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Middle-Class Condo Project Clears Planning Commission Hurdle

The 48-unit Los Portales project now needs the approval of the Santa Barbara City Council.

A proposal to build a price-controlled condo development for the middle class on industrial Montecito Street came a big step closer to reality Thursday with the Santa Barbara Planning Commission giving its blessings.

The 5-1 vote in favor of the 48-unit Los Portales project means that, after four years of wrangling, developer Jeff Bermant’s proposal just needs to pass muster with the Santa Barbara City Council to get started. The council is scheduled to consider the plan Sept. 10.

The Los Portales project, at 535 E. Montecito St. near the intersection of North Calle Cesar Chavez, is a private-public partnership to bring ownership housing to the middle class in a city where the cost of even a humble abode is out of reach for many teachers, nurses, engineers and police officers. Top priority and first right of refusal would be given to employees in the nonprofit sector; if the project is approved, half of the units would be set aside for them.

Although the project is price-controlled, this is Santa Barbara — where the median cost of a home is more than $1 million — so the qualified applicants still would need a pretty good income.

Under the proposal, residents would need a family income of $100,000 to $140,000.

The appreciative value of the homes would be capped at 2.5 percent annually. By comparison, market-rate condos have increased in value by an average of about 9 percent annually since 2000, officials with Bermant’s company said. 

On Thursday, Bermant said he’s not in this for the money. “I’m very passionate about this project,” he said. “This should be an inclusive community, not an exclusive community. I feel we have left a whole bunch of people out of our plan.”

The 1.8-acre project would be split into six buildings, with the tallest reaching 42 feet. The project would include eight market-rate units, which would help subsidize the 40 below-market rate units. The proposal would flip on its head the city’s inclusionary housing ordinance, which requires developers of projects with at least 10 units to set aside 15 percent of the units for middle-class housing.

However, Bermant’s definition of middle class involves a higher-paid family than the city’s definition.

One sticking point with city staff and the commissioner who voted against the project — Charmaine Jacobs — was the relatively small gap between the price of below-market-rate units and the actual median cost of a market-rate condo around town.

The cost of the Los Portales below-market rate units would range from $495,000 for the most-affordable two-bedroom unit to $645,000 for the most-expensive price-controlled, three-bedroom unit. City officials say the median cost of condos in Santa Barbara is $575,000 for two bedrooms and $710,000 for three bedrooms.

“We feel the proposed project is too close to market value,” housing programs supervisor Steve Faulstich said.

Bermant officials didn’t dispute the city’s numbers for median market-rate condos, but countered that the city’s figures were skewed because they include many condo units that were built in the 1960s and earlier. Brand-new three-bedroom condos, Bermant officials said, still would fetch $800,000 to $900,000.

City staff members also opposed Bermant’s request for the freedom to increase the price of the condos by 3 percent every year until they are completed to keep pace with the rising cost of construction.

Ultimately, the Planning Commission sided mostly with Bermant, but compromised a little by reducing Bermant’s 3 percent request to 2.5 percent.

The matter needs approval from the City Council because it involves altering the zoning to allow the condo developments in an area zoned for light industrial.

The project is a stripped-down version of its former self. When originally proposed in 2004, it included 90 units. It met stiff opposition from neighbors concerned about the size, bulk, scale and blocked views. On Thursday, no opponents spoke against the project to the commission, and the audience was sparse.

“When the room is empty something positive is happening, as far as community feedback is concerned,” said Commissioner Harwood “Bendy” White.

But Jacobs said the project reminded her a little of a large condo complex on Chapala Street called Paseo Chapala. That project, too, was approved with little-to-no opposition, but controversy erupted later, as it was getting built. Now, the building is widely credited as a major inspiration for the organized effort to lower height limits in the city.

“The decision to change how Chapala Street looked was one we all liked a lot, and the benefit was housing,” she said.

The business model for the project is unique. The land was purchased for $3.5 million by the Housing Authority of Santa Barbara. This alone is atypical, given how that department generally focuses on working with low-income housing.

To better make the payments, the Housing Authority received a loan from the Santa Barbara Foundation. The project would be policed by the city’s Community Development Department.

Among the rules to be enforced is the stipulation that at least one family member work in the city of Santa Barbara. Also, the residences must be occupied by the owners; they cannot be rented out. In addition, the units can’t be sold at market value.

Meanwhile, Bermant has capped his maximum profit on the project at $2 million, an amount he is referring to as a developer’s fee.

Commissioner John Jostes was absent.

Noozhawk staff writer Rob Kuznia can be reached at [email protected]

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