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Monday, February 18 , 2019, 7:08 am | Fair 44º


City Council Leaves the Door Open for Middle-Class Condo Project

Santa Barbara city leaders are expected to cast a final vote later this month on the language of the proposed 48-unit Los Portales project.

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An artist’s rendering depicts developer Jeff Bermant’s 48-unit, price-controlled condo project for industrial Montecito Street. (Bermant Homes photo)

After four years of wrangling, the Santa Barbara City Council gave its unofficial blessings Tuesday for a developer’s concept to build dozens of price-controlled homes on industrial Montecito Street that would be affordable to the upper middle class.

The 7-0 vote in favor of developer Jeff Bermant’s 48-unit Los Portales project wasn’t the final approval, but rather was a signal to city staff and the developer that the council agrees with the direction of the development.

The council is expected later this month to cast a final vote on the language of the proposal, which would involve altering the zoning to allow the residential condo developments to exist in an area zoned for light industrial.

“We do have a housing crisis here, and that housing crisis does affect a range of people who really have a right to live in Santa Barbara,” Councilman Grant House said. “I mean, this is where they work, this is where they grew up, this is where their families live. Where would these people live if this was not provided? Well, they would live pretty far away. And they’d be driving in. And they’d be impacting our streets with the traffic.”

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.

The 1.8-acre project would be split into six buildings, with the tallest reaching 42 feet, although most of the buildings would be shorter than that. 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.

Despite the unanimous vote, some council members expressed reservations.

Mayor Marty Blum and Councilwoman Iya Falcone voiced concern about how the difference between the price-controlled cost of the future condos and the median cost of market-rate condos that have been selling in the past year is not so vast.

“If I were buying a condo, I would look at this one and say, ‘You know, for $50,000 more … I could buy one on the market and probably in a place that I like better,’” Blum said. “I’m struggling with that a little bit.”

City staff members share the concern.

Housing Programs Supervisor Steve Faulstich said the average price of a two-bedroom condo in the Los Portales project is $510,000, and the median cost of the two-bedroom condos that have sold in Santa Barbara in the first half of 2008 is $575,000, a difference of $65,000. Two years ago, when the housing market was hot, the difference between the average cost of the proposed Los Portales two-bedroom units and the condos selling in the open market was $314,000. 

Bermant Homes President John Campanella countered that Faulstich’s figures are misleading because they included many older condo units. He said the lowest-priced new two-bedroom condo sold on the open market this year for $962,000. 

“Then it goes up from there,” he said.

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, Campanella said.

Bermant also has the freedom to increase the price of the condos by 2.5 percent every year until they are completed to keep pace with the rising cost of construction. City Council members, however, asked him to try to keep it below that if possible.

If the project is approved this month, Campanella said construction would probably begin in nine months, and people would probably start moving in about a year after that.

Last month, the Planning Commission asked that the affordable units be made available only to Santa Barbara residents, but all of the City Council members felt that the availability should be open to people on the South Coast, although with the caveat that residents of Santa Barbara be given first dibs. 

The project is a stripped-down version of its former self. When proposed in 2004, it included 90 units. It met stiff opposition from neighbors concerned about the size, bulk, scale and blocked views.

Councilwoman Iya Falcone said she preferred the project with 90 units.

“It’s not the ideal picture I had in mind,” she said. “It still has enough benefits for me. I have some red flags that are sort of waving in the air but I’ll sort of corral them for the moment and hope that it all works out.”

The business model for the project is unique. The land was purchased for $3.5 million by the Housing Authority of Santa Barbara. That 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.

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, which he says would cover the cost of development.

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

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