Rents Jump 20 Percent

With Santa Barbara’s vacancy rate hovering at a historically low 0.5 percent, rent prices — already some of the highest in the country — have spiked another 20 percent. Over the past year, the average Santa Barbara studio rent increased from $1,090 to $1,391, the average one-bedroom jumped from $1,500 to $1,728, and the average two-bedroom went from $2,000 to $2,373, according to Steve Golis at the annual Radius Real Estate and Economic Forecast gathering late last month.

At the same time, apartment complex sales are on pace to shatter records. So far this year, 29 multifamily properties have sold along the South Coast, with four currently on the market and four more in escrow. Two years ago, the average per-unit price was $270,000. This year, it’s $308,000. Golis highlighted one apartment complex at 1501 Santa Barbara Street where the per-unit rate hit $462,000.

“Rising sales undoubtedly bring rising rents in those complexes, in addition to rising concerns from tenants and the public in general over what can be done to alleviate the housing crunch,” Radius stated in its forecast report, which took note of the city’s Average Unit-size Density (AUD) incentive program and its goal of creating more affordable and workforce housing. The report also referenced fresh rumblings among tenant-rights groups about the need for rent control to stem the rising cost of living.

First Rental Housing in Decades

The experimental AUD program has been heralded as a success in Santa Barbara, enticing developers to build rental housing for the first time in decades by permitting them to squeeze in more units per acre and include fewer parking spaces per unit. While these allowances make rental projects financially feasible for builders — when only large condominiums were before — they have also fomented concern among neighbors and members of City Hall that the denser developments will sacrifice the charm and character of single-family home neighborhoods.

City planner Renee Brooke ran through preliminary program data for the Santa Barbara City Council and Planning Commission, which held a joint meeting a week after the Radius event. Only four units have actually been occupied since the program’s launch in 2013, she said, explaining that information is in short supply as the AUD is still in its infancy.

So far, Brooke said, 55 projects totaling 966 units sit in the development pipeline; 203 permits have been issued, and 361 units have been approved. The remaining 398 are still being reviewed. Brooke stressed that it’s extremely unlikely all 966 will be built; her department has found that on average, two out of three proposed units are never constructed.

The program’s initial trial period of eight years or 250 occupied units in a specific high-density category will likely sunset in the next 22-28 months, Brooke asserted, a few years ahead of schedule. Without a doubt it has generated smaller units, she went on. The average unit size of projects approved between 2001 and 2012 was 1,468 square feet. Since the AUD program went online two and a half years ago, the average size has dropped to 821 square feet. It has also turned Santa Barbara’s condominium craze — which gave rise to luxury developments like Chapala One and Alma Del Pueblo — completely on its head. From 2001 to 2013, 547 condos were built or approved. Since then only three have been permitted.

Rents Priced for Workforce

Brooke acknowledged that a central goal of the AUD ordinance is to foster the creation of workforce housing, defined in Santa Barbara as units that are occupied by residents earning 120 to 200 percent of the area median income, which is $77,100 for a family of four. That translates to monthly rent for a single-person household of $1,619 to $2,698, assuming they don’t spend more than 30 percent of their income on housing. For a two-person household, workforce rent would be $1,850 to $3,084; a three-person household would pay $2,081 to $3,469; and a four-person household would pay $2,313 to $3,855.

Of all the AUD projects proposed, only The Marc development on upper State Street has announced its rent rates, Brooke explained. One- and two-bedroom units will rent there for $2,445 to $3,150; three-bedrooms will go for $3,500 and above. Though these prices have been criticized as too high, Brooke acknowledged, they do technically fall with the parameters of city “workforce housing.”

As the AUD program progresses, Brooke and her staff recommended a few key changes for the council and commission to consider. First and foremost they suggested that more than one parking spot per unit be required. When the program was created during dozens of public meetings and debates, parking emerged as the stickiest sticking point. Requiring too many spaces would erase the financial incentives offered by the program, developers argued. Not mandating enough spots would unfairly create on-street parking hassles for area residents, neighborhood conservationists argued back.

In a last-minute compromise for approval, the City Council agreed on one spot per unit, no matter the bedroom count. “No one in their wildest imagination thought this program was going to be this successful,” said principal city planner Rob Dayton at this week’s meeting. “If we did, we would have done things differently.” Brooke suggested 1.5 parking spaces for two-bedroom units; two spaces for units with three bedrooms or more might be more appropriate, she said.

Assert Design Control

Brooke also proposed that the city’s Historical Landmarks Commission and Architectural Board of Review be given more tools and power to scrutinize AUD projects. She said both bodies would benefit from more detailed project information and data. They also deserve the support of city staff and should be taken on additional site visits, she concluded.

Bill Mahan, a member of the Historic Landmarks Commission, agreed. “The commission has real problems with AUD projects,” he complained. “Some are moving forward successfully, but some are stuck.” Mahan acknowledged the need for more rental housing but said some of the proposals he’s seen simply don’t have enough open space or parking, even though they conform with AUD guidelines. He also said the map where AUD projects are allowed should be redrawn to exclude the historic downtown district. “Please change the ordinance to make it more workable for us,” he said.

Members of the public voiced worries about the loss of on-street parking and a lack of available water. They also expressed serious doubt that the new rentals would be occupied by working Santa Barbarans. Instead, they predicted the units would be eaten up by students and vacationers.

Other speakers asked that the program not be hobbled until it’s allowed to mature. Chamber of Commerce CEO Ken Oplinger said that until the city sees the AUD process through as it was set up, “We don’t have the information to make necessary changes.” Oplinger complimented city officials for being more proactive in encouraging new rental housing. He said they shouldn’t change course now. “If we want to be sustainable, we have to house our own,” he said.

Not Pandora’s Box

Lisa Plowman with the Coastal Housing Coalition implored City Hall to not act prematurely and “gut the program.” She agreed rental rates at The Marc are higher than expected, but it will still house local workers. Plus, she said, The Marc boasts many pricey amenities that other complexes won’t, and once more units are built and the market loosens up, cheaper units will become available. Greg Reitz, a member of The Marc’s development team, defended the project as the city’s first big rental project in nearly 40 years. “That’s to be applauded,” he said.

There was no clear consensus among the councilmembers and planning commissioners on whether to start overhauling the AUD program. On one hand, Councilmember Gregg Hart said much of the consternation could be relieved by the Historic Landmarks Commission and Architectural Board of Review properly exercising their authority to revise or even deny AUD projects. “The program is permissive,” he said. “It’s not mandatory.” The design boards should hold AUD developments to the same standards as other projects when it comes to aesthetics and neighborhood compatibility, Hart said. And it’s okay if projects get stuck in the review pipeline or are opposed by neighbors — that resistance is part of the public process that ultimately creates better buildings, he said. “I expect the design boards to do their job, and if they do, that solves 90 percent of the problem,” he asserted.

Planning Commissioner Deborah Schwartz cautioned against any major rework of the program. She advised performing “noninvasive surgery” before messing with an ordinance that took years to craft. Councilmember Cathy Murillo was similarly hesitant about giving the impression that the AUD program as a whole is in jeopardy. “I don’t want people to think we’re reopening Pandora’s Box,” she said. “These are small changes.”

Councilmember Jason Dominguez, on the other hand, said real energy should be put into reshaping and improving the program. He compared its unforeseen success to the construction of the city’s desalination plant during the 1986-1991 drought. “We fired it up, and it rained,” he said of the plant’s closure soon after. “Now, we fired up AUD, and it’s raining housing.” As bold as the city was in creating the ordinance, it needs to be as brave in changing it, he said. Dominguez took specific issue to the definition of workforce housing as rentals meant for Santa Barbara residents earning 120 to 200 percent of the area median income. He suggested the city should focus on housing those making 80 to 140 percent.