The County of Santa Cruz Board of Supervisors adopted the November 14, 2023 (see documents below) and has been forwarded to the California Department of Housing and Community Development for certification, a 60-day process.

Housing development is affected by public regulations and other forces. This chapter discusses governmental and non-governmental constraints on housing in Santa Cruz County. Governmental constraints include policies, requirements, or other actions by various government levels that affect land ownership, housing ownership, and development. In addition to local standards, the County follows state building and design laws, the Uniform Building Code, Subdivision Map Act, energy conservation requirements, and other regulatory standards. However, federal and state regulations constraining development are beyond the County’s control and are not addressed here. Non-governmental constraints are other conditions impacting housing development like market factors, environmental setting, land availability, and construction costs.

The Santa Cruz County General Plan is founded on the core principle that rural areas are best suited for lower density development, while urban areas can support more intensive land uses and should be encouraged to do so. This concept of concentrating development in defined urban areas to protect rural landscapes, now known as “smart growth” or “sustainable development”, was established in Santa Cruz County by the 1978 voter referendum Measure J. Measure J enacted several key components: preserving agricultural land by strictly limiting conversions to other uses; clearly delineating urban and rural areas through an Urban Services Line and restrictions on rural land divisions; and facilitating affordable housing by requiring it in new residential developments.

Measure J and its implementing ordinances identified prime and non-prime agricultural land throughout unincorporated Santa Cruz County. To aggressively protect these agricultural lands for farming, the county enacted General Plan policies and ordinances that limited new farm parcel sizes, required extensive findings before rezoning farmland, mandated agricultural buffers between farms and new housing, and compelled recorded acknowledgements of agriculture-development conflicts. A right-to-farm ordinance further strengthened Measure J’s directive to preserve county farmland for agricultural use and production.

The creation of the Urban Services Line (USL) is perhaps the most significant effect of Measure J. The USL establishes a boundary on expansion of intense land uses like dense residential and large commercial development. It creates neighborhoods that can be served efficiently by public services including transportation, fire and police protection, pedestrian improvements, and other urban amenities. Simultaneously, it protects the natural resources in rural areas from overdevelopment. The key distinction between urban and rural areas is the permitted development density based on available infrastructure support.

The concept of an urban/rural boundary was later expanded to the Rural Services Line (RSL). The RSL identifies areas like the towns of Felton, Ben Lomond, Boulder Creek, Davenport, and La Selva, where existing development has urban densities. Though these areas may lack full urban services, they are established locations appropriate for denser development, sometimes using package treatment facilities for sanitation. They also have commercial services concentrated to serve their populations, which would not otherwise be allowed outside the USL.

To limit rural sprawl, Measure J restricted the number of lots that could be created from rural land divisions. Lot allotments were based on a percentage of the Rural Building Permit Allocation. The County developed the Rural Density Matrix to implement this requirement instead of assigning fixed densities to rural zones. The matrix considers factors like water availability, septic capacity, fire response times, slope stability, access, groundwater quality, timber and wildlife resources, and fire risk to determine suitable densities for an area. Before Measure J, rural land was divided into denser developments than suitable, as evidenced by existing problems with road access, sanitation, and drinking water in these neighborhoods.

One component of the Measure J initiative that has been successful is the provision for affordable housing. By requiring affordable units within new developments through an inclusionary program, Santa Cruz County was a pioneer in recognizing that sustainable growth management must include affordable housing.

The Measure J requirements state that 15% of housing units built must be made available to moderate-, low-, or very low-income households. For the most part, these inclusionary units blend seamlessly into the surrounding homes.

Under Measure J, ownership projects with five or more units must provide affordable units on-site. In recent years, the Board of Supervisors eliminated this on-site requirement for rentals, substituting an impact fee instead. The County has also created more flexibility and options for developers to meet affordable housing requirements. Current methods available to projects with five or more units include:

  • On Site Inclusionary Housing – This option requires that 15% of the ownership units built in projects with five or more units be sold to moderate- or low-income households.
  • Impact fee payment – For at least the next two years, developers can be relieved from building an on-site inclusionary unit by paying an impact fee, which was set at $15 per square foot of all units in the project in 2015, with the amount to be annually adjusted based on cost increases.
  • Existing unit conversion program – Developers can acquire existing housing in the community at the rate of two homes for each one-unit obligation. In other words, a developer with a one-unit obligation could fulfill their requirement by acquiring a duplex and reselling each unit to an income-qualified purchaser. The developer could then convert their one on- site inclusionary unit to an additional market rate unit.
  • Partnership with affordable housing developer – This approach allows for-profit developers to partner with developers of affordable housing projects. These projects may either contain more than the required number of affordable units or units at a greater level of affordability.

The pricing formula for affordable units follows the County’s Affordable Housing Guidelines, which require pricing the units at a level affordable for households earning 100% of the County median income. The formula adjusts for household size and number of bedrooms, assuming households spend no more than 30% of income on housing. For example, a 3-bedroom home is priced at a level affordable for a 4-person household earning the County’s median income of $490,000 in 2023.

The County’s 35-year history of affordable housing requirements has adjusted land values to reflect the policy without constraining development. Each city in the County also has its own affordable housing programs. The County’s program permanently encumbers affordable units, building a lasting affordable housing supply. Since Measure J began, 550 inclusionary affordable units have been built, with deed restrictions remaining for 455 units.

The building permit allocation system established by Measure J generated controversy in the past due to the perception that it created artificial limits on housing construction. In reality, demand for permits exceeded availability in only 2 out of 37 years (1978 and 1979, the first years of the program). Additionally, the Board of Supervisors can carry over any unused permits from one year to the next, meaning building permits have consistently been readily available. Today, the allocation of building permits applies solely to market-rate housing, while affordable housing is exempt. Permits are granted upon developer request without additional requirements or procedures.

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