market updates on my blog
Additional Resources:
• Proposed draft of the updated Santa Cruz County Housing Element
• Santa Cruz County Comprehensive Economic Development Strategy
• Sustainable Santa Cruz County Plan
• Additional Sustainable Santa Cruz County documents
• Out of Reach 2015 (report on rent in the US)
Hinweis der Redaktion
Sorry for having all of these notes in my hands.
Talking about housing in Santa Cruz County in an hour is a bit like condensing the Star Wars movies or Lord of the Rings into an escalator ride.
My background
Why I do what I do? Why do I love what I do?
What am I doing to get involved and make a difference?
Success begins at home.
A safe, stable affordable place to live keeps families healthy, helps people find and keep jobs and helps kids come to school ready to learn.
A home keeps families stable and connected.
That question is a lot like asking a Santa Cruz County resident what the weather was like this morning.
It depends.
Just like we have MICROCLIMATES in weather, so we do in real estate.
Where are you?
Are you a buyer? Seller?
What time of year?
What type of market?
How do we determine the market?
Determined by the balance – or imbalance as Is often the case – between
buyer demand and seller supply of homes to purchase.
WHAT DRIVES THOSE TWO?
Local, regional, state, country
Population growth, employment, new home construction, crime, high-tech booms, consumer confidence, interest rates, stock market,
shenanigans in congress, upcoming elections
Environmental factors such as droughts and earthquakes can jump in and affect the market.
All jostling for effect, ebbing and flowing, sometimes appearing out of nowhere to shake things up or suddenly shrinking and quickly forgotten
Today’s Factors: stock market volatility, weak economic growth in China, uncertainty about rates, wage stagnation, the upcoming presidential election…
DON’T DESCRIBE EACH ONE
A lot of different ways to look at the market and market trends – week to week, month to month, year to year
Together these all tell us about the market – rising or falling, buyer or seller, inventory and price trends…
Hard to quantify “how’s the market” because it depends. Its relative. Can’t quantify hot or cold, buyers or sellers, etc. Need to look at the overall picture and trends.
Seller Activity impacts the market too: location, condition, pricing (sellers can dictate the market by their actions)
Strongest summer market since 2008
Listings are the lowest in 18 years
Of the active listings xx are >$1mm, xx $700k…
One local realtor was quoted as believing that SC is undervalued when you look at other communities
As we look at data week-week, month-month, also look at years
Median Home Prices are nearly back to where they were in 2006-2007
HOWEVER, as one of my lenders puts it, money is still cheap!
The thing is, lending requirements are more strict now
Approval process for a loan is much harder
Money is cheap, but harder to come by.
CALCULATED BY dividing available homes for sale by the average monthly homes sold
Example: Currently 526 Active Properties, averaged 210 sold/month = 2.5 months
In 2015 we held steady around 2 months of inventory actively for sale each month
What caused the spike in inventory before it dropped off?
Foreclosures, short sales, REOs, bank owned, auctions…and then they were more or less gone.
Banks were competing with themselves, everything hit the market all at once. Slowed down, changed their guidelines.
Inventory is still extremely tight, making it a tough market for buyers and realtors
There is A LOT on this graph. The Camelback Chart.
GOAL is to show trends are the same year over year.
Amount of inventory changes seasonally every year.
There is a “selling season” and the trend is the same every year.
So when you hear that inventory is increasing hugely in February or March and think the market is shifting, remember it will plummet again in the fall.
What this doesn’t show you is the number of closed sales to give a sense of how quickly it depleted
Houses are appraising and rents are rising faster than wages are increasing.
2 of 4 highest employment sectors are hospitality and agriculture – associated with low wage workers.
Means BIG gap between median wage and cost of median home/rental
20% Downpayments are NOT required
3.5% down up to a $645k purchase price ($22.5k down) – FHA (+MI, rates may be higher)
10% down up to $1.4mm purchase price ($140k down)
20% down up to $2.5mm purchase price ($500k down)
HUD = Housing & Urban Development
Affordable is essentially median household cost relative to median household income
What do those costs include (rent, mortgage, utilities, insurance, taxes, etc.)
For those who missed it, on Sept. 17th the Fed announced plans for rates: No Liftoff!
I am no expert in this, but many are gambling on where rates will go next year.
An important factor when we think about where prices and affordability will go.
What’s next? WHO KNOWS!
Things could shift or…
Then again, due to the scale of our high-tech boom
(another area of exuberantly conflicting predictions)
other driving factors and our deeply inadequate supply of housing, demand may continue to exceed supply and the pressures of recent years may continue until
Add’l inventory comes to market. There are solutions, which we will talk about in a little bit.
The rental market, however, is probably the most talked about topic when it comes to housing in Santa Cruz County
We already talked about inventory and prices in the for-sale market
we see similar issues in the rental market
22% according to Zillow research
m\Median rent is around $2700 right now
Rent is outpacing growth in home values.
Home values only have increased 16% in the same timeframe.
Great for investors, terrible for renters.
Debate of whether to RENT vs BUY
Just to look at that increase visually in recent years…
WHOA!!!
3rd least affordable <500k population
There is no adequate database for statistics on rental inventory, prices, turnover…(UCSC)
(Perhaps this is one of many problems in rental markets)
**There is no state in the U.S. where a minimum wage worker working full time can afford a one-bedroom apartment at the fair market rent.
WHY?
Homeownership rates are at historic lows rental markets rapidly tighten
Cuts in federal funding programs
Estimated mean renter wage = $14/hr
Minimum wage $9, would need 3+ full-time jobs
INVENTORY is slightly seasonal, but tight
A room advertised for rent on the Westside for $750 received 100 responses. Other property managers are seeing 40-50 people coming through their open houses.
We aren’t alone, however, Nationwide renting in the is the worst it has been in 36 years – based on % of income spent on housing
While unemployment is the lowest in 8 years (6.1% vs (4.8% in 2007) wages have been stagnant
No denying that low inventory and lack of affordable housing are an issue.
We need approx 5% rental and 2% for sale vacancy rates to facilitate mobility
High prices however are a double-edged sword depending who you are:
BAD: incomes haven’t kept pace, sluggish wage growth = harder for buyers to enter the market (especially first-time and borderline borrowers), difficult to save for downpayments/college/retirement/etc. Wages have not kept pace with housing prices.
GOOD: increased home equity, brings some owners above water, increase net wealth, able to start small businesses, move up the economic ladder
High Level:
Neighborhood Resistance to Development
Overly Burdensome Regulations
2010-2014 housing in Santa Cruz County increased at a slower rate than the population. 9213 people vs 301 new units
Growth is uneven across the county
AMBAG (Assoc of Monterey Bay Area Govt’s expects the county to grow by 37,000 in the next 20 yrs
UCSC is growing in popularity
This year there will be approx 4030 new freshman, up 730 from 2014 – only added 216 more beds
Students are staying after graduating
Not just those that moved here in the last decade, but growing families who were raised here and want to stay.
People priced out of SV and SF
Able to find more work locally, work remotely or more flexible schedules – concept of the “Digital Nomad”
2008 Market Crash
At first there was a flood of inventory overnight
At first inventory boomed because of short sales, foreclosures, REO…then….
Funny thing happened in 2008: School enrollment figures went up. Speculation that families were no longer driven away by housing prices and started to come back.
This is the $64 million dollar question.
2 Biggest motivators in human behavior are fear and greed and neither seem to be getting homeowners to budge.
Fear of values declining and greed with median prices being back to close to where they were before the crash don’t seem to be motivating enough.
Lack of confidence in the US economy in the next 5 years
Unaware of tax and other incentives (Proposition 13, 60, 90, 1031 exchanges)
Houshunt.com study: 90% of seniors would prefer to stay in their own homes than move to assisted living facilities or retirement communities
(comfort, emotions, memories, improvements in healthcare)
There is no specific data of how many long-term rentals have been converted to vacation rentals
In the city of Santa Cruz of the 330 listed as vacation rentals only 2/3 have registered and pay the transient occupancy tax
We should also think about what Vacation Rentals are doing to the hotel/motel industry?
There are limits on these rentals, but the are not strictly enforced.
Good article on this in the sentinel this week regarding a moratorium
Oh the irony…
Dearth of buildable land in SCC and except for urban cores, not much support for high density, affordable housing in more suburban areas.
Natural capital and stewardship provide significant goods/services and an extraordinary ROI - $800mm to $2.2bb in benefits to people and the local economy each year
Natural constraints – geography, slopes, landslides, fault zones, sensitive habitats, coastal zone and sea level rise
What can be developed? Zoning? What is left to develop where people want/need to be?
Septic, water requirements, emergency access, density, setbacks, etc.
Slow growth on the slow coast. “Slow Growth Coalition”
Early progressive residents took control of local gov’t and defeated development initiatives
Our past strategies and approaches finally catching up to us?
Strategy slowed population growth rate, but it was accompanied by housing unavailable and unaffordable to our workforce
Measure J was a (or the) landmark slow growth initiative.
As part of Measure J, the county sets annual limits on new building permits.
Encouraging, or focusing, or directing, new development inside an area where development had already occurred.
The idea was not necessarily to reduce population in rural areas but to prevent new developments that would increase population.
For a long time we found creative uses for underutilized urban areas, which we are running out of.
In the past 4 years 1016 housing permits were set aside. How many were used? A mere 108, an average of 27 a year.
Difficult in high fee areas to persuade builders to construct housing for lower income properties when the ROI is much better on multi-million dollar homes.
Most devastating to Affordable Housing was the elimination of the Redevelopment agencies (2011) that by law had to invest 20% of their revenues into affordable housing programs.
This was our key mechanism for subsidizing affordable housing.
In the last 3 years federal, state & local housing $ have been reduced by as much as 79% in CA.
Housing bond funds have been depleted and federal funds continue to decline year after year.
Section 8 – Renter pays 30%, federal gov’t pays the remainder.
Lifeline to 4300+ households with 2000 landlords participating. At any time 150-175 households are looking
4800 on the closed waiting list
Need federal funding, but also need landlord participation (perception of low-income and paperwork)
Silicon Valley (and SF) businesses are leading economic growth in CA and we are seeing a spill-over effect as they buy 2nd homes and move here while commuting or working remotely.
Boom in income as employees cash out IPOs, stocks, etc.
Also a population shift as those in Silicon Valley and SF seek out lower prices
SV = $960k, SF = $1.1mm+
Free market prices are set by those with the most money
Wages have been stagnant, same as saying they are decreasing in a rising market.
Growing disparity between haves and have nots.
What will happen if the majority of our population is forced to pay well over 30% of their income on living costs?
FARM WORKERS!!! Lowest wages, hardest hit.
Telling it is not on my slide as they are most forgotten.
Barrier for economic success in SCC
Unbearably expensive housing market will affect overall economic vitality of SCC
Affordable housing is one of the biggest pain points for companies recruiting employees
Families
Grandparents can’t move close to their grandchildren, Difficult for families to form
Longer commute times means more time away from family
Students
Paying more on rent means less towards tuition
Some students are not returning to UCSC because they can’t find housing
Move away
Losing students, seniors, recent grads, workforce
Unable to Save
Can’t build wealth. No downpayment for a home, retirement, paying off debt (like student loans)
Dipping into savings, retirement, 401k, stocks, etc. for downpayments
Seniors
As the average age of residents continues to increase, single family homes away from stores/services/transit will create challenges for those who wish to age in place
Difficult to find affordable housing with limited income streams forced to give up independence or move away from home and family
If we can answer this we can solve problems in the Middle East.
It is true that the market will correct itself, it tends to cycle every 10 years (give or take). But we are a proactive community and have a record of investing in ourselves and our future.
Herein lies the problem: What is good for one is not good for all. One neighbor to the next, one neighborhood to the next, one part of the county, renter versus buyer versus seller versus investor.
OUR COMMUNITY IS ON BOARD.
BUT what to do??
Santa Cruz Waves recently posted a video by Action Santa Cruz which asked people at the Live Oak Farmers’ Market: What would make Santa Cruz a better place?
30% of the responses were housing related.
…But this is Santa Cruz, so the other responses were of course, pretty varied…
Right up there with affordable housing is,
Of course
A mermaid festival
Solving our housing issues is not a new concept.
County leaders and community members have been thinking through what needs to be done and how to do it.
Source: Santa Cruz Chamber Study Group (public sector planners, administrators, elected, private sector housing developers, affordable housing advocates, engineers, architects, residential realtors and mortgage lenders, etc.)
This is an hour presentation in itself…one the county should give.
Changes in plans, codes, regulations
Update General Plan, County Code & Housing Element
Housing Element must ID adequate sites to accommodate County’s fair share of housing over next 10 yrs – 1314 units 2014-2023
Another study called for 3000 more units by 2023
ADUs – streamline planning approvals, granny unit ordinance revisions
Infill, Mixed-Use, Density
Develop along established corridors (stores, transportation, etc.)
Optimize available land (don’t just build something on available parcels)
Supports county’s sustainability goals
Affordability is closely linked to density
Mixed-Use Benefits: limit sprawl, water efficient, maximize land use, located along transit corridors
Update General Plan and County Code to allow varied housing types
Height
Many of the changes coincide with climate adaptation too
Vacation Rentals
How? In a free market is this fair to homeowners? Taking away property rights and income?
Limit minimum stay? 30 days?
Programs
Downpayment assistance
First-time buyer programs (Scotts Valley, Capitola)
Measure O (city of Santa Cruz)
Section 8
USDA farmworker housing
Merrill Road (Apts in Aptos)
Measure J
We undoubtedly need the buy-in of developers. HOW?
Fees
Timelines (15-20 yrs to approve and break ground)
Regulations
Environmental review
Lack of land
Cost of land
Impact Fees / Inclusionary Housing requirements
Construction costs
Financing
ROI is the most important bottom line – time & cost
Affordable housing developers leverage state/local funds = GONE
Community needs to support their projects, or suggest improvements
UCSC added 216 more beds this fall (but 730 more freshman)
Issue is not just for students but for faculty as well.
Turning doubles into triples, converting common areas into rooms.
Staff has been asked to rent spare rooms to students
Reconsider Long Range Development Plan
ratio of beds to students
timeline of when new beds must be added as student body increases
What else can they do?
(March 2015 – Cruz Cares: A Pitch for Social Change – 2 of the winners were housing related)
The Inspiring Enterprise
Launching Social Ventures that solve critical local issues in Santa Cruz County
10 mo. mentoring/training startups focused on:
Homelessness – Workforce development, mental health services, community support, etc.
Water Management – Advocacy, technology, systems, etc.
Sustainability – Solar, conservation, transportation, food systems, etc.
Housing – Affordability for students, elderly, and low-income residents, etc.
Habitat For Humanity (built 41 homes)
build decent, affordable homes and provide home ownership opportunities to qualified families who live and work in Santa Cruz County.
Families purchase our homes with a down payment, sweat equity, and a 0% interest monthly mortgage. Homeowner families are chosen according to their need, their ability to repay the no-profit, zero-interest mortgage, and their willingness to work in partnership with Habitat. Each Habitat homeowner contributes 500 hours in sweat equity towards the construction of a Habitat home.
New program putting the granny back in granny units – ADUs for seniors
EquityStone
A product of The Inspiring Enterprise, connects homeowners struggling to pay their mortgages with renters
Changing the culture of existing homes “Sharing Economy”
180/2020
180/2020 is a multi-agency community initiative in Santa Cruz County, CA to help men, women, and families who have experienced long-term homelessness turn their lives around.
We will help them move into permanent housing with the support services they need to stay housed, thereby changing lives and improving our community.
Building on the success of housing over 200 people during our first 180 initiative, we've set a new goal to end chronic homelessness in Santa Cruz County by 2020.
Monterey Bay Economic Partnership
Do we have resources to support continued growth?
(water, schools, transportation, sewage treatment…)
Staff available on the county level to move forward?
Air quality, waste diversion, emissions, etc.
Buildings need to get greener (carbon footprint & water)
41% of annual SCC water consumption is from SFR, 23% is multi-family residential (according to Santa Cruz Water Supply Advisory Committee)
How does this change neighborhood character and quality of life?
Greed = money, afraid of change, impact on MY house, MY neighborhood
It is apparent that we need to do something about housing in Santa Cruz County
What do we do?
How do we do it?
Who should do it?
Where?
When?
How quickly?
Will it be enough?
So remember, when living in Santa Cruz County starts to feel a bit like this
You know, surrounded by hippies with not enough space and the ticket prices are through the roof
Think about the cause of some of the problems we face and how you can help by…_________________________
TAKE AWAY:
When we discuss housing we need to
look across the county & provide for one another
People who grew up here shouldn’t have to move away
We shouldn’t exile retirees, people who worked and contributed to the community their entire lives.
Families should be able to stay together.
Neighbors should be able to grow old together.
Grandparents should be able to play with their grandchildren more than once/year.
Housing allows our families to connect, neighborhoods to remain stable.
It keeps our community…communities…strong.
It keeps us healthy. That is something we should all support.