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Photograph by Carlie Statsky
Will Build for Suits: Cheaper than single-family houses but touting luxury all the way, downtown's new condo projects cater to a junior class of homeowners.

Condo Confidential

Is downtown Santa Cruz turning into a yuppie ghetto? Some may find the answer surprising.

By Paul Wagner

Walking through the apartments at 1010 Pacific, one can't help notice the difference between them and most of Santa Cruz's housing stock. Large double-layered windows of ultraclear glass stretch upward from midwall up to ceiling, filling even far corners with light. Dryers perch above washers in utility closets. Back-to-back walk-in closets, assuring privacy, separate adjoining bedrooms. Walls are so insulated that noise can hardly be detected from room to room or floor to floor. Outdoor decks offer bicycle closets with solid-core doors. There is, in short, a sense not only of solidity, but one of luxury.

The word "luxury" has been, in fact, appearing quite often in literature for some of downtown Santa Cruz's newest buildings, along with its cousin "upscale." Their promoters have labeled the new condominiums popping up on the triangle at 2030 Pacific, due for first occupancy in January 2008, as "upscale." Bolton Hill Company, one of the partners developing the Pacific Garden Place retail/residential project next to Lulu Carpenter's, describes those future units as "luxury." Along with 1010 Pacific, that makes three such projects on post-millennial Pacific Avenue.

So what is happening to downtown Santa Cruz? Is it going yupscale? Bending to gentrification? Will current local residents be able to continue living downtown, or end up giving way to commuting newbies?

"It would be disingenuous to say that real estate in coastal California hasn't risen in price above the affordability of very many working people," says Norman Schwartz of the aforementioned Bolton Hill. And having helped get a myriad of small- to medium-size housing projects up and running, from single room occupancy (SRO) units with private kitchenettes and bathrooms reserved for the disabled to the upcoming luxury condos, Schwartz knows the market from top to bottom.

"The kind of diversity we used to have is gone," he says. But then, after a pause, he adds, "And it's gone to some extent because of what we don't build, as well as what we do."

Downtown Santa Cruz has long lacked entry-level ownership housing that allows renters to grab their first homes, build equity and climb the housing ladder up to the prized, and initially prohibitively pricey, single family homes—or to climb back down later in life when they wish to simplify. Until a few years ago, Schwartz observes, these markets were "completely unserved" in the downtown area. He notes especially the plight of seniors "who now live in large houses where they have to step into a car to get a quart of milk and would like to live in a walkable environment." The new downtown developments, he points out, fill that void.

But why "luxury"? Doesn't that mean "out of reach for most"?

Not necessarily, says Schwartz, describing "luxury" as a marketing term indicating desirable location, style and design, durable materials interior and exterior, "and in this case, secured parking."

Despite the description of the upcoming units as "luxury," Schwartz says they will end up costing far less than the county's single-family homes. Those, according to the California Association of Realtors' most recent Real Estate Report of May 2007, cost buyers an average of $832,842.

Schwartz says there will be a range in sizes and prices for units in Pacific Garden Place to serve those of differing income levels—although in lieu of providing the city's standard 15 percent guaranteed-affordable units on-site, the development team is kicking $2 million into the city's affordable housing fund. That's enough to pay for a lot of housing rehabs. Just not here.

What about the 2030 North Pacific "upscale" condos, the initial pricing of which, as reported in the Sentinel, caused quite a shock, with some units coming in at $800,000—right in the middle of the range of single family homes?

Chris King, sales manager for the project, indicated a bit of shock at that initial reporting. He says there are "only two or so units" in that price range.

"Our availability starts at $499,000 to the mid-$700,000s in general," he says. Meanwhile, 2030's owner is paying in-lieu fees to the city for six of the 10 required affordable units and building four others on-site.

Prices? According to Norm Daly of the city of Santa Cruz Planning Department, that isn't calculable yet, since the city (which oversees guaranteed-affordable unit pricing) depends on three factors to set prices: area median income, interest rates and level of homeowners' association dues—and all three are subject to change by the time construction is completed.

Daly can say, though, that after applying the city's standard 16.5 percent subtraction from area median income (an indicator that city residents' incomes are slightly lower than those of residents in the surrounding hilly communities), maximum income levels to qualify for the affordable units will range from $47,512 for a single person to $67,886 for a family of four.

Still, the question remains as to whether the luxuriant will become the norm. So we asked Carol Berg, housing specialist for the city of Santa Cruz, to send a list of all the current and recent housing projects in the downtown area.

The mixture of projects, it turns out, is remarkably diverse.

Hoi Polloi Central

First, there are the SROs, which may or may not contain individual bathrooms and kitchen areas (as opposed to studio apartments, which offer both). In the last five years, builders have erected 29 SROs at 500 Soquel Avenue (one block past Ocean Street from downtown) and another 15 at 1008 Soquel Ave. near Doyle and Benito. Both are within comfortable walking distance of downtown.

Even closer in are 48 SROs, collectively known as Branciforte Commons, at 630 Water Street, between Gold's Gym and Kiva Retreat. And finally, another 70 at 401 Pacific Ave., right where Pacific and Front Street meet and turn toward the beach area. That's 162 in total. Given their small size and limited amenity levels, SROs nearly universally rent at levels affordable to low and very low income tenants. Guaranteed affordable units rent for less.

Also guaranteed affordable are 48 units at Nueva Vista, in the Beach Flats, and 37 condos at 211 Gault St., in the Seabright area. Both offer 98 percent of their units—which usually means all but live-in managers' units—at rent levels affordable to lower income people.

And moving back up the income scale, another 114 condominiums have sprouted up on River Street, Blaine Street, Frederick Street and Soquel Avenue, all within walking distance of downtown.

And the liltingly luxurious 1010 Pacific? Turns out that 40 percent of its units—that's a total of 44 apartments—are guaranteed to remain affordable to moderate and very low income renters for the next 55 years. Currently that means moderate income tenants pay $1,550 a month for a one-bedroom apartment and $3,000 a month for a three-bedroom. Very low income residents are looking at $730 a month.

Berg echoes Schwartz's observations: the overall pattern of development downtown is changing to allow home ownership for the first time.

"Much of the housing we have downtown—in fact, nearly all of the older units—are SROs, which are either restricted to, or, being smaller, naturally fall in the rent level range of, low and very low income residents," she says. "Now, with the newest condominium projects, we have our first ownership housing downtown. And with that, we're actually increasing the diversity of our downtown housing stock."

Do the newer buildings, though, represent a new upward trend? Looking at start and completion dates, it appears not. All these projects are going up within a couple years of each other, and the majority serve those of median income and below.

And meanwhile, thanks to the city's recent hard-fought reforms of rules governing second units, several hundred such backyard cottages have sprung up in the last few years, many in or near downtown neighborhoods. Given the city's flexible affordability policy, which doesn't require rent caps but gives loan and design benefits to owners who agree to them, new second units rent to singles and couples at levels affordable to very low income up through moderate income. These, too, have enriched the set of housing options available in the downtown.

Overall, notes Berg, this new diversity that's replacing the decades-long former emphasis on single-family homes balances out. "The city will need to continue to produce more housing, especially housing affordable to those who work and live here," she says.

And apparently it's doing so, with granite countertops, sky-filled windows and secured parking simply part of the new and dynamic mix that's revitalizing—and, surprisingly, diversifying—downtown Santa Cruz.

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