Residents of the Palomar Inn described rent hikes and habitability concerns. (Nik Altenberg — Santa Cruz Local)

SANTA CRUZ >> “They’re gonna put us out on the street? I wouldn’t last a day out on the street.” 

Those are the words of a tenant at the Palomar Inn on Pacific Avenue, where residents are facing rent hikes after an affordable housing agreement expired. 

“I’m having a hard enough time as it is with my health, and that the Palomar gets more than half of my Social Security, and then I’m left with nothing for my bills,” said the tenant, a senior who is too ill to work and faces a roughly $250, or 30%, rent hike. “I can’t afford it, and I have nowhere to go.”

Like most of the 10 tenants that Santa Cruz Local spoke with, the resident requested anonymity for fear of retaliation from property managers.

The nearly century-old, 97-unit building has a cockroach infestation, tenants said, as well as leaky plumbing, soiled carpets and unreliable elevators. The building includes mostly single-room occupancy units under 200 square feet. Most residents are seniors on fixed incomes, people with disabilities and people transitioning from homelessness.

California law generally limits rent increases to 5% to 10% per year, but for buildings with expiring below-market-rate restrictions like the Palomar or nearby St. George Apartments, landlords are allowed to raise the rent without limit. Palomar has been restricted as low-income since the 1980s, according to a city staff report, and the latest agreement expired in January.

The same month, Santa Cruz city leaders struck a new deal with Palomar owner Evelyn Baumelgruen to ease the rent hikes in exchange for a $1 million, three-year, low-interest loan. According to the loan agreement, city staff and Baumelgruen will seek a long-term solution to keep the rents low. 

Baumelgruen did not respond to a request for comment left with a Palomar Inn property manager on April 23.

Still, even kept below market prices, the units are getting more expensive, with many residents facing 20% to 35% higher rents beginning June 1. Deputy city manager Bonnie Lipscomb said the city wants to buy the building and maintain its affordability, but the owner isn’t interested in selling.

Tenants that spoke with Santa Cruz Local reported current rents ranging from $255 to $1,833, with rent hikes of at least 20%. According to the city agreement, there were 65 units that had been restricted for low income renters and 32 units without restrictions. 

A unit sits empty on the building’s top floor, 93 of the 97 homes at Palomar Inn are single-room occupancy, have no kitchen and are smaller than 200 square feet. Some residents pay about $1,800 per month. (Nik Altenberg — Santa Cruz Local)

After receiving notice of the rent hikes, several residents formed the Palomar Inn Tenants Association with the help of Tenant Sanctuary and Santa Cruz County Renters Union. They said the notices were not delivered properly, as the law states they should be mailed or personally delivered, but the notices were taped to residents’ doors. 

The association, which has now grown to nearly 30 residents, also pushed back when they got 60 days’ notice for a rent increase beginning May 1, while the law requires 90 days for hikes above 10%. Property managers then extended the date to June 1.  

Tenants of the association maintain that the 30-day extension is not proper, and residents are due a new, 90-day notice. They also believe the delivery method of the notices was unlawful and said they are in discussion with property managers to resolve the issue.

“We are in the process of resubmitting and speaking with the city about options, and just making sure with the lawyers what we should do,” said property manager Geno Lira, who confirmed that the notices were not given in line with the law. “We’re happy to be working with the residents.”

Cockroaches ‘all over the place’

“They’re all over the place. They’re all over every single room in this place,” one tenant said of the roaches. The tenant is facing a rent hike to roughly $1,700. “They’re approximately three-quarters to an inch. And they start off from little, they will lay their eggs around the room. The eggs will hatch on a monthly basis. And then, it’s cyclical, because the Palomar management comes in here once a month to spray the baseboards.”

The Palomar Inn was built in 1929, then renovated after sustaining heavy damage in the 1989 Loma Prieta earthquake. (Amaya Edwards — Santa Cruz Local/CatchLight Local)

Posted notices reviewed by Santa Cruz Local indicate that residents must clear access to the baseboards in their units for a local pest company to spray. 

The roaches then appear to try to escape the chemicals, the tenant said, and “come out en masse because they have some sort of allergic reaction to the stuff.” They added that the insects gravitate toward moisture or the smell of food, and are more active at night, “so you spend your evening, if you get up in the middle of the night, just taking some toilet paper or something and disposing of roaches.”

When reached by phone on April 23 and asked about the cockroach infestation, Lira said, “Oh, yeah, that happens with all businesses. It’s something that’s normal.”

A ‘stepping stone’ from homelessness

Palomar resident David Rankin, 75, said he likes living at the Palomar and has no issues with the place, apart from not being able to cook. The units have no kitchen and some appliances draw too much power and are not allowed. Many residents live off a microwave and toaster to make meals. 

David Rankin speaks about his living situation in an interview in Santa Cruz Coffee Roasting April 29. (Nik Altenberg — Santa Cruz Local)

Rankin said he used to live in his van but several aneurysms and a stroke left him using a walker, and he left vanlife behind for the Palomar three years ago. 

He lives on about $700 a month in veteran benefits and he said as it is, “I’m not quite making ends meet.” His rent is set to increase to $350, up from $255. “At the moment, yeah, I’m struggling.”

Sam Altis, executive director of the Association of Faith Communities, said the Palomar has been hugely important to their work to help house homeless people because they accept tenants without a good rental history or credit score. 

“The Palomar has been a really essential stepping stone for people coming out of homelessness,” he said. In 2025, “we moved 50 people into permanent housing, and I am guessing at least a quarter of those moved into the Palomar.”

Participants usually have to pay their own rent, Altis said, and most local programs to assist in rental payments have run out of funds, meaning a rent hike at Palomar could derail their effectiveness in rehousing people. 

Palomar is “a really important gateway for so many of our folks,” Altis said. “I also think there are a lot of people living there right now who, if their rent got raised significantly, could potentially end up back on the street.”

Lipscomb, the deputy city manager, said the city has rental assistance available for qualified Palomar tenants. It’s unclear how many residents it would cover, or for how long. Tenants can inquire about city assistance at 831-420-5150, in person at 337 Locust St., or by email at [email protected].

Donovan Young, 37, has lived at the Palomar since December after Association of Faith Communities and Community Action Board helped house them and their girlfriend who were homeless. Young has tangled with property management over their appliances and habitability concerns. (Amaya Edwards — Santa Cruz Local/CatchLight Local)

No long term solution

An 80-year-old tenant who said their rent was increasing to $1,000 from around $750 said they will have to dip into their modest savings to make up the difference in the near term. Long term, they don’t know how they’ll make ends meet.

A tenant who works full-time said they may need to get a second job to afford the new $1,300 rent, up from $1,000. They said it will cut into their already limited time to see their family.

A senior tenant who has a Housing Choice Voucher, also called Section 8, said they didn’t know how much their rent was increasing because their portion — 30% of their income — won’t change. 

Another tenant who spoke on the record, Sayida Peter F-bidar, who goes by Father Doctor Peter, said he won’t be able to pay the difference when his rent increases to $1,000 from $758. 

When asked what he will do when his rent goes up, the 79-year-old said, “I go to the different places that I know, churches. I am already doctor, and I am already archbishop. So I don’t need to worry.”

Sayida Peter F-bidar spoke with Santa Cruz Local by the Palomar Inn’s ballroom on April 29. He called the property owners ‘money lovers.’ (Nik Altenberg — Santa Cruz Local)

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