Not all housing is created equal.

Affordable housing advocates are pushing the City of Santa Barbara to ensure that any redevelopment of Paseo Nuevo includes high numbers of below-market rate housing.

The city’s own Housing Authority even wants a seat at the table.

“We believe that with our involvement that a target of 30% to 40% affordability is not just aspirational, it is achievable through strategic collaborations,” said Rob Fredericks, executive director of the Housing Authority.

“We are ready to lend this expertise to the Paseo Nuevo project ensuring it is not just a development, but a legacy of community benefit.”

The City Council last week voted 7-0 to approve a project agreement with Nashville-based AllianceBernstein Commercial to transform the mall, which spans two downtown blocks between State and Chapala streets and West Canon Perdido and West Ortega streets.

The current plans call for 500 apartments and 85,000 square feet of retail space at the 458,000-square-foot mall.

Sections of the development could be as tall as seven stories, although assistant city attorney Dan Hentschke said such a height is not likely. The city’s current height limit at that location is 60 feet.

Nothing is set in stone. The project agreement, however, allows the city and AB Commercial to work on a plan that makes sense economically.

Santa Barbara owns the land on which the mall is built, but AB Commercial — which owns the lease for the next 42 years — and its partner developer, New York-based Georgetown Company, need some form of assurance before investing further in the project.

The project agreement is intended to offer more certainty.

The mall has fallen on retail hard times in recent years, with the loss of Nordstrom, Macy’s and other anchor tenants.

The mall’s previous owners defaulted on a $120 million loan, and AllianceBernstein took back the property in 2022.

The company could have flipped it to another retail developer, but instead, at the request of the city, decided to develop housing.

The city does not have $120 million to pay off the loan, so the parties are working together on a housing plan.

Whether housing ever happens is unclear. The project agreement is intended to allow all the parties to come together and propose a concept that could work at the site.

High interest rates and rising construction costs make it more difficult for a developer to consider below-market rate housing.

Projects currently under construction were approved about five years ago. Those currently in the pipeline would not be ready to finance and build for about five to six years.

“This a very, very challenging market for development projects,” said Patricia Flynn, managing director at The Maxima Group, a Los Angeles consultant hired by the city.

“We have high interest rates, which is affecting feasibility. We have high construction costs and high construction inflation.”

Housing advocates want a large percentage of the project to be for people who earn between 80% and 120% of the area median income, which is about $102,000, for a family of four.

Santa Barbara resident Fred Sweeney urged the city to avoid the situation that has arisen at La Cumbre Plaza. Developers there want to build 642 apartments at the northeast corner of the mall at State Street and Hope Avenue, but only include 8% affordable units.

In that case, the city wanted to create a specific plan for the entire property to maximize affordable housing units.

That effort — and a $1.1 million grant to fund it — was scuttled by Santa Barbara County Supervisor Das Williams, the then-chairman of the Santa Barbara County Association of Governments, who instead backed the project with 8% affordable units proposed by the developers, the father-and-son team of Matthew and Jim Taylor.

Sweeney said the city can’t make the same mistake with Paseo Nuevo.

“You saw what has happened out at La Cumbre Plaza with the Macy’s project,” he said. “They are going to build a 76-foot-high building. They are going to give you not 10%, but 8%.”

Sweeney said the city owns the land so it should negotiate from a position of power.

“You are about to give the only leverage we have and that is the ownership of the land,” he said. “They are in it to make money and they are going to turn it around and sell it.”

Hentschke, however, urged everyone not to get too enthusiastic about the possibility of 30% percent affordability at Paseo Nuevo. The mall owners could sell the project to another developer, or build something without a city partnership.

Although the Housing Authority wants to be involved, AB Commercial is already working with a developer for the site.

“I don’t want to get a false sense of hope that any other housing developer would have an opportunity to do this,” Hentschke said. “AB owns the ability to use that space.”

Dianne Black, a member of the League of Women Voters of Santa Barbara, urged the city to partner with the Housing Authority.

“We believe a concession on height should only be granted in conjunction with high levels of affordability, especially on a city-owned, publicly owned site,” she said.

Fredericks said the Housing Authority works fast and has a record of building successful affordable housing projects.

Councilwoman Kristen Sneddon also raised concerns about the potential building heights, and pushed for more affordable units.

She also said that whatever is built should include space for the arts, including Center Stage Theater and the Museum of Contemporary Art Santa Barbara, both of which currently call Paseo Nuevo home.

Mayor Randy Rowse said the city should be careful not to slow down the project.

“We don’t have the ability to do whatever we want,” he said. “We have a big risk of owning this property into oblivion, if we don’t do something.

“The big upside of this is the vitality, the tax revenues, and having housing downtown. I don’t care what we do with any kind of designs or architects, this is going to the be light switch that turns the downtown back on.”

Councilwoman Meagan Harmon said she is looking forward to the city and the Housing Authority working together to maximize affordable housing opportunities.

“For me, first and foremost is more affordability, the most that we can get,” she said. “Tiered income levels is something I am very interested in.

“The Housing Authority is such a trusted partner. I am excited about that. I am excited to see what is there.”