Santa Barbara is pursuing new standards on housing developments in an effort to create more affordable housing and bring in more money for the city’s affordable housing fund. 

On Tuesday, the Santa Barbara City Council approved 10 recommended amendments for the inclusionary housing and in-lieu fee program, which included higher fees per square foot for rental and for-sale projects, and expanding affordability requirements to more projects. 

Inclusionary housing is a zoning standard that requires a certain amount of units in a market-rate development to be restricted as affordable. Developers can fulfill the requirement by building the units on site or paying an in-lieu fee that goes into the local housing trust fund, which supports affordable housing development.

City staff will continue to work on the amendments to the inclusionary housing ordinance and bring it back to the Ordinance Committee later this year.

The council had a separate vote for each recommendation. Votes on five changes were unanimous, but Councilwomen Wendy Santamaria and Kristen Sneddon either voted against or abstained from decisions on in-lieu fees, as they were in favor of higher fees than what staff proposed.

The current in-lieu fee rate is $25 per square foot, and staff proposed a new fee of $50 per square foot for rental and ownership housing with 10 units or more, and $35 per square foot for projects with fewer than 10 units.

The Santa Barbara Planning Commission reviewed the policy recommendations last month and suggested that in-lieu fees be raised to the legal maximum rate of $91.41 per square foot for rental housing and $72.53 per square foot on for-sale properties, according to Dana Falk, city project planner. 

Sneddon and Santamaria supported the commission’s suggestions, hoping that higher fees could facilitate developers to actually build below-market-rate units. 

“Even if we raise them to the max, even if we raise them to what the Planning Commission has recommended and what is legally allowable, that will never be enough to build the units that we need,” Santamaria said. “We also can’t keep the fees too low to the point where developers will just say, ‘Well, easy. I’ll just continue to choose to pay those fees instead of building the units.’” 

Councilman Mike Jordan, on the other hand, thought the commission’s recommended fees were “obscene” and didn’t think it would lead to more housing.

“I’m not supportive of anything that puts another higher burden on the development dynamic,” Jordan said.

The city currently has two inclusionary housing requirements for ownership and rental housing. 

For new for-sale housing with two or more units, 15% of the total units have to be restricted to middle-income or upper-middle income households.

For rental housing with five or more units that are using the average unit-size density (AUD) program, 10% of the total units in a project have to be restricted for moderate-income households.

Developers can satisfy the requirement by having the affordable units on site or paying an in-lieu fee that goes to the development of other affordable housing projects. 

Those standards haven’t produced as much housing as the city had hoped since the for-sale standards were adopted in 2004 and the rental standards were adopted in 2019.

Specifically, there have been 21 deed-restricted for-sale units, 13 deed-restricted rental units and more than $1.3 million collected for in-lieu fees, according to Falk.

During public comment, a number of speakers were a concerned that the proposed changes would continue to disappoint.

“We’re already in a feasibility crunch with projects, and we’re only seemingly making it more difficult for projects to move forward with the newly proposed ideas of what the in-lieu fees should be,” said Ellen Bildsten, an architect with Bildsten Architecture and Planning.

On top of changing the in-lieu fee rates, the council approved expanding inclusionary housing requirements to all rental projects, meaning the standards would apply to all developments, no matter the size. However, the in-lieu fee rate would be lower for projects with fewer than 10 units.

The council also unanimously voted to adjust in-lieu fees over time based on the California Construction Cost Index.