Hundreds of Santa Cruz County families could lose their federal rental assistance as early as December unless Congress restores funding to a pandemic-era housing voucher program, local officials warned Tuesday.
The agency provides federally funded rental vouchers to nearly 6,000 households in Santa Cruz County, serving roughly 10,000 people.
Housing Authority of Santa Cruz County Executive Director Jenny Panetta told the Santa Cruz County Board of Supervisors that the agency has increased the number of people served by 20% and expanded its annual budget by $27 million.
In addition to tenant-based vouchers, the Housing Authority administers project-based vouchers, a U.S. Department of Housing and Urban Development rental assistance program in which subsidies are tied to specific housing developments rather than individual tenants. The program is designed to incentivize construction of new affordable housing units.
Panetta said 25 new projects have been completed and 21 more are in development. Together, they are expected to add about 1,600 affordable units within the next few years.
The agency also offers scholarships, summer camps, academic tutoring, backpacks, bus passes, housing mediation and senior services.
For the first time in 30 years, the Housing Authority is directly developing affordable housing, including the Natural Bridges apartments. A separate 60-unit development on Chanticleer Avenue is expected to begin next year.
“So when you drive around the county and see affordable housing being built, those projects are being partially supported by vouchers,” Panetta said.
But Panetta said federal funding uncertainty threatens part of that work.
The Emergency Housing Voucher program, created under the 2021 American Rescue Plan Act, provided 280 vouchers locally to assist vulnerable individuals and families during the COVID-19 pandemic. HUD initially expected the funding to last through 2031, but the money is being spent more quickly than anticipated.
HUD has told housing authorities that once funding is exhausted, assistance for families in the program will end in December unless Congress provides additional money, Panetta said.
Locally, that could affect about 250 households. Funding could run out by December without congressional action.
The Housing Authority has placed those families on the regular Housing Choice Voucher waiting list and created a preference category for them. Panetta said the agency plans to shift families to standard vouchers if emergency funding expires.
She said she is “cautiously optimistic” that the agency can continue assisting all affected households.
Even with new affordable developments such as Harvey West Studios and Pacific North Station, demand far exceeds supply. Hundreds of families are waiting just for a chance to join the Housing Authority’s waiting list, which already includes about 2,000 families who have been waiting since 2019.
“Even though we’re concentrating all of our project-based voucher and housing authority unit capacity to EHV households, it’s not going to be enough,” Panetta said. “And there will still be households in the EHV program when funding for that program comes to an end at the end of 2026.”
Congress has not yet finalized funding levels for the broader housing voucher program. Panetta said she expects it will be funded at about 99% of current levels, without accounting for a projected 5% increase in inflation.
“Our funding is not keeping up with our costs,” she said.
Separately, HUD on Feb. 20 proposed regulations that would require all household members receiving housing vouchers to be U.S. citizens or legal residents. Currently, at least one member of a household must have legal status.
Panetta said the change would force some families to remove noncitizen relatives from their household or forgo assistance altogether. The Housing Authority “strongly opposes” the proposal, she said.
In other action Tuesday, supervisors received an early overview of the county’s budget ahead of formal hearings in June.
Santa Cruz County is projecting a $5.4 million deficit in fiscal year 2025-26 and a $23.2 million shortfall in 2026-27, driven by a structural gap between modest revenue growth and rising expenses. Labor costs are the primary factor, reflecting inflation and higher local costs for housing, energy and insurance.
Sales tax revenue is also weakening, with a $1.295 million downward adjustment tied to online sales. About 2.5% of the 9.5% local sales tax is allocated by the state using formulas that credit revenue to warehouse locations rather than buyers’ residences.
The projected deficits do not yet account for potential state and federal funding cuts. Without corrective action, the shortfall could reach $67.5 million by 2028-29. The county imposed an immediate hiring and travel freeze Feb. 23.
Budget hearings for fiscal year 2026-27 begin May 5, with additional hearings scheduled for June 10, 11 and 24.
