An Older Population Has Come Full Circle

An Older Population Has Come Full Circle

Continuing the conversation… about the 40+ years of slow growth that have shaped the landscape of Santa Cruz and how, starting in 2013, our local housing crisis went from bad to worse with ten straight years of record low inventory and record high prices.

Back in the 1970s, Santa Cruz was building more new homes than ever before (or since). Among those coming to the Coast, were lots of 20 somethings drawn to an expanding UCSC campus (not to mention the beautiful natural surroundings, world class waves and a burgeoning subculture that was decidedly left-leaning).

Prior to the1970s Santa Cruz County had one of the oldest populations in California. It was a sleepy beach town with a nice selection of mobile home parks nestled near the sand – perfect for retiring seniors on a budget. It’s not surprising that some of those early UCSC grads stayed and bought homes (not easy but still possible) and got involved in neighborhood politics that would be the impetus for later slow growth efforts.

The priority was to stop uncontrolled growth and suburban sprawl and protect the environment by preserving as much open space as possible. As idealistic 20 somethings, they weren’t thinking much about what slow growth might look like in 2023.

Fast forward to today and many of those 20 somethings are aging boomers in their 70s who’ve successfully leveraged their biggest assets using all the benefits of homeownership: mortgage interest and property tax deductions, low Prop 13 tax bases, capital gains exemptions and 40+ years of stellar appreciation (due to lack of supply!) They’ve refinanced multiple times to send their kids to college and buy local rental properties. Now that they’re retired, they have $1m-$2m in equity and lots of first world problems.

Meanwhile the benefits of slow growth have exacted tough trade-offs: horrendous traffic, a displaced workforce, strained infrastructure ( if you don’t build it they won’t come) fewer families/school children and some of the highest rents and real estate prices in the world. We live in uncomfortable proximity to those things while we continue to kick slow growth down the road.

So what happened in 2013 when the market reached a tipping point? It’s simple: those aging baby boomers (born 1946-1964) started turning 65 and as they began transitioning into retirement, the dynamic between supply and demand and the calculus of the marketplace changed.

Boomers are living longer and holding onto their homes longer. The tenure of homeownership has increased since 2010 as has the % of homes owned by people over 65. There are plenty of people talking about downsizing but relatively few are actually doing it. The bulk of today’s “shadow inventory” resides in the hands of aging boomers.