Council Moves Forward with 2 Percent Rent Cap

But Will It Ultimately Be Adopted When Rowse Replaces Murillo?

City Hall | Credit: Carl Perry

A bold gambit by Cathy Murillo in one of her last acts as mayor paid off this Tuesday with the Santa Barbara City Council supporting a controversial proposal she put forth alongside Councilmember Oscar Gutierrez to cap annual residential rent increases at two percent, plus a yearly consumer price index (CPI) adjustment.

The pending ordinance, which still must be researched, drafted, and adopted by a later vote, goes above and beyond the current state law that caps rents at five percent plus CPI. It would apply specifically to apartments, and not to duplexes or single-family homes.

“It just feels so critical right now,” Murillo said, pointing to reports of dramatic rent increases exacerbated by Santa Barbara’s chronic housing shortage. “People are really feeling the crunch.”

“We’re bringing this forward at a time when our city and our state are experiencing a housing shortage, we’re seeing an increase in homelessness, and we have many residents living with very high rental rates,” Murillo continued. “Some of these residents are low-income earners, or they are working class, and they struggle to live here.”

New South Coast data shows that from 2012 to 2021, the average price of a two-bedroom apartment increased from $2,000 a month to $2,800. One-bedroom units jumped from $1,470 to $2,000.

“This is intended to make the city more livable for everyone,” said Gutierrez, explaining “record numbers of families, particularly families of color” are being forced out of their neighborhoods by rising rents. Both he and Murillo also pushed for a comprehensive registry of city rentals to track rates and vacancies and to protect, they said, against illegal conversions to vacation rentals.

Gutierrez also presented a recent statement by the Santa Barbara Association of Realtors that celebrated the city’s meteoric housing market. The report lauded the South Coast’s “exciting real estate ride” and thanked the “COVID Bump” for big returns. This was evidence, Gutierrez said, that government intervention is needed.

The vote was close, however. While Councilmembers Kristen Sneddon and Meagan Harmon supported the motion — the two had previously floated their own rent stabilization proposal — Councilmembers Eric Friedman, Michael Jordan, and Alejandra Gutierrez voted against it. The ordinance’s ultimate fate also remains unclear as incoming mayor Randy Rowse, who is more politically conservative than Murillo, has expressed hesitation over rent stabilization laws.

In explaining her “aye” vote, Sneddon noted how Santa Barbara’s wages are lower compared to similar communities yet rents are markedly higher. Wages are also remaining stagnant while living costs are going up. “This is impacting every segment of our community,” she said, referencing a long-running exodus of teachers, nurses, and first responders. “It’s reached a crisis point, and it’s not just anecdotal anymore. It’s pervasive. We are losing really good people.”

Sneddon insisted rent stabilization models work and referenced a new positive report on ordinance adopted by Beverly Hills. But Sneddon also pushed for more data, workshops, and community buy-in before Santa Barbara’s own law is passed. She was adamant that property owners and landlords be brought into the conversation and acknowledged the challenges they face, including rising insurance costs. “This is a symbiotic relationship,” she said. “We need both sides to hum.”

Gutierrez said she felt the rent cap didn’t get to the root of Santa Barbara’s housing problem. Large, greedy property management companies are to blame for the woe out there, she said, and the city ought to crack down on them and their illegal practices, she said. “We need to hold them accountable,” she demanded, also expressing concern that a cap would unfairly affect small mom-and-pop landlords. “We need to protect them,” she said. “They’re vulnerable too.”

Friedman echoed that sentiment, and said he feared small property owners worried about their bottom line might be tempted to sell their units to outside investors or be converted into vacation rentals. Friedman also said he’s seeing more and more evidence of rentals being converted and sold as time-shares. “Every unit off the market lowers the supply and increases rents,” he said.

Even more significantly, Friedman explained the cap could have a chilling effect on the production of new housing, particularly downtown and, in the future, at La Cumbre Plaza, which is zoned for a whopping 1,800 units. “How will the two percent ceiling affect developers?” he asked, pushing for more data before the ordinance is moved forward. “We need to know.”

Friedman finished by offering a handful of other strategies for addressing the crisis, including applying pressure to Santa Barbara City College to build student housing and creating a partnership between the business community, philanthropic organizations, and the city to pool funds to offer rental assistance, similar to a section 8 program.

For his part, Jordan said he sees the housing crisis as an issue of supply, not cost. He referenced a recent report in the Independent that stated, in the past 10 years, the City of Santa Barbara saw the construction of 388 new housing units within city limits. In that same time, however, 454 units of housing were taken off the housing market — either for sale or for rent — thus generating a net reduction in actual housing units of 66. Jordan called the cap “premature” before more study could be done.

Tuesday’s meeting, which ran into the late hours of the night, attracted more than 40 public speakers, many of whom urged the council to act. One of the most compelling statements came from Hillary Blackerby, who is the market manager for Santa Barbara MTD but spoke as a citizen and renter. “It is not an equal relationship between landlords and tenants,” she argued. “They have all the cards, and the tenants have none. The only way tenants can get protection and power is from the government. That is your job — to protect the vulnerable people of the community.”

Blackerby went on to recount her own troubles with a property management company whose name rhymes with “Shmeridian,” she said, and described the reality for renters as “really, really scary and bad. I’m way better off than most renters in this town, and it’s still terrifying, and it keeps me from moving on with my life and family.” Don’t waste any more time, she told the council. “You know the facts. It’s simple math. Please, please have compassion for people who have no power.”

The council ultimately directed staff to conduct a comprehensive needs assessment and begin drafting the ordinance. The final vote will come sometime next year, after Rowse assumes the mayor’s seat.

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