The City of Santa Barbara is moving to make it easier to convert vacant commercial buildings into housing, but so far is leaving out one component that developers say is necessary to make an impact on the housing crisis.
The city’s Planning Commission voted 5-0 on Thursday to make changes to its adaptive reuse ordinance. Commissioner Ben Peterson left the meeting before the final vote because he said he was being “called away.”
The changes would allow adaptive reuse projects anywhere in the city that allows multi-unit residential use, except the coastal zone, as long as the building is at least 5 years old.
In addition, other incentives proposed by staff include allowing unlimited residential density and reduce or eliminate requirements for open yard, parking and setbacks.
Adaptive reuse projects also would not have to comply with pre-application and concept review requirements.
However, developers and at least one member of the commission want the city’s requirement that 10% of the units be set aside at below-market rates.
“We are losing housing by not doing this,” Planning Commissioner Brian Barnwell said. “We use the word crisis for housing. Crisis means we are in trouble.”
Ben Romo, however, who represents developers Jason and Kevin Yardi, said that requiring affordable units on downtown commercial buildings will kill projects.
“We talk about crises, we talk about matters of urgent concern in this city; we don’t always act like they are crises or matters of urgent concern,” Romo said. “If you feel that revitalizing downtown and revitalizing State Street is a matter of urgent concern, you will adopt the policy without the requirement to comply with the city’s existing inclusionary ordinance.”
Romo said his clients have worked on three projects downtown, but they are “unicorns,” doing the work for philanthropic reasons. They are willing to take a 5% return on their housing projects, but that number would be unacceptable for most developers.
He said the downtown area is the most expensive place to build because land values are so high, construction costs are through the roof, there’s a labor shortage and interest rates are as high as 6.5% right now.
“We feel the policy as written will lead to no new projects in the Central Business District,” Romo said. “Requiring affordable housing in the Central Business District will kill projects. Absolutely.”
A project at 12 E. Carrillo St., Romo said, would have worked a year ago, but now that new Section 8 vouchers are under threat for next year, that return will be much lower.
The other item in the ordinance is that such projects would need a 90-year contract with the city to remain affordable, or below-market. Romo said many property owners don’t want that length of a relationship with government.
He said that requiring an in-lieu fee that goes to the city for affordable housing makes more sense, but even that is risky because there are so few possibilities to convert commercial buildings downtown, and requiring additional cost would devastate already scarce opportunities.
Rob Fredericks, executive director of the Housing Authority of the City of Santa Barbara, urged the city to keep the inclusionary housing requirement in the ordinance.
“Vacant commercial buildings linger while the need for housing, especially affordable housing, grows more urgent every day,” Fredericks said.
Downtown housing, he said, “brings housing closer to where people work, shop and play.”
He said inclusionary housing is not a deal-breaker if done thoughtfully and that rents could be increased on the remaining market-rate units to make up for it.
The ordinance still must go to the full City Council for a vote, although it appears that the city would have to amend its inclusionary housing ordinance separately if it wants to exempt it from projects in the downtown business district.