By Tereza Coraggio
In response to various editorials and guest commentaries, this continues my theme in “Santa Cruz Hates Homeowners” to show that the authors’ solutions will only result in greater debt and the division of SC into laptop-of-luxury workers renting from hedge fund landlords and those afraid to be kicked out of subsidized housing if they make any money. Is this what we want?
Here’s the data in a nutshell: median sale price in California $900,000 requiring $180,000 annual income. San Jose median price $1.7 million at 5.78% interest requiring $9,000/month. Santa Cruz/Aptos median price $1.5 million with bids 19% over asking price. California real estate purchased by hedge funds so far = $77 billion. California second lowest national ownership (of mortgages, not even houses) at 56%; 180,000 new houses a year needed to meet the demand, even though birth rates are falling. In LA, “67% of all rental units and 74% of buildable vacant lots are owned by investment vehicles, not by human landlords.”
What is an investment vehicle? It’s the money that bankers took from your parents and grandparents for mortgages they conjured out of thin air. Now that they can no longer raise housing prices by dropping the interest rate, their goal is to drop the pretense and own the houses outright. Money is no object.
The current shakedown is raising interest rates after variable mortgages jacked up the price. Since we bid against each other based on our maximum debt, a variable rate never helps homeowners, only the banks. The same goes for variable loans to cities and the interest-swap derivatives that bankrupted Detroit — I’d be surprised if Santa Cruz doesn’t have this time bomb too.
Repealing Proposition 13’s “unjust legacy” so homes reflect their speculative value would make the median property tax $15,000/year. The Empty Home Tax would charge $6,000 to anyone who left, say, to care for elderly parents or who’s been hanging on until they can retire. Will the surrendered houses sold go to hardworking SC families? Not on your life. Another windfall for the investors robber barons.
Opinion page author Fred Keeley wants 40% of California’s $97 billion surplus to build low-income housing. Mark Primack wants all new housing to be future duplexes, so mortgages can rise to four incomes rather than two. The two-part Sentinel Editorial on housing affordability says Santa Cruz is obligated to build 3,400 ‘housing units’ this decade and the state will provide $1 billion in down-payment loans and 20% for second mortgages to raise our indebtedness further. Will this help us compete with hedge funds or bid up against each other?
Meanwhile, we’re housing 18,000 students with thousands more planned, many of whom will want to stay. Keith McHenry says the city should be “prepared to welcome hundreds of additional people who will become homeless and seeking a safe place to live.” He states the unhoused are unhappy with their accommodations, so the salaries of city staff should be allocated since $73 million is a fraction of what’s flowing to City Hall’s “celluloid avatar poverty pimps.”
Here is the ONLY real solution: take the power to conjure money from thin air away from bankers and return it as the exclusive right of government. Have local government issue mortgages in a local currency that has a high exchange rate from dollars, driving out speculative investors. Price rents in the local currency and tax their extraction into dollars, driving out non-local landlords. Use the mortgage profits to give local Social Security and retirement savings a high return. Start fixed mortgages at 3% interest but raise them over time so the price of houses go down.
We aren’t more secure with more debt for less house and we don’t need “woke guilt” to say we owe the banks AND everyone else so they can have the same at our expense.
Tereza Coraggio is a 40-year resident of Santa Cruz, author of How to Dismantle an Empire and creator of Third Paradigm on YouTube and Substack.