Santa Cruz Real Estate  Digest,  Ed. 31
March, 2018 - In This Issue:
In This Month's Issue

On Tuesday, February 13th, the Santa Cruz City Council passed temporary rent freeze and just cause for eviction ordinances for certain rental properties within the city limits . The article below  summarizes the current rent freeze and just cause for eviction laws as well as the proposed ballot initiative that could make these changes permanent.

We've written about the downsides of rent-control in recent articles, and how the more sustainable solution to our present-day housing crisis would be an increase in the supply of affordable housing. In our second article of the month, we explore some of the more interesting solutions , proposed or implemented, to increase affordable housing in Denver, CO and Berkeley, CA.
The cement industry is one of the primary producers of carbon dioxide, a potent greenhouse gas. One interesting alternative is hempcrete. Learn more about this promising building-material alternative in Christine's Corner.

Real Estate Market Statistics 
For Santa Cruz, Santa Clara, and  Monterey

The reports contain median home prices, real estate price statistics, valuable information about mortgage rates and much more.

On Tuesday, February 13th, the Santa Cruz City Council passed temporary rent freeze and just cause for eviction ordinances for certain rental properties within the city limits (see exceptions below). This sudden action was in response to community-member complaints that, given the impending threat of a rent-control moratorium on the November ballot, landlords have an incentive to raise rents and evict tenants to guard against losses should new laws come into effect. The following summarizes the current rent freeze and just cause for eviction laws.

Rent Freeze and Just Cause for Eviction Ordinance Summary

Rent Freeze Ordinance

The  rent freeze ordinance stipulates that annual rent increases may not exceed 2%.
The following are exempt from the freeze (but are still subject to the just cause for eviction ordinance):
  • Single-family dwelling units;
  • Condominium and Townhouses;
  • Rental units with an initial certification of occupancy dated after February 1st, 1995 as pursuant to the Costa-Hawkins Rental Housing Act.
It is possible to petition the rent-increase ceiling if an owner believes that it deprives him/her of the ability to receive a "just and reasonable" return on investment.
Fines for violations can reach $4,000 and the tenant has the right to civil remedies.

Just Cause for Eviction Ordinance 

The just cause for eviction ordinance stipulates that one of the following reasons must be present for a landlord to terminate a rental agreement:
  • Failure to pay rent;
  • Breach of lease;
  • Nuisance;
  • Illegal activity;
  • Failure to give access;
  • Necessary and substantial repairs requiring temporary vacancy;
  • The owner of the property wants to move in;
  • Withdrawal of the rental unit permanently from the rental market.
In the following scenarios, properties will be exempt from the just cause for eviction ordinance:
  • A Rental Unit which constitutes the Landlord's sole rental property;
  • If the Landlord lives on site in: the same residence; a duplex; or a single-family residence with an accessory dwelling unit.
Find the full  ordinance here.

When They Terminate

Both of these temporary measures will terminate if and when any of the following happen:
  • A rent stabilization and/or just cause for eviction measure is not placed on the ballot for November 2018, on September 1, 2018.
  • The rent stabilization and/or just cause for eviction measure is not approved by a majority of the voters for the November 2018 election.
  • If a rent stabilization and/or just cause for eviction measure is approved by a majority of the voters, these temporary measures will be in effect until the new respective law becomes active.
To read more about the current law, including Frequently Asked Questions, please visit the city webpage on this topic, found  here.
You can read more about the actual meeting and arguments for and against these measures in this Santa Cruz Sentinel  article.

Petition for Rent Control and Just Cause for Eviction: Ballot Initiative for November 2018 Ballot

The petition currently in circulation, which proposes to establish long-standing rent control and just cause for eviction regulations is called the "Santa Cruz Rent Control and Tenant Protection Act". You can find the full text of the petition and corresponding Ballot Initiative using  this link. If you own or plan to own a rental property in the City of Santa Cruz, please take time to read this ballot initiative carefully. If passed into law, this ordinance may have a significant impact on your investment properties. We have provided a summary below.

Rent "Stabilization"

If Section 6 of the ballot initiative is approved, no landlord will be able to charge rent in a "covered rental unit", or a unit that is not exempt in Section 4 of the petition, in excess of the "base rent", which will be set at the rent in effect on October 19, 2017. The landlord is then restricted to rent-increases within a predetermined "annual general adjustment" which cannot exceed 5 percent annually.
If put into law, this ordinance will establish a Rent Board, which is responsible for implementing and administering the new law. Landlords will be able to petition with the Rent Board to raise rents more than the annual allowable increase; to be successful he or she will have to demonstrate that the rent-increase limits do not allow for a fair return on investment. The landlord must use the maintenance of net operating income (MNOI) methodology when petitioning, which is further explained in Section 11 of the petition.  

Just Cause for Eviction 

The just cause for eviction section of ballot Initiative (Section 5) includes the following "just causes" to evict a tenant household that currently occupies a unit:
  • Failure to pay rent,
  • Breach of Lease,
  • Nuisance,
  • Illegal Activity,
  • Failure to give access,
  • Necessary and substantial repairs requiring temporary vacancy,
  • The owner of the property wants to move in,
  • Withdrawal of the Rental Unit Permanently from the Rental Market,
  • Vacating an unpermitted rental unit,
  • Subtenant in sole possession,
  • Refusal by the Tenant to Execute new Lease.
Additionally, the landlord must provide  six times the current fair market rent  as relocation assistance to affected Tenant households if one of the following "just causes" is present:
  • Vacating an unpermitted rental unit,
  • The owner wants to move in,
  • Necessary and substantial repairs requiring temporary vacancy,
  • Withdrawal of the unit permanently from rental market.
If the household includes qualified tenants, the relocation assistance increases. Additionally, if a tenant household is displaced from a rental unit due to inability to pay rent increases in excess of 10 percent in an twelve-month period, the landlord must pay relocation assistance if he or she receives a written request within 15 days of the delivery of the notice of rent increase. 

 Here, fair market rent refers to the rent for a similar Rental Unit in Santa Cruz County as determined by the U.S. Department of Housing and Urban Developme nt. A  Qualified Tenant is a tenant who satisfies any of the following criteria: has attained age 62; is handicapped as defined in Section 50072 of the California Health and Safe Code; is Disabled; or is a person residing with and on whom is legally dependent (as determined for federal income tax purposes) one or more minor children.


Both short-term vacation rentals and rental units in which the tenant shares a bathroom or kitchen with the landlord are exempt from both the proposed rent control and just cause for eviction laws if the house is the primary residence of the landlord.
The following are excluded  solely from the proposed rent control laws:
Any rental unit that is exempt from regulation for rental rates pursuant to state law (largely the Costa-Hawkins Rental Housing Act), including
  • Single Family Residential Homes,
  • Condominiums (with some restrictions),
  • Units built after 1995.


On a statewide level, assembly members are proposing similar legislation. This year, one Assembly member has attempted to pass a bill that would repeal the Contra-Hawkins Act.  It died after  failing to gain support by members of the the Assembly Housing and Community Development Committee. Since then, another bill has been  announced which would put a just cause for eviction requirement in place on the statewide level. While rent control appears to ameliorate the pressures of high-cost housing that many tenants around the state feel, it will likely have negative long-term consequences on our local housing market. Read why  here.
If you are a property owner or investor in the Santa Cruz City limits, and would like to discuss your options, feel free to contact me at 831-600-6550.


We've written about the downsides of rent-control in recent articles, and how the more sustainable solution to our present-day housing crisis would be an increase in the supply of affordable housing. However, creating affordable housing in the second-smallest (by land area) county in the state is not an easy task.

One proposed solution in Santa Cruz City involves rezoning the main corridors to allow for higher-density housing in Santa Cruz city. Unfortunately, affordable housing in this area is often restricted by a lack of funds, buildable land, and timely legislation to remove barriers to development.

While particularly acute in this part of the country, affordable housing is an issue around the nation. What are other cities and counties doing about it? In this article, we explore interesting proposed and implemented solutions to increase affordable housing in Denver, CO and Berkeley, CA.

Denver, CO

In 2015, it was found that nearly 53% of renters in Santa Cruz County pay more than 30% on housing. In Denver, 61% of renters face the same issue.

To reduce the pressure felt by renters and low-income buyers, Denver has created a local fund to generate an estimated $150 million over 10 years to support affordable housing development and preservation. Additionally, an affordable housing fund was created to support people experiencing homelessness and risks of homelessness.

Where do these funds come from?  There is a 50-50% split between two sources, property taxes and development fees. According to the Denver Office for Economic Development,
  • The impact on a typical homeowner in Denver will be $12 per year on a median home priced at $300,000
  • The impact on a commercial property owner will be $145 per year for every $1M of value
The initiative has had so much success bringing new projects online that the city expanded support for affordable housing last fall, approving plans to preserve or build thousands of units.

At a land area of only 155 square miles, Denver is a particularly good example of a small city making big strides towards increasing the supply of affordable housing.

Berkeley, CA

Berkeley's median rent averages over $3,000 and there are more than 1,000 homeless people on the street. With large cuts in federal funding for section 8 vouchers and corporate tax cuts which disincentivized the creation of affordable housing, this progressive city has gotten creative.
Berkley is exploring the possibility of launching an initial coin offering (ICO) and using raised funds to creating affordable housing, especially for the most vulnerable in the community.

While some ICO's have been speculative, and others downright fraudulent, this initiative is unique. These coins will represent a real security, municipal bonds, issued for a specific purpose. Additionally, the city will be able to create a public ledger, which provides transparency as funds are spent. Councilman Ben Bartlett, one of the legislators behind this idea, explains "it's like a non-profit, special purpose vehicle, meant to fund social good".

One of the benefits of using a cryptocurrency over traditional paper municipal bonds is that it will make bond-issuance more effective and affordable. According to this study , municipal bond issuers across the nation faced upwards of $4 billion of issuance costs annually (up to 2012). The report states "this money represents taxpayer and ratepayer money diverted from infrastructure development and service provision to a variety of financial industry interests. More-over, the burden falls most heavily on smaller-often less financially capable-bond issuers".

If this initiative is successful, it would be the first U.S. city to launch its own currency. In the spirit of Silicon Valley, this small city is poised to embraced new technology and leverage it for good.

Do you want to learn how other cities are addressing affordable housing issues in creative ways? Take a look at this article .

Christine's Corner

The cement industry is one of the primary producers of carbon dioxide, a potent greenhouse gas. The primary production of conventional concrete has a footprint of 456 to 689 pounds of carbon dioxide per 1.3 cubic yards

One interesting alternative is hempcrete. JustBioFiber , a hemp-based modular block supplier, reports that its product sequesters 243 to 287 pounds of carbon dioxide per 1.3 cubic yards, based on the quantity of carbon-storing plant fiber used. Additionally, the blocks re-carbonate an additional 141 pounds per 1.3 cubic yards during the curing process. The company claims that their product also enhances the energy efficiency of buildings with its high insulating capacity-resulting in a 64 percent reduction of greenhouse gas emissions compared with building code standards. ( source )

According to wikipedia, hempcrete is a low density material and resistant to cracking under movement thus making it highly suitable for use in earthquake-prone areas such as Northern California. Other advantages of hempcrete include: fire-resistant, pest-resistant, an excellent insulator, and fully recyclable.

What about building costs? Hempcrete is comparable to other building materials in cost. In other words, your expenses will likely be similar if you were to use more traditional building materials. However, if you look over the lifetime of the building, superior thermal performance may provide significant extra savings in the long-run.

What would help bring this promising building-material alternative mainstream? Legislation. Since 1970, all forms of Cannabis sativa L., including hemp, have been classified as a Schedule 1 drug under the Controlled Substances Act. This classification is grouping hemp, which has a THC level of less than .3%, in the same category as marijuana with a THC level ranging from 5%-30+%. In part, this is why you can buy hemp Lotions, hemp seeds, and other products that use the crop: other countries have recognized the difference, and allow for the commercial cultivation of hemp.

The Industrial Hemp Farming Act of 2017 , if successful, will eliminate the controlled substance designation for hemp. This will make it easier for farmers around the country to grow the crop. This change may eventually help lower the cost of hempcrete as building materials become more readily available and innovation improves efficiency.

If you wanted to build a hempcrete house in Santa Cruz, could you? I posed this question to the County Planning Department, and the answer is yes, you can permit a hempcrete house. If you are interested in learning more, this website has useful information about the hempcrete building process as well as consultation services.