Every eight years, California authorities require cities and counties to submit plans to encourage more housing construction — including homes for low-income renters.

In April, staff of the County of Santa Cruz and cities of Watsonville, Santa Cruz, Capitola and Scotts Valley filed their first yearly check-ins on those plans.

Meeting the state targets is important because: 

• For decades, Santa Cruz county has grown in population without building many new homes. From 1980 to 2023, Santa Cruz County added about 80,000 residents and built about 26,000 new homes, according to county records. 
• Several California laws in the past 10 years have removed many of local officials’ powers to stop or change housing projects. If local governments don’t meet their Housing Element goals, they’ll have even less oversight of housing proposals. 

Based on recent housing production updates from the County of Santa Cruz and its four cities, here are five takeaways.

#1 The City of Santa Cruz is on track to reach its housing goals. Other local governments, not so much.

The City of Santa Cruz has made significant progress, especially with large apartment buildings downtown and on major streets. It has permitted 16% of its 2032 target, including 44% of its target for homes for low-income residents.

Projects from nonprofit affordable housing developers, such as a planned 120-unit complex for chronically homeless people with disabilities on Coral Street, are a major part of Santa Cruz’s housing strategy.

While some people laud the progress, the rapid change has provoked pushback from residents concerned about the creeping skyline and traffic, water and other infrastructure challenges. More development could be on the way with the downtown expansion plan, which would allow more homes and more building density south of Laurel Street. The Santa Cruz City Council is set to consider the plan May 13.

#2 In-law units were a large share of new permits outside of cities in 2024.

State laws have expanded opportunities for building in-law units, also called accessory dwelling units or ADUs. In unincorporated Santa Cruz County, they made up 72% of new homes permitted in 2024. 

Santa Cruz County Supervisor Justin Cummings said he hoped more ADUs would be deed-restricted to be rented below market rate. While an ADU “might be considered affordable by design because it’s small, that’s not actually going to help when it comes to providing housing for low income folks in our community,” Cummings said at a March 25 county supervisors meeting.

In the city of Santa Cruz, rents for small market-rate apartments often exceed what low-income renters can pay, he noted. 

In the coming years, larger housing projects may play a bigger role for unincorporated Santa Cruz County.

Multiple 100% below-market-rate apartment buildings are in the works in Soquel, including 256 homes at 41st Avenue and Soquel Drive, and 181 homes in the Anton Solana development on Soquel Drive and Thurber Lane. Hundreds of more buildings with mostly market-rate homes are also in the pipeline.

The county is set to spur more development with anticipated rezones to allow more homes. But April 29, the Santa Cruz County Supervisors voted to delay four rezones in Live Oak and Corralitos.

#3 Lofty state housing goals are challenging, especially for building below-market-rate homes.

All local governments except the City of Santa Cruz fell short of their goals in the previous eight-year housing cycle. The new targets are about three times as high for unincorporated Santa Cruz County and Watsonville, four times as high for the city of Santa Cruz, and nine times as high for Capitola and Scotts Valley. 

The portion of Santa Cruz County outside of cities has the highest target — 4,634 new homes. 

Housing targets are set every eight years by the state and the Association of Monterey Bay Area Governments. They’re based on population, area, number of jobs and other factors.

Some elected leaders are wincing at their housing production targets, even as they’re trying to meet them. 

“I mean, I’m trying to be optimistic, but there’s no way of hitting that number,” said Watsonville City Councilmember Jimmy Dutra at a March 26 council meeting.

#4 Scotts Valley and Capitola have struggled to bring new housing — but more is on the way.

Scotts Valley has permitted 11 homes so far — less than 1% of its 2032 goal. But 125 more homes have been entitled, and are likely to soon receive building permits. 

Capitola also faces challenges in finding spaces for new homes as the city with the smallest population and area in Santa Cruz County. The city has permitted 57 homes, or 4.3% of its 2032 goal, with at least 70 more anticipated this year.

Capitola city staff plan to propose new rules for multi-family housing to allow more development, and formalize plans to allow buildings up to 70 feet for a potential redevelopment of the Capitola Mall.

A Capitola Mall project could bring hundreds of new homes. But “especially in today’s environment with construction costs and the economy. It’s a really hard challenge right now for getting commitment on redevelopment,” said Capitola Community Development Director Katie Herlihy at a March 27 Capitola City Council meeting.

#5 Tariffs and proposed federal budget cuts add uncertainty to housing production.

Over the next three years, developers expected to complete a combined 199 units on Airport Boulevard and Main Street in Watsonville. But construction there — and across the county — may be slowed by federal trade policies.

“What you see in Downtown Santa Cruz under construction right now started the process five or more years ago, when money was a lot cheaper. There weren’t, potentially, tariffs being imposed,” said Matt Orbach, Watsonville’s assistant community development director, at a March 25 city council meeting. “We don’t control those macro economic factors. You just have to create the plan and then hopefully the conditions allow people to utilize it.” 

Tariffs could radically increase construction costs, said Don Lane, a housing advocate and former Santa Cruz mayor. “Projects are put together with an assumption that this is how much it’s going to cost to build,” Lane said. “Then if the price of the materials goes up 10% or 15% or 20%, that’s millions of dollars that can’t really be made up.”

Proposed cuts to the U.S. Department of Housing and Urban Development also could decimate grants for affordable housing through the Community Development Block Grant and the HOME Investments Program. HOME can fund new affordable housing projects, improvements to existing affordable housing, and programs to help people get and keep housing. Those cuts would need approval from Congress to go into effect.

Jessica de Wit, housing and community development manager for the city of Santa Cruz, emphasized that it’s too early to know for sure how federal cuts or trade policies could impact local housing efforts. 

“At least for this year, we should be fine,” she said. “What happens in the next coming years is a question mark.”

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