Santa Barbara City Council
May 5, 2026

CITY OF SANTA BARBARA

CITY COUNCIL
Randy Rowse
Mayor
Kelly McAdoo
City Administrator
Kristen W. Sneddon
Mayor Pro Tempore
Oscar Gutierrez
Ordinance Committee Chair
John S. Doimas
City Attorney
Eric Friedman
Finance Committee Chair
Meagan Harmon
Mike Jordan
Wendy Santamaria
City Hall
735 Anacapa Street
http://www.SantaBarbaraCA.gov
MAY 5, 2026, 2:00 PM
AGENDA
IN-PERSON PUBLIC COMMENT: At the beginning of each meeting of the City Council, Finance Committee, or Ordinance Committee, any member of the public may address the City Council concerning any item not on the Council's agenda. Any person wishing to make such address should first complete and deliver a "Request to Speak" form prior to the time that public comment is taken up by the City Council. Each speaker will be given a total of 3 minutes to address the Council. Pooling of time is not allowed during general public comment. The time allotted for general public comment at the beginning of the 2:00 p.m. session is 30 minutes.

Any member of the public who did not speak during the 2:00 p.m. session but who submitted a request to do so during the 2:00 p.m. 30 minute session may do so at the end of the meeting when the additional “Public Comment (If Necessary)” is announced. The City Council, upon majority vote, may decline to hear a speaker on the grounds that the subject matter is beyond their jurisdiction.

REMOTE PUBLIC COMMENT: Members of the public wishing to speak must “raise their hand” in the Zoom platform by selecting the virtual hand icon when their item is called. The keyboard shortcut for this is Alt+Y for Windows and Option+Y for Macs. City staff will activate the speaker’s microphone when the speaker’s name is called. The speaker will then need to unmute themselves. The keyboard shortcut for this is Alt+M for Windows or Command-Shift-A for Macs.

HOW TO REMOTELY OBSERVE AND/OR SPEAK LIVE AT A MEETING
• Web: https://santabarbaraca-gov.zoom.us/j/89359334270 (Participation via Zoom) • Telephone: Dial 1-669-900-6833, Enter Webinar ID: 893 5933 4270 (press *9 to raise/lower hand; press *6 to mute/unmute) • Online Streaming: Council meetings are streamed live at www.SantaBarbaraCA.gov/CAP • TV: Each regular City Council meeting is broadcast live in English and Spanish on City TV Channel 18 and rebroadcast in English on Wednesdays and Thursdays at 7:00 p.m. and Saturdays at 8:00 a.m., and in Spanish on Sundays at 3:00 p.m.

Each televised Council meeting is closed captioned for the hearing impaired. Check the City TV program guide at www.santabarbaraca.gov/citytv for rebroadcasts of Finance and Ordinance Committee meetings.

WRITTEN PUBLIC COMMENT: Public comments may also be submitted via email to [email protected] prior to the beginning of the Council Meeting. All public comments submitted via email will be provided to City Council and will become part of the public record.
(CONTINUED ON NEXT PAGE)
ORDER OF BUSINESS: Regular meetings of the Finance Committee and the Ordinance Committee begin at 12:00 p.m. The regular City Council meeting begins at 2:00 p.m. in the Council Chambers at City Hall.

REPORTS: Copies of the reports relating to agenda items are available for review at http://www.SantaBarbaraCA.gov/CAP.In accordance with state law requirements, this agenda generally contains only a brief general description of each item of business to be transacted or discussed at the meeting. Should you wish more detailed information regarding any particular agenda item, you are encouraged to obtain a copy of the Council Agenda Report (a "CAR") online at the City's website (http://www.SantaBarbaraCA.gov/CAP). Materials related to an item on this agenda submitted to the City Council after distribution of the agenda packet are posted to the City’s website as soon as reasonably feasible.

CONSENT CALENDAR: The Consent Calendar is comprised of items that will not usually require discussion by the City Council. A Consent Calendar item is open for discussion by the City Council upon request of a Councilmember, City staff, or member of the public. Items on the Consent Calendar may be approved by a single motion. Should you wish to comment on an item listed on the Consent Agenda, after turning in your "Request to Speak" form, you should come forward to speak or raise your hand in Zoom at the time the Council considers the Consent Calendar.

LANGUAGE TRANSLATION AND INTERPRETATION: The City of Santa Barbara offers live Spanish translation and interpretation for City Council Meetings via the Wordly platform. Follow the directions below to access the service. • Go to: https://attend.wordly.ai/join/QQBV-6746
o Ensure the Session ID QQBV-6746 is displayed.
o Select “Spanish” and click on the “Attend” button.
o You can now read the captions on your device and/or listen to the translation of the City Council meeting. o Click the speaker button to hear a text-to-speech version of the translated dialogue. • If you have any questions or concerns, please contact City TV at 805-564-5311.

SPANISH INTERPRETATION: If you need interpretation of your communications to Council from Spanish into English, please contact the City Clerk’s Office at 564-5309 or by email at [email protected]. If possible, notification of at least 48 hours will usually enable the City to make arrangements.

INTERPRETACIÓN EN ESPAÑOL: Si necesita una interpretación del español al inglés, para sus comunicaciones al Consejo, comuníquese con la Oficina del Secretario Municipal al 564-5309, o por correo electrónico a [email protected]. Si es posible, la notificación de al menos 48 horas generalmente permitirá a la Ciudad hacer los arreglos.

AMERICANS WITH DISABILITIES ACT: If you need auxiliary aids or services or staff assistance to attend or participate in this meeting, please contact the City Administrator's Office at 564-5305 or by email at [email protected]. If possible, notification at least 48 hours prior to the meeting will usually enable the City to make reasonable arrangements. For those who need accessibility accommodation in using the “raise hand” function and/or registering to participate in the Zoom session, please contact the Clerk’s office by 5:00 p.m. the day before the meeting for assistance. Additionally, a speaker may email [email protected] by 5:00 p.m. the day before a meeting, stating which item they wish to speak on. Specialized services, such as sign language interpretation or documents in Braille, may require additional lead time to arrange. 05/05/2026 Santa Barbara City Council Final Agenda Page 1 MAY 5, 2026 AGENDA
FINANCE COMMITTEE MEETING - 12:00 P.M. IN THE COUNCIL CHAMBER

1. Subject: Finance Committee Review of the City Administrator’s Recommended Two-Year Financial Plan for Fiscal Years 2026 and 2027 and Operating and Capital Budget for Fiscal Year 2027
Recommendation: That Finance Committee hear a report from staff in connection with the City Administrator’s Recommended Operating and Capital Budget for Fiscal Year 2027.
05/05/2026 Santa Barbara City Council Final Agenda Page 2 REGULAR CITY COUNCIL MEETING - 2:00 P.M.

CALL TO ORDER

PLEDGE OF ALLEGIANCE

ROLL CALL

CEREMONIAL ITEMS

1. Subject: Water Safety Month

2. Subject: Employee Recognition – Service Award Pins
Recommendation: That Council authorize the City Administrator to express the City’s appreciation to employees who are eligible to receive service award pins for their years of service through May 31, 2026.

CHANGES TO THE AGENDA

CONSENT CALENDAR

3. Subject: Waiver of Reading in Full of Ordinances and Resolutions Recommendation: That Council waive the reading in full of all ordinances and resolutions on the agenda and authorize reading by title only, pursuant to City Charter Section 511, unless otherwise requested by a member of the City Council; this waiver shall not apply to emergency ordinances, which shall be read in full as required by Section 511.

4. Subject: Master Agreement with the Santa Barbara Metropolitan Transit District for Transportation Management and Transit Services [Agreement] Recommendation: That Council authorize the City Administrator to execute a fiveyear Master Agreement with the Santa Barbara Metropolitan Transit District, in a form acceptable to the City Attorney, for transit services in an amount not to exceed $230,000 for the first year of service.

5. Subject: Professional Services Agreement between Hiltachk Marketing Group, LLC, and the Santa Barbara Airport [Agreement]
Recommendation: That Council enter into a Professional Services Agreement with Hiltachk Marketing Group, LLC, for strategic marketing and media services at the Santa Barbara Airport.
05/05/2026 Santa Barbara City Council Final Agenda Page 3

6. Subject: Professional Services Agreement with EcoTierra Consulting Inc. for the Franceschi House Project [Agreement]
Recommendation: That Council authorize the Parks and Recreation Director to execute a Professional Services Agreement with EcoTierra Consulting Inc., in the amount not to exceed $214,826, to provide environmental documentation for the Franceschi House Project.

7. Subject: Waterfront Department Revocable License Agreement with Corazon SDM, a California Limited Liability Company, for Property Located at 113 Harbor Way #180 [Agreement]
Recommendation: That Council approve a revocable license agreement with Corazon SDM, a California Limited Liability Company, for property located at 113 Harbor Way Suite #180.

REPORT FROM THE FINANCE COMMITTEE

GENERAL PUBLIC COMMENT

PULLED CONSENT ITEMS

CITY COUNCIL ADMINISTRATIVE AND ATTORNEY REPORTS

COMMUNITY DEVELOPMENT DEPARTMENT

8. Subject: Inclusionary Housing and In-Lieu Fee Study
Recommendation: That Council receive a presentation on the Inclusionary Housing and In-Lieu Fee Study and direct staff to draft amendments to the City’s existing inclusionary housing ordinances.

MAYOR AND COUNCIL REPORTS

9. Subject: Interviews for City Advisory Groups – Est. Time 4:00 p.m.

Recommendation: That Council hold interviews of applicants to various City Advisory Groups.

COUNCIL AND STAFF COMMUNICATIONS

COUNCILMEMBER COMMITTEE ASSIGNMENT REPORTS & ENGAGEMENTS

PUBLIC COMMENT (IF NECESSARY)

ADJOURNMENT

CITY OF SANTA BARBARA

FINANCE COMMITTEE MEETING

MEETING AGENDA
Agenda Date: May 5, 2026
Meeting Time: 12:00 PM
Meeting Location: Council Chambers
Finance Committee:
 Eric Friedman, Committee Chair
 Wendy Santamaria, Committee Vice Chair
 Meagan Harmon, Committee Member
Staff:
 Kelly McAdoo, City Administrator
 John S. Doimas, City Attorney
 Keith DeMartini, Finance Director
IN-PERSON PUBLIC COMMENT: Any person wishing to address the Finance Committee should first complete and deliver a "Request to Speak" form prior to the time that public comment is taken up by the Committee Member. Each speaker will be given a total of three minutes to address the Committee. The Finance Committee, upon majority vote, may decline to hear a speaker on the grounds that the subject matter is beyond their jurisdiction.

REMOTE PUBLIC COMMENT: Members of the public wishing to speak must “raise their hand” in the Zoom platform by selecting the virtual hand icon when their item is called.

The keyboard shortcut for this is Alt+Y for Windows and Option+Y for Macs. City staff will activate the speaker’s microphone when the speaker’s name is called. The speaker will then need to unmute themselves. The keyboard shortcut for this is Alt+M for Windows or Command-Shift-A for Macs.

HOW TO REMOTELY OBSERVE AND/OR SPEAK LIVE AT A MEETING:
 Web: SantaBarbaraCA-gov.Zoom.US/s/85839766181 (Participation via Zoom).  Telephone: Dial 1-669-900-6833, Enter Webinar ID: 858 3976 6181 (press *9 to raise/lower hand; press *6 to mute/unmute).  Online Streaming: Finance Committee meetings are streamed live at SantaBarbaraCA.gov/CAP.
 TV: Each regular Finance Committee meeting is broadcast live in English and Spanish on City TV Channel 18. Each televised Finance Committee meeting is closed captioned for the hearing impaired. Check the City TV program guide at SantaBarbaraCA.gov/CityTV for rebroadcasts of Finance Committee meetings.

WRITTEN PUBLIC COMMENT: Public comments may also be submitted via email to [email protected] prior to the beginning of the Finance Committee Meeting.

All public comments submitted via email will be provided to the Finance Committee and will become part of the public record.

REPORTS: Copies of the reports relating to agenda items are available for review at SantaBarbaraCA.gov/CAP. In accordance with state law requirements, this agenda generally contains only a brief general description of each item of business to be transacted or discussed at the meeting. Should you wish more detailed information regarding any particular agenda item, you are encouraged to obtain a copy of the Council Agenda Report (a "CAR") online at the City's website (SantaBarbaraCA.gov/CAP).

Materials related to an item on this agenda submitted to the City Council after distribution of the agenda packet are posted to the City’s website as soon as reasonably feasible.

LANGUAGE TRANSLATION AND INTERPRETATION: The City of Santa Barbara offers live Spanish translation and interpretation for City Council Meetings via the Wordly platform. Follow the directions below to access the service.  Go to: Attend.Wordly.AI/Join/QQBV-6746.
o Ensure the Session ID QQBV-6746 is displayed.
o Select “Spanish” and click on the “Attend” button.
o You can now read the captions on your device and/or listen to the translation of the City Council meeting.
o Click the speaker button to hear a text-to-speech version of the translated dialogue.
 If you have any questions or concerns, please contact City TV at 805-564-5311.

SPANISH INTERPRETATION: If you need interpretation of your communications to Council from Spanish into English, please contact the City Administrator’s Office at 805- 564-5305 or by email at [email protected]. If possible, notification of at least 48 hours will usually enable the City to make arrangements.

INTERPRETACIÓN EN ESPAÑOL: Si necesita una interpretación del español al inglés, para sus comunicaciones al Consejo, comuníquese con la Oficina del Administrador de la Ciudad al 805-564-5305, o por correo electrónico a [email protected].

Si es posible, la notificación de al menos 48 horas generalmente permitirá a la Ciudad hacer los arreglos.

AMERICANS WITH DISABILITIES ACT: If you need auxiliary aids or services or staff assistance to attend or participate in this meeting, please contact the City Administrator's Office at 805-564-5305 or by email at [email protected] if possible, notification at least 48 hours prior to the meeting will usually enable the City to make reasonable arrangements. For those who need accessibility accommodation in using the “raise hand” function and/or registering to participate in the Zoom session, please contact the Finance Department by 5:00 p.m. the day before the meeting for assistance.

Additionally, a speaker may email [email protected] by 5:00 p.m. the day before a meeting, stating which item they wish to speak on. Specialized Services, such as sign language interpretation or documents in Braille, may require additional lead time to arrange.
(CONTINUED ON NEXT PAGE)
ITEM FOR CONSIDERATION:

Subject: Finance Committee Review of the City Administrator’s Recommended Two-Year Financial Plan for Fiscal Years 2026 and 2027 and Operating and Capital Budget for Fiscal Year 2027.

Recommendation: That Finance Committee hear a report from staff in connection with the City Administrator’s Recommended Operating and Capital Budget for Fiscal Year 2027.

City of Santa Barbara
Finance Committee Agenda Report
Agenda Date: May 5, 2026
To: Finance Committee
From: Finance Department
Subject: Finance Committee Review of the City Administrator’s Recommended Two-Year Financial Plan for Fiscal Years 2026 and 2027 and Operating and Capital Budget for Fiscal Year 2027 Recommendation:

That Finance Committee hear a report from staff in connection with the City Administrator’s Recommended Operating and Capital Budget for Fiscal Year 2027.

Discussion:

On Tuesday, April 21, 2026, the City Administrator’s Recommended Operating and Capital Budget for Fiscal Year (FY) 2027 was submitted to Council. Council heard an overview of the budget and approved the Schedule of Council Budget Review Meetings and Public Hearings. An overview of the Operating and Capital Budget for FY2027 will be presented to the Finance Committee. Topics include major revenue and expenditure changes, capital projects, fee changes, and other program-related changes.

The public can access the City Administrator’s Recommended Operating and Capital Budget for Fiscal Year 2027 on the online budget tool at SantaBarbaraCA.gov/Budget.

Budget/Financial Information:

There is no direct financial or budget impact by the City Council taking action on staff’s recommendations. The City Administrator’s recommended budget for FY2027 includes many budget, financial, and operational recommendations that impact the City as well as considerations for the long-term fiscal sustainability of the organization.

Sustainability Impact:

Producing and making the City’s budget publicly available using the online budget tool is in line with the greater sustainability and resilience goals of the City through leveraging technology to disseminate information to a broad audience and minimizing the use of paper and other materials.

Agenda Item No. 1
Finance Committee Agenda Report
Finance Committee Review of the City Administrator’s Recommended Two-Year Financial Plan for Fiscal Years 2026 and 2027 and Operating and Capital Budget for Fiscal Year 2027
May 5, 2026

Attachment:

1. Recommended Schedule of City Penalties, Fees, and Service Charges Fiscal Year 2027
Prepared By: Natalija Glusac, Budget Manager
Submitted By: Keith DeMartini, Finance Director
Approved By: Kelly McAdoo, City Administrator

CITY OF SANTA BARBARA
Budget Hearing Schedule – Fiscal Year 2027
PROPOSED Schedule of ALL Budget Review Meetings & Public Hearings Please Note: Meeting dates and times are subject to change on short notice.

MEETING DATE BUDGET AGENDA ITEM(S)

SPECIAL BUDGET

WORK SESSION
Tuesday, April 9, 2026
9:00 a.m. – 11:30 a.m.

Faulkner Gallery
• FY2027 Mid-Cycle Budget Update
• Measure C Update
• Budget Balancing Solutions

REGULAR CITY
COUNCIL MEETING:

PUBLIC HEARING
Tuesday, April 21, 2026
Afternoon Session
Council Chambers
• Filing of the Recommended Operating & Capital
Budget for Fiscal Year 2027
• Schedule of Budget Work Sessions & Public
Hearings Approved
• Overview of Recommended Budget

FINANCE

COMMITTEE

MEETING
Tuesday, May 5, 2026
12:00 p.m. – 1:30 p.m.

Council Chambers
• Overview of Recommended Operating & Capital
Budget for Fiscal Year 2027

REGULAR CITY
COUNCIL MEETING:

BUDGET WORK

SESSION &

PUBLIC HEARING
Tuesday, May 12, 2026
Afternoon session
Council Chambers
General Fund & related Capital Budget
Presentation
• City Administrator
• City Attorney
• Community Development
• Finance
• Fire Department
• Human Resources
• Library
• Parks & Recreation
• Police Department
• Public Works (Admin. & General Services)
• Sustainability & Resilience
• General Fund Capital & Measure C Capital

REGULAR CITY
COUNCIL MEETING:

BUDGET WORK

SESSION &

PUBLIC HEARING
Tuesday, May 19, 2026
Afternoon session
Council Chambers
Enterprise Fund, Internal Service Funds, Special
Funds & related Capital Budget Presentation
• Airport
• City Administrator (City Affordable Housing,
Community Development Block Grant, Federal
Home Loan Program, Permanent Local Housing
Allocation, Local Housing Trust Fund)
• Finance (Self Insurance)
• Information Technology
• Parks & Recreation (Golf Fund)
• Public Works (Engineering, Fleet, Facilities,
Streets, Measure A)
• Sustainability & Resilience (Santa Barbara Clean
Energy, Creeks, Solid Waste, Street Sweeping)
• Water Resources (Water, Wastewater)
• Waterfront

REGULAR CITY
COUNCIL MEETING:

PUBLIC HEARING
Tuesday, June 9, 2026
Afternoon session
Council Chambers
• Budget Deliberations

REGULAR CITY
COUNCIL MEETING:

PUBLIC HEARING
Tuesday, June 16, 2026
Afternoon session
Council Chambers
• Budget Adoption

ATTACHMENT
Agenda Item No. 1
City of Santa Barbara
Council Agenda Report
Agenda Date: May 05, 2026
To: Mayor and Councilmembers
From: City Administrator’s Office
Subject: Employee Recognition – Service Award Pins
Recommendation:

That Council authorize the City Administrator to express the City’s appreciation to employees who are eligible to receive service award pins for their years of service through May 31, 2026.

Discussion:

The City appreciates the loyalty to the community and the dedication to public service that are demonstrated by City employees throughout the organization every day. Since 1980, the City Employees’ Recognition Program has recognized length of City Service.

Service award pins are presented to employees for every five years of service. Those employees achieving 256 years of service or more are eligible to receive their pins in front of the City Council.

Attached is a list of those employees who will be awarded pins for their service through May 30, 2026.

Budget/Financial Information:

There is no budgetary or financial impact for this item.

1. May 2026 Service Awards
Agenda Item No. 2
Attachment:

Prepared and
Submitted By:

Approved By:

Talhia Dorado, Administrative Specialist
Kelly McAdoo, City Administrator

ATTACHMENT
MAY 2026 SERVICE AWARDS
May 05, 2026 Council Meeting
5 Years
Kira Esparza, Esparza, Kira, Community Development Department Edgar Ramirez, Senior Engineering Technician, Public Works Department 10 YEARS
Sandra Vose, Senior Library Technician, Library Department 15 YEARS
Carson Wollert, Principal Engineer, Public Works Department Madeline Wood, Administrative Analyst II, Department of Water Resources 20 YEARS
Johny Salas, Parking Coordinator, City Administrators Office Justin Berman, Parking Coordinator, City Administrators Office Elizabeth Stotts, Administrative Analyst II, Community Development Department 25 YEARS
Christina Ortega, Police Officer, Police Department
35 YEARS
Onalisa Hoodes, Police Services Coordinator, Police Department City of Santa Barbara
Council Agenda Report
Agenda Date: May 5, 2026
To: Mayor and Councilmembers
From: City Administrator’s Office
Subject: Master Agreement with the Santa Barbara Metropolitan Transit District for Transportation Management and Transit Services [Agreement]
Recommendation:

That Council authorize the City Administrator to execute a five-year Master Agreement with the Santa Barbara Metropolitan Transit District, in a form acceptable to the City Attorney, for transit services in an amount not to exceed $230,000 for the first year of service.

Discussion:

On September 17, 2024, Council reviewed the State Street Short-Term Action Plan (Action Plan), which details pilot projects and proposals intended to improve the vitality, safety, and experience of the State Street Promenade while informing the development of the State Street Master Plan. The pilot projects and proposals in the Action Plan are organized around 11 focus areas, including shuttle service and assisted mobility, roadway configuration, sustainability, and economic development, among others. Since initiating the Action Plan, the City has completed many of the proposed projects and made progress on each of the 11 focus areas.

Staff proposes a five-year Master Agreement with MTD to fund continued operation of the Downtown-Waterfront Shuttle (Shuttle), an all-electric circulator connecting the Central Business District and the Waterfront that is a central component of the Action Plan’s shuttle service and assisted mobility focus area. For the past two summers, MTD has operated the circulator shuttle between Memorial Day and Labor Day weekends. The Shuttle connects Downtown and Waterfront attractions by traveling northbound on Chapala to Sola Street, then heading southbound on Anacapa to join State Street at Gutierrez Street. From there, it proceeds south to Cabrillo Boulevard, where it runs between the Zoo and the Harbor. The shuttle operates on Fridays, Saturdays, and Sundays from 10:00 am to 6:00 PM. During its three-month run in the summer of 2025, the shuttle transported 9,218 passengers, a 13.4% increase over 2024 ridership.

Agenda Item No. 4
Council Agenda Report
Master Agreement with the Santa Barbara Metropolitan Transit District for Transportation Management and Transit Services [Agreement] May 5, 2026

The MTD Board approved the five-year Agreement at its April 7, 2026 meeting.

Agreement Terms
This five-year Agreement covers the period from May 23, 2026 through June 30, 2031.

Under the Agreement, MTD is responsible for all aspects of shuttle operations, including routes, schedules, headways, equipment, and personnel, while the City will provide an hourly subsidy to MTD based on the operational cost per revenue hour. Although service in 2026 is limited to summer weekends, the Agreement allows the City and MTD to expand routes, schedules, and service levels in the future if demand grows and funding is available.

The City will provide an hourly subsidy to MTD based on the audited cost per revenue hour for the prior fiscal year. For the initial period of service (May 23 through September 7, 2026), the hourly subsidy is $204.45 per revenue hour. In subsequent years, the subsidy may be adjusted upward based on the Consumer Price Index, subject to the approval of the City Administrator. Farebox revenue collected by MTD is credited back against the subsidy, reducing the City’s net cost. MTD will provide an annual report to the City documenting total fares collected, ridership, and actual revenue hours.

The City’s obligation to provide funding for services in future years is contingent upon annual appropriation of sufficient funds. Should funding be unavailable in a given year, the Agreement requires the City to notify MTD in advance.

Budget/Financial Information:

Based on the proposed services for summer of 2026, the City’s cost under this Agreement will not exceed $230,000 for the first year of services. There are sufficient funds appropriated from Measure C for the State Street Action Plan in Fiscal Year 2026 to cover this expenditure, and the City Administrator’s recommended budget for Fiscal Year 2027 requests additional Measure C funds to sustain these services.

Sustainability Impact:

The Downtown-Waterfront Shuttle directly supports the City’s Together to Zero Climate Action Plan, which identifies a goal of promoting safe, equitable, zero-emission transportation options to reduce pollution and urban congestion and increase public transit mode share. The Shuttle operates exclusively with electric vehicles and produces no direct tailpipe emissions. By encouraging visitors to “park once” and travel the Downtown corridor by transit, the shuttle reduces vehicle use in the Central Business District and Waterfront area.

Council Agenda Report
Master Agreement with the Santa Barbara Metropolitan Transit District for Transportation Management and Transit Services [Agreement] May 5, 2026

A copy of the Agreement may be requested from the City Administrator’s Office for public review by emailing [email protected].

Prepared By: Sarah Clark, Downtown Services Manager
Submitted By: Anthony Valdez, Deputy City Administrator Approved By: Kelly McAdoo, City Administrator
City of Santa Barbara
Council Agenda Report
Agenda Date: May 5, 2026
To: Mayor and Councilmembers
From: Airport Department
Subject: Professional Services Agreement between Hiltachk Marketing Group, LLC, and the Santa Barbara Airport [Agreement]
Recommendation:

That Council enter into a Professional Services Agreement with Hiltachk Marketing Group, LLC, for strategic marketing and media services at the Santa Barbara Airport.

Discussion:

Santa Barbara Airport (SBA) relies on strategic marketing to strengthen awareness of local air service, influence traveler behavior, and support the Airport’s competitiveness within the regional air travel market. A coordinated and data‑driven marketing program is essential to advancing the Airport’s long‑term air service development objectives and ensuring that residents throughout the region understand the benefits of choosing SBA for commercial travel.

Hiltachk Marketing Group (Hiltachk), based in Sacramento, was originally selected through a competitive Request for Proposals process in 2017. During that process, the firm demonstrated strong qualifications in strategic planning, market research, creative development, media buying, and performance evaluation. Since then, SBA has maintained a productive and long‑standing partnership with the firm. Hiltachk’s work has helped SBA sustain a consistent marketing presence, adapt to evolving travel patterns and market conditions, and communicate effectively with the traveling public.

Under the proposed agreement, Hiltachk would continue to provide comprehensive strategic marketing and communications support for SBA’s commercial passenger air service program. The scope of work includes strategic planning, creative content development, media planning and placement, social media outreach, public information support, market research, and detailed performance reporting. These services enable Agenda Item No. 5
Council Agenda Report
Professional Services Agreement between Hiltachk Marketing Group, LLC, and the Santa Barbara Airport [Agreement]
May 5, 2026

SBA to maintain an integrated and responsive marketing program that reflects current industry trends and local travel dynamics.

The agreement also consolidates agency services and media buying into a single contract structure. This approach improves coordination between campaign strategy, creative development, and media execution, while streamlining contract administration and simplifying budget oversight. Together, these elements support more efficient project delivery and enhance the effectiveness of SBA’s overall marketing efforts.

Budget/Financial Information:

The agreement includes a not to exceed amount of $630,000 per fiscal year over a threeyear term. Each annual allocation consists of up to $210,000 for agency services and up to $420,000 for media expenditures. These funds will be incorporated into SBA’s annual operating budget.

Hiltachk’s efforts consistently drive measurable results. In FY25, paid digital media campaigns generated more than 9,000 outbound ticket sales and over $4 million in airline revenue, delivering a return on advertising spend exceeding $50 for every $1 invested.

FY26 performance is currently on pace to surpass these results. A copy of the contract/agreement may be requested from the Airport for public review by emailing [email protected].

Prepared By: John Feldhans, Airport Properties Manager
Submitted By: Chris Hastert, Airport Director
Approved By: Kelly McAdoo, City Administrator
City of Santa Barbara
Council Agenda Report
Agenda Date: May 5, 2026
To: Mayor and Councilmembers
From: Parks and Recreation Department
Subject: Professional Services Agreement with EcoTierra Consulting Inc. for the Franceschi House Project [Agreement]
Recommendation:

That Council authorize the Parks and Recreation Director to execute a Professional Services Agreement with EcoTierra Consulting Inc., in the amount not to exceed $214,826, to provide environmental documentation for the Franceschi House Project.

Discussion:

In 2018, City Council unanimously voted to replace the Franceschi House with an interpretive project in the same footprint. Since 2024, the Department has conducted community engagement and developed preliminary plans to obtain a land use planning permit. In January 2025, a majority of the Historic Landmarks Commission supported the preliminary design and the deconstruction of the House. The next step in the process is to receive a “complete” determination regarding the planning permit and start the subsequent environmental review process, including an Initial Study and a Focused Environmental Impact Report (EIR).

The purpose of this contract is to allow the environmental review process to begin concurrently, while the design team continues to work through the remaining storm water compliance requirements before the planning permit can be deemed complete.

The Professional Services Agreement with EcoTierra Consulting Inc. is not to exceed $214,826. There are sufficient expenditure appropriations in the Department’s Fiscal Year 2026 Capital Fund to cover the costs for the project’s environment review process.

Agenda Item No. 6
Budget/Financial Information:

Council Agenda Report
Professional Services Agreement with EcoTierra Consulting Inc. for the Franceschi House Project [Agreement]
May 5, 2026

Sustainability Impact:

The proposed project design will incorporate the use of green building materials and energy efficient lighting to the greatest extent feasible. Water conservation will also be maximized with the use of drought tolerant landscaping.

The primary intent of environmental review is to identify and analyze the potential, significant environmental effects of the proposed project. The EIR will inform public agency decision-makers and the general public of potential environmental consequences, identify ways to minimize or avoid damage, and consider reasonable alternatives to the project before it is approved.

A copy of the agreement for public review may be requested from the Parks and Recreation Department by contacting Courtney Carlson at [email protected].

Prepared By: Adam Porte, Recreation Manager
Submitted By: Jill Zachary, Parks and Recreation Director Approved By: Kelly McAdoo, City Administrator
City of Santa Barbara
Council Agenda Report
Agenda Date: May 5, 2026
To: Mayor and Councilmembers
From: Waterfront Department
Subject: Waterfront Department Revocable License Agreement with Corazon SDM, a California Limited Liability Company, for Property Located at 113 Harbor Way #180 [Agreement]
Recommendation:

That Council approve a revocable license agreement with Corazon SDM, a California Limited Liability Company, for property located at 113 Harbor Way Suite #180.

Background:

The City of Santa Barbara owns the property located at 113 Harbor Way, Suite #180.

After conducting a Request for Proposals (RFP) process in December 2025, Corazon SDM, LLC, was selected to lease the premises and operate the restaurant Corazon Sal De Mar.

The City and Corazon SDM, LLC are currently negotiating a long-term master lease, under which the City will serve as landlord and Corazon SDM, LLC will be the tenant of the property. The leasing process is underway and requires approval from the City Council, followed by adoption of an Ordinance. The lease will not become effective until the Ordinance is adopted and the thirty-day referendum period has concluded.

Due to the existing condition of the premises and the short timeline to start operating before the summer season begins, Corazon SDM, LLC needs to access and occupy the premises before the end of the referendum period to carry out interior renovations, such as painting, flooring, and installation of kitchen equipment and furniture.

During the license period, the space won’t be open to the public and no events, whether private or public, will be allowed.

Agenda Item No. 7
Council Agenda Report
Waterfront Department Revocable License Agreement with Corazon SDM, a California Limited Liability Company, for Property Located at 113 Harbor Way #180 [Agreement] May 5, 2026

Discussion:

Corazon SDM, LLC proposes to occupy premises through a license agreement with the City. Basic terms of the proposed license agreement are summarized as follows:
• Term: This Revocable License Agreement begins upon City Council approval and ends at the earlier of the start of the Master Lease or, if not commenced, when the Lease is deemed ineffective by the City and written notice is given to Corazon SDM, LLC, unless otherwise terminated by mutual agreement. • Base Rent: Rent is not required for the duration of this Revocable License Agreement, but Corazon SDM LLC will pay fees for their utility useage. • Insurance: Corazon SDM, LLC is required to procure and maintain, for the duration of the license period, insurance against claims for injuries to persons or damages to property which may arise from or in connection with the possession, occupancy, operation, improvement, or use of the facility by the Licensee, their guests, agents, representatives, employees, or subcontractors.

Budget/Financial Information:

There will be no financial impact for the City throughout the term of this revocable license agreement.

The Harbor Commission recommended approval of the Master Lease with Corazon SDM, LLC, at their February 19, 2026, meeting.

A copy of the license agreement may be requested from the Waterfront Department for public review by emailing [email protected].

Prepared By: Cesar Barrios, Waterfront Business Manager Submitted By: Mike Wiltshire, Waterfront Director
Approved By: Kelly McAdoo, City Administrator
City of Santa Barbara
Council Agenda Report
Agenda Date: May 5, 2026
To: Mayor and Councilmembers
From: Community Development Department
Subject: Inclusionary Housing and In-Lieu Fee Study
Recommendation:

That Council receive a presentation on the Inclusionary Housing and In-Lieu Fee Study and direct staff to draft amendments to the City’s existing inclusionary housing ordinances.

Executive Summary:

The Inclusionary Housing and In-Lieu Fee Study (Attachment 1) analyzes the City’s inclusionary housing requirements for ownership unit projects and rental unit projects to assist in identifying possible changes to existing inclusionary housing requirements.

Inclusionary Housing is a zoning standard that requires a set percentage of residential units in a development to be restricted as affordable units. Inclusionary housing requirements are currently fulfilled by providing affordable units on-site or paying an inlieu fee. Staff requests feedback on the following ten recommendations proposed in the Inclusionary Housing and In-Lieu Fee Study (Study) to guide future amendments to the inclusionary housing ordinances:

A. Apply Inclusionary Housing Requirements to All Rental Projects with 5+ units B. Maintain Current Inclusionary Housing Requirements
C. Update the In-Lieu Fee Rate for Rental Projects with 10+ Units D. Set an In-Lieu Fee Rate for Ownership Projects with 10+ Units E. Set a Lower In-Lieu Fee Rate for “Small” Rental and Ownership Projects F. Count Rental Inclusionary Units as Bonus Density
G. Consider Options for In-Lieu Fee Payments to Fulfill Inclusionary Requirements:
 G.1. Consider In-Lieu Fee Payment for All Fractional Inclusionary Requirements
Agenda Item No. 8
Council Agenda Report
Inclusionary Housing and In-Lieu Fee Study
May 5, 2026

 G.2. Consider In-Lieu Fee Payment for All Inclusionary Requirements H. Simplify the In-Lieu Fee Calculations for Ownership Projects I. Implement Automatic Annual In-Lieu Fee Rate Adjustments J. Adjust Target Area Median Income for Moderate-Income Rents from 100 percent to 110 percent
Discussion:

Inclusionary housing is a zoning standard that requires units restricted as affordable to households in specified income categories, such as Very-Low-, Low-, or ModerateIncome, as part of a market rate residential development. The City has inclusionary housing requirements for both ownership and rental housing developments.

Background
Housing Element Program HE-13: Evaluate Inclusionary Housing Ordinances directs staff to 1) evaluate the inclusionary housing requirements with a feasibility study, and 2) draft ordinance amendments if warranted by the results of the evaluation. Full text of Program HE-13 is included in Attachment 2. The City hired BAE Urban Economics, Inc. (BAE) to prepare the Inclusionary Housing and In-Lieu Fee Study.

Existing Inclusionary Housing Requirements
The City’s existing inclusionary housing requirements differ depending on whether the project is creating ownership units or rental units. The inclusionary housing requirements are summarized below. Inclusionary units are affordable units that are sold or rented at prices at specific income categories, set as percentages of the Area Median Income (AMI). Inclusionary housing requirements are fulfilled by on-site inclusionary units or payment of an in-lieu fee; the allowed method depends on the total number of units in the project. In-lieu fees are collected in the Local Housing Trust Fund.1 Ownership Unit Projects (Chapter 30.160, Chapter 28.43) There are three distinct types of ownership projects, each with different inclusionary housing requirements. Projects consisting of only one ownership unit are exempt from inclusionary housing requirements.
1 The purpose of the Local Housing Trust Fund (SBMC Chapter 26.80) is “utilizing and leveraging locally generated dollars for the production and preservation of affordable housing units.” Council Agenda Report
Inclusionary Housing and In-Lieu Fee Study
May 5, 2026

 Condominiums. Projects of ten or more units must provide 15 percent of units onsite for sale to Middle-Income households (120–160 percent of the area median income, or AMI). The required on-site units are density bonus units allowed above the site’s maximum density. Projects with two to nine units have the option to provide one on-site unit or pay an in-lieu fee.
 Construction of single-unit residences on individual lots. Projects of ten or more units must provide 15 percent of units for sale to Upper-Middle-Income households (160–200 percent AMI). The required on-site units are density bonus units allowed above the site’s maximum density. Projects with two to nine units have the option to provide one on-site unit or pay an in-lieu fee.
 Lot subdivision without construction of homes (“dry lot subdivision”). These projects are required to pay an in-lieu fee.

In-lieu fees are recalculated for each project to make up the monetary difference between the estimated production cost and the price of a two-bedroom unit affordable to a LowIncome household, with additional variables in the calculation based on the total unit quantity and the project’s unit sizes.

Twenty-one inclusionary ownership units have recorded covenants restricting them as affordable for Middle- or Upper-Middle-Income households. Between 2004 and December 31, 2025, ownership projects have generated $933,604 in inclusionary in-lieu fee payments.

Rental Unit Projects (Section 30.150.110)
The inclusionary housing requirement for rental projects with five or more units is ten percent of the total units restricted for Moderate-Income households (80–120 percent AMI), with an in-lieu fee option available for fractional units. Rental projects that do not use the Average Unit-Size Density Incentive Program (AUD Program) or are located in the coastal zone are not subject to the inclusionary requirements. Projects with one to four rental units are exempt from inclusionary housing requirements.

On-site units. On-site units are required for any rental project with ten or more units and are optional for projects with five to nine units. The required units are counted within the maximum residential density allowed on the site.

In-lieu fee. The in-lieu fee is an alternative to providing on-site units for projects with five to nine units. For projects with ten or more units, an in-lieu fee can only be paid for the Council Agenda Report
Inclusionary Housing and In-Lieu Fee Study
May 5, 2026

“fractional unit” based on a remainder less than 0.5 for any on-site unit (e.g., 24-unit project must provide two inclusionary units and pay an in-lieu fee for the 0.4 fractional unit). The in-lieu fee rate is $25.00 per net residential square foot.

Thirteen inclusionary rental units have recorded convents restricting them as affordable for Moderate-Income households. Between 2019 and December 31, 2025, rental projects have generated $397,188 in inclusionary in-lieu fee payments.

Residential Development Production and Trends
This section reviews recent housing production numbers and construction starts2 to provide context for the analysis and recommendations in the Inclusionary Housing and In-Lieu Fee Study. This analysis is outlined below and included in Attachment 3.

The City has issued building permits for 200 units affordable to Very-Low-, Low-, and Moderate-Income households so far in the 2023–2031 Housing Element cycle. All but one of the Lower-Income units counted in the 2023–2031 Regional Housing Needs Allocation (RHNA) Progress are in projects using State Density Bonus Law (SDBL, Gov.

Code §65915). Projects that use SDBL can count the affordable units provided toward the local inclusionary housing requirements; therefore, projects using SDBL may not be required to provide inclusionary units. This means the City’s affordable housing stock is increasing in Very-Low- and Low-Income rental units—the most common deed-restricted units provided in local SDBL projects—but fewer Moderate-Income units are being produced. Of the 69 Moderate-Income units that have been permitted so far, a great majority are not inclusionary units but are from the Housing Authority of the City of Santa Barbara project at 400 West Carrillo Street (55 Moderate-Income units).

There is very limited government funding available for units affordable to Moderate-, Middle-, and Upper-Middle-Income households, which are the AMI categories targeted by the City’s inclusionary housing requirements.

Staff studied residential trends for multi-unit residential projects using project data compiled for RHNA Progress reports that were provided to the State during this Housing Element cycle. Because a majority of the multi-unit permitted projects are rental projects with fewer than ten units (57 percent), only nine projects are required to provide on-site 2 “Construction start” as indicated by a successfully passed building inspection in the permit-tracking system.

Council Agenda Report
Inclusionary Housing and In-Lieu Fee Study
May 5, 2026

inclusionary units. Over time, the quantity of units in projects using SDBL is rising as a percentage of total units permitted in multi-unit residential projects, reflecting an increase in SDBL utilization.

Public Engagement
At project initiation, BAE conducted interviews with local development professionals to inform the Inclusionary Housing and In-Lieu Fee Study. A summary of this input is included in Appendix B: Input from Practitioners of the Study.

A draft Inclusionary Housing and In-Lieu Fee Study was made available for public review and comment from January 28 through March 1, 2026. Staff collected 18 comments from community groups and individuals. The Study was revised in response to comments received, and the final Inclusionary Housing and In-Lieu Fee Study was published on April 2, 2026.

Inclusionary Housing and In-Lieu Fee Study
The purpose of this hearing is to present the Inclusionary Housing and In-Lieu Fee Study and gather feedback to guide future related ordinance amendments. Staff will draft inclusionary housing ordinance amendments based on Council direction and return to Planning Commission, Ordinance Committee, and City Council with proposed ordinance amendments.

The Study provides analysis to assist the City in considering changes to its existing inclusionary housing requirements in support of the Housing Element’s affordable housing goals.

The Study uses a common pro-forma financial model to evaluate financial feasibility for seven development prototypes. A pro-forma model relies on assumptions to estimate cost and value for a project. Developers use a pro-forma to evaluate development opportunities to model costs and potential returns to help determine whether to pursue and construct a project. A pro-forma is just one tool available to a developer to evaluate possible projects; no developer will use the same tool, or even use the same tool in the same way, when looking at projects.

The 2026 Study is similar in many aspects to the 2017/2019 Feasibility Study and Residential Nexus Study prepared by Keyser Marston Associates, which informed adoption of the AUD Program’s rental inclusionary housing requirements. Both the 2026 Council Agenda Report
Inclusionary Housing and In-Lieu Fee Study
May 5, 2026

Study and the previous study analyze development prototypes to test financial feasibility with a pro-forma financial method. Where the two studies diverge is the value the proforma financial models are “solving” for to evaluate financial feasibility. During the public review period of the draft Study, staff received multiple comments questioning the use of Residual Land Value (RLV) to evaluate financial feasibility in the 2026 Study when the past 2017/2019 Study used Return on Cost (ROC). In essence, the two studies show two ways of mathematically arriving at the same result. RLV holds developer profit static to solve for the land cost a prototypical development could support; whereas ROC holds land cost static to solve for the developer profit a development would generate.

To analyze financial feasibility, no matter the value being solved for using a pro-forma, there needs to be a comparable threshold that indicates feasibility. For RLV, the cost of recent land sales is used to evaluate financial feasibility. If a prototype’s RLV is higher than the comparable land cost, the project is considered feasible. The feasibility of all prototypes is currently challenging due to construction cost increases and many other external market factors.

Table 1: Feasibility of Prototypes
RLV per
site sf
Land price
per site sf
Feasibility
Analysis
Prototype I: Ownership Townhome $81 $125 Not Likely Feasible Prototype II: Ownership $57 $125 Not Likely Feasible
Prototype III: Rental Townhome $42 $125 Not Likely Feasible Prototype IV: Rental Mixed-Income $97 $150 Not Likely Feasible Prototype V: Rental Mixed-Use Large $82 $150 Not Likely Feasible Prototype SDBL-I: Rental Mixed-Use
Density Bonus
$157 $150 Likely Feasible
Prototype SDBL-II: Rental Density
Bonus
$187 $150 Likely Feasible
The infeasibility of residential development impacts the creation of market-rate and inclusionary housing units. If projects are not feasible, they are not constructed, and no inclusionary or market rate units are provided. Therefore, it is important for the City to consider development feasibility when evaluating inclusionary housing requirements.

Balancing the inclusionary housing requirements with development feasibility is necessary when calibrating any potential changes to the inclusionary housing ordinance requirements.

Study Recommendations
Council Agenda Report
Inclusionary Housing and In-Lieu Fee Study
May 5, 2026

The Study includes ten recommendations to amend the existing inclusionary housing requirements, which are structured to work together as a complete package. Taking forward all recommendations would have the greatest impact. The recommendations can also stand individually regardless of other recommendations. The recommendations are organized in three general categories: program-related, policy-related, and administration-related.

Public comments received on the draft Study varied between adopting higher inclusionary requirements to reducing or removing inclusionary housing requirements. The Study recommendations attempt to strike a balance to meet affordable housing goals while not constraining the production of housing. That being the case, staff supports the recommendations but requests feedback and guidance, particularly on the program and policy recommendations.

Program-related recommendations. These recommendations focus on updates to the existing program including inclusionary housing percentage requirements and in-lieu fee rates. Program recommendations were calibrated with an eye on financial feasibility of prototype developments, but the intention of these recommendations is not solely to improve feasibility. Instead, the program recommendations update variables while maintaining the existing program’s structure.
 Recommendation A. Apply Inclusionary Housing Requirements to All Rental Projects with 5+ units.

Expand inclusionary housing requirements for rental projects beyond the AUD Program (e.g. include non-AUD projects inland and all rental projects in the coastal zone).
 Recommendation B. Maintain Current Inclusionary Housing Requirements.

Projects with 10 or more units: Require 15 percent of units as Middle-Income units for ownership and ten percent of units as Moderate-Income units for rental.  Recommendation C. Update the In-Lieu Fee Rate for Rental Projects with 10+ units.

Increase the in-lieu fee rate from $25 to $50 per square foot for fractional units in rental projects with ten or more units.
 Recommendation D. Set an In-Lieu Fee Rate for Ownership Projects with 10+ units.

Set the in-lieu fee rate at $50 per square foot for fractional units in ownership projects with ten or more units.

Council Agenda Report
Inclusionary Housing and In-Lieu Fee Study
May 5, 2026

 Recommendation E. Set a Lower In-Lieu Fee Rate for “Small” Rental and Ownership Projects.

Set the in-lieu fee rate at $35 per square foot for projects with fewer than ten units.

Policy-related recommendations. These recommendations aim to align requirements between the rental and ownership requirements while considering options from recent public comments on housing topics. The policy recommendations were calibrated, in part, to improve financial feasibility of projects.
 Recommendation F. Count Rental Inclusionary Units as Bonus Density.

Allow rental inclusionary units above allowed density, similar to the ownership program (e.g., required Moderate-Income inclusionary units are on top of allowed density).
 Recommendation G. Consider Options for In-Lieu Fee Payments to Fulfill Inclusionary Requirements.
 Recommendation Option G.1: Consider In-Lieu Fee Payment for All Fractional Inclusionary Requirements.

Projects with ten or more units: Do not require an inclusionary unit for fractions of

0.5 or greater; allow payment of the $50 per square foot in-lieu fee.  Recommendation Option G.2: Consider In-Lieu Fee Payment for All Inclusionary Requirements.

Projects with ten or more units: Allow all inclusionary requirements to be satisfied with payment of an in-lieu fee of up to $72 per square foot.

Staff specifically requests feedback and guidance on the policy options in Recommendation G to consider in-lieu fee payments fulfilling inclusionary housing requirements. Only one option—G.1 or G.2—can be adopted.

Administration-related recommendations. These recommendations were not proposed to improve financial feasibility of projects. Instead, administrative recommendations are identified as adjustments to the existing program to improve administrative efficiency by City staff.
 Recommendation H. Simplify In-Lieu Fee Calculations for Ownership Projects.

Use the same methodology as rental projects (i.e. in-lieu fee rate per square foot).  Recommendation I. Implement Automatic Annual In-Lieu Fee Rate Adjustments.

Account for yearly inflation in in-lieu fee rates automatically.

Council Agenda Report
Inclusionary Housing and In-Lieu Fee Study
May 5, 2026

 Recommendation J. Adjust Target AMI for Moderate-Income Rents from 100 percent to 110 percent.

Align calculation with the methods used by the State and other jurisdictions.

Planning Commission Feedback
The Planning Commission considered the Study and provided feedback on the ten recommendations for potential ordinance amendments on April 16, 2026. Draft Minutes are provided as Attachment 4. The Planning Commission supported all ten of the recommendations, with the following amendments:
 Recommendation A: Planning Commission supported applying inclusionary requirements to all multi-unit residential projects of two or more units in the City. o This would apply rental inclusionary requirements to all rental projects, not only AUD projects.
o This would reduce the rental project threshold from five units to two units, thereby aligning the minimum unit number for both ownership and rental projects.
 Recommendation B: Planning Commission supported the Study’s recommendation to maintain the existing inclusionary housing requirements for ownership unit projects (15 percent of total units as affordable to Middle-Income households or Upper-Middle-Income households) and rental unit projects (ten percent of total units as affordable to Moderate-Income households).

Commissioner Baucke dissented.
 Recommendation C: Planning Commission supported updating the rental in-lieu fee rate with a rate of $91.41 per square foot.
o Planning Commission supported the maximum in-lieu fee rate from the Residential Nexus Study (Appendix D in Attachment 1).
o This would increase the in-lieu fee rate charged on rental projects of ten or more units from the current $25.00 per square foot to $91.41 per square foot.
o The Study recommended an in-lieu fee rate of $50.00 per square foot.  Recommendation D: Planning Commission supported setting an ownership in-lieu fee rate of $72.53 per square foot.
o Planning Commission supported the maximum in-lieu fee rate from the Residential Nexus Analysis (Appendix D in Attachment 1).

Council Agenda Report
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May 5, 2026

o This would, in conjunction with Recommendation H, apply an in-lieu fee rate of $72.53 per square feet to ownership projects of ten or more units. o The Study recommended an in-lieu fee rate of $50.00 per square foot.  Recommendation E: Planning Commission supported an in-lieu fee rate for smaller projects of $50.00 per square foot.
o Planning Commission supported an in-lieu fee rate of $50.00 per square foot rather than the $35.00 recommended by the Study.
o This, in conjunction with Planning Commission’s Recommendation A, would apply an in-lieu fee rate of $50.00 per square foot to ownership and rental projects of two to nine units.
 Recommendation F: Planning Commission supported the Study’s recommendation to count rental inclusionary units as bonus density.  Recommendation G: Planning Commission supported option G.2 to allow payment of an in-lieu fee to satisfy all inclusionary requirements, in conjunction with the updated in-lieu fee rates from Recommendations C and D. o Planning Commission supported option G.2 for flexibility in satisfying inclusionary housing requirements by allowing either in-lieu fee payments, on-site units, or a combination of both.
o There is precedent in benchmarked jurisdictions to allow in-lieu fee payments to satisfy all inclusionary requirements (Option G.2) when requested and approved project by project as an alternative compliance method. Allowing in-lieu payments without requiring approval (allow byright) is unprecedent according to research conducted by Staff and the consultant.
 Recommendation H: Planning Commission supported the Study’s recommendation to change the ownership in-lieu fee payment calculation method to match the existing rental in-lieu fee payment calculation.  Recommendation I: Planning Commission supported annual adjustments to the inlieu fee rates for inflation using either the Engineering News-Record (ENR) or the California Construction Cost Index (CCCI) published by the California Department of General Services.
 Recommendation J: Planning Commission supported the Study’s recommendation to align maximum rent calculation for Moderate-Income households with those used by the State and other jurisdictions.

Council Agenda Report
Inclusionary Housing and In-Lieu Fee Study
May 5, 2026

Next Steps
Staff will draft amendments to the inclusionary housing ordinance based on feedback and guidance received from Planning Commission and City Council, continue public engagement efforts to inform the proposed ordinance amendments, and return at a later date for ordinance amendment hearings.

Budget/Financial Information:

This action does not have a budget/financial impact on the City. However, the decision on recommendation G could impact the amount of money going into the City’s Local Housing Trust Fund.

Attachments:

1. Inclusionary Housing and In-Lieu Fee Study

2. Housing Element Program HE-13 and Applicable General Plan Goals, Policies and Actions

3. Housing Production (2023-2031 RHNA Progress)

4. Draft Planning Commission Minutes, April 16, 2026
Prepared By: Dana Falk, Project Planner
Submitted By: Allison DeBusk, Community Development Director Approved By: Kelly McAdoo, City Administrator
bae urban economics
Inclusionary Housing and In-Lieu Fee Study
Prepared for the City of Santa Barbara
April 1, 2026
ATTACHMENT 1
Inclusionary Housing and In-Lieu Fee Study i

TABLE OF CONTENTS
EXECUTIVE SUMMARY ............................................................................................................... 5 Study Objectives ........................................................................................................................... 5 Key Study Findings ....................................................................................................................... 6 Study Recommendations............................................................................................................. 7 INTRODUCTION ........................................................................................................................ 12 Study Objectives ........................................................................................................................ 13 Study Organization .................................................................................................................... 13 Residential Development Trends ............................................................................................. 15 Housing Affordability ................................................................................................................. 20 EXISTING PROGRAM ................................................................................................................ 22 Inclusionary Housing Requirements for Ownership Projects ................................................. 22 Inclusionary Housing Requirements for Rental Projects ........................................................ 23 DEVELOPMENT PROTOTYPES ................................................................................................. 25 Site Selection ............................................................................................................................. 25 Baseline Prototypes .................................................................................................................. 25 Density Bonus Prototypes ......................................................................................................... 27 Adaptive Reuse ......................................................................................................................... 28 FINANCIAL FEASIBILITY ANALYSIS ........................................................................................... 31 Financial Feasibility Methodology ............................................................................................ 31 Baseline Prototypes .................................................................................................................. 33 Density Bonus Prototypes ......................................................................................................... 37 IN-LIEU FEE ANALYSES ............................................................................................................ 39 Construction Cost Analysis ....................................................................................................... 42 Fee Equivalent Analysis ............................................................................................................ 44 BENCHMARK ANALYSIS .......................................................................................................... 45 RECOMMENDATIONS .............................................................................................................. 50 A. Apply Inclusionary Housing Requirements to All Rental Projects with 5+ units ............... 51 B. Maintain Current Inclusionary Housing Requirements ...................................................... 51 Inclusionary Housing and In-Lieu Fee Study ii
C. Update the In-Lieu Fee Rate for Rental Projects ................................................................ 54 D. Set an In-Lieu Fee Rate for Ownership Projects ................................................................. 55 E. Set a Lower In-Lieu Fee Rate for “Small” Projects .............................................................. 55 F. Count Rental Inclusionary Units as Bonus Density ............................................................. 56 G. Consider Options for In-Lieu Fee Payment to Fulfill Inclusionary Requirements ............. 57 H. Simplify In-Lieu Fee Calculations for Ownership Projects .................................................. 60 I. Implement Automatic Annual In-Lieu Fee Rate Adjustments .............................................. 60 J. Adjust Target AMI for Moderate-Income Households .......................................................... 62 APPENDIX A: ASSUMPTIONS FORMULAS ................................................................................ 63 APPENDIX B: INPUT FROM PRACTITIONERS ............................................................................ 77 APPENDIX C: RESIDENTIAL PRO-FORMAS ............................................................................... 81 APPENDIX D: RESIDENTIAL NEXUS ANALYSIS ....................................................................... 100 APPENDIX E: OVERVIEW OF IMPLAN ..................................................................................... 113

Inclusionary Housing and In-Lieu Fee Study iii

LIST OF TABLES
Table 1: Recommendations for Updates to Existing Program ....................................................... 8 Table 2: Multifamily Market Overview, Built 2017+, City of Santa Barbara ...............................18 Table 3: Affordability of New Market-Rate Residential Units by Target AMI ...............................20 Table 4: Summary of Residential Prototypes, Baseline and Density Bonus...............................30 Table 5: Summary of Residential Development Feasibility, Existing Program ...........................35 Table 6: Summary of Residential Development Feasibility, Baseline vs SDBL ..........................38 Table 7: Spread of In-Lieu Fee Rates by Methodology for Rental Projects with 10+ units........41 Table 8: Spread of In-Lieu Fee Rates by Methodology for Ownership Projects with 10+ units.41 Table 9: In-Lieu Fee Rates by Construction Cost Analysis ...........................................................43 Table 10: In-Lieu Fee Rates by Fee Equivalent.............................................................................44 Table 11: Recommendations for Updates to Existing Program...................................................50 Table 12: City of Santa Barbara Income Limits, effective April 2025.........................................63 Table 13: Multifamily Market Overview, Built 2017+, City of Santa Barbara.............................64 Table 14: Sales Prices in Newer (2007+) Condominiums, City of Santa Barbara .....................64 Table 15: Maximum Rents for Low- and Moderate-Income Households....................................65 Table 16: Maximum Sales Prices by Income Level, City of Santa Barbara, 2025 .....................66 Table 17: Utility Allowance Table, City of Santa Barbara, 2025..................................................67 Table 18: Median 2-br Condominium Sales Price, Q1 2025, City of Santa Barbara.................69 Table 19: LIHTC Completed Project Sample for Construction Cost.............................................74 Table 20: Comparable Land Sales, Santa Barbara......................................................................76 Table 21: Income Required to Rent New Multifamily Units (built in 2017 or later) in Santa Barbara..........................................................................................................................................101 Table 22: Income Required to Purchase New Market-Rate Units in Santa Barbara................102 Table 23: Worker Household Income Level by Industry of Employment, Santa Barbara County .......................................................................................................................................................104 Table 24: Jobs and Worker Household Generation by Income Level from New Multifamily Rental Housing..............................................................................................................................106 Table 25: Jobs and Worker Household Generation by Income Level from New Ownership Housing..........................................................................................................................................107 Table 26: Summary of Induced Housing Need per 100 Units by Residential Development Type by Income Category ......................................................................................................................108 Table 27: Affordable Housing Financing Gaps, Santa Barbara, 2025......................................110 Table 28: Nexus-Based Fee Rates for Market-Rate Residential Units......................................112

Inclusionary Housing and In-Lieu Fee Study iv

LIST OF FIGURES
Figure 1: Annual Permitted Units in Multiunit Projects, City and Santa Barbara County...........16 Figure 2: Multifamily Asking Rent per Unit, Q1 2018 to Q1 2025, City of Santa Barbara ........18 Figure 3: Theoretical Rental In-Lieu Fee Rate per net square foot, applied to Prototype V.......46 Figure 4: Financial Feasibility under Existing Program, Prototype I: Ownership Townhome Prototype .........................................................................................................................................83 Figure 5: Financial Feasibility, Prototype I with Recommended Small Project In-Lieu Fee $35.00/sf........................................................................................................................................84 Figure 6: Financial Feasibility under Existing Program, Prototype II: Ownership Condominium Prototype .........................................................................................................................................85 Figure 7: Financial Feasibility, Ownership Prototype II: Recommended Option G1 ...................86 Figure 8: Financial Feasibility under Existing Program, Prototype III: Rental Townhome Prototype .........................................................................................................................................87 Figure 9: Financial Feasibility, Rental Prototype III: Recommended Small Project In-Lieu Fee $35.00/sf........................................................................................................................................88 Figure 10: Financial Feasibility under Existing Program, Prototype IV: Rental Mixed-Use Prototype .........................................................................................................................................89 Figure 11: Financial Feasibility, Rental Prototype IV: Hypothetical 15% Moderate-Income Requirement ...................................................................................................................................90 Figure 12: Financial Feasibility, Rental Prototype IV: Recommendation F (Count Rental Inclusionary as Bonus) ...................................................................................................................91 Figure 13: Financial Feasibility, Rental Prototype IV: 10% Moderate-Income w/ Recommended Target 110% AMI ............................................................................................................................92 Figure 14: Financial Feasibility under Existing Program, Prototype V: Rental Mixed-Use Large Prototype .........................................................................................................................................93 Figure 15: Financial Feasibility, Rental Prototype V: Recommended In-Lieu Fee $50.00/sf....94 Figure 16: Financial Feasibility, Rental Prototype V: Recommendation F (Count Rental Inclusionary as Bonus) ...................................................................................................................95 Figure 17: Financial Feasibility, Rental Prototype V: 10% Moderate-Income w/ Recommended Target 110% AMI ............................................................................................................................96 Figure 18: Financial Feasibility, Rental Prototype V: Hypothetical 15% Moderate-Income Requirement ...................................................................................................................................97 Figure 19: Financial Feasibility, Prototype SDBL-I: Rental Mixed-Use Density Bonus Prototype .........................................................................................................................................................98 Figure 20: Financial Feasibility, Prototype SDBL-II: Rental Density Bonus Prototype ................99 Inclusionary Housing and In-Lieu Fee Study | Executive Summary 5

EXECUTIVE SUMMARY
This Inclusionary Housing and In-Lieu Fee Study (“Study”) analyzes the City of Santa Barbara’s existing inclusionary housing requirements for ownership and rental housing developments (“Existing Program”) to assist the City in considering changes to the program. The Existing Program is broadly summarized as follows:
• Ownership projects with 10 or more units require 15 percent of units to be sold at prices affordable to Middle-Income households1. The ownership inclusionary units are allowed above a site’s maximum density (as bonus density). • Ownership projects of two through nine units may designate one unit as affordable to Middle-Income households1 or pay a prorated in-lieu fee based on the number and size of the proposed units.
• Ownership projects of one unit are not subject to any inclusionary housing requirements.
• Rental projects pursuant to the Average Unit-Size Density Incentive Program (“AUD Program”) with 10 or more units require 10 percent of the units onsite as affordable to Moderate-Income households.
• Rental projects pursuant to the AUD Program with five to nine units may designate one unit as affordable to Moderate-Income households or pay an in-lieu fee of $25.00 per net residential square foot.
• Rental projects pursuant to the AUD Program with four or fewer units are not subject to any inclusionary housing requirements.
• Rental projects not using the AUD Program are not subject to any inclusionary requirements.

Study Objectives
The objectives of this Study are:
• Implement goals, policies, and programs from the 2023—2031 Housing Element that encourage affordable and market rate housing units in support of the City’s Regional Housing Needs Allocation (“RHNA”).
• Identify opportunities to align the separate ownership and rental inclusionary housing requirements into one Inclusionary Housing Program.
1 For Residential Lot Subdivisions for the construction of single unit homes, units may be sold to Upper-MiddleIncome households.

Inclusionary Housing and In-Lieu Fee Study | Executive Summary 6 • Evaluate the Existing Program’s inclusionary requirements and in-lieu fee rates under current market conditions and development standards.
• Analyze the extent to which current in-lieu fee rates reflect the cost to build inclusionary units as required under the Existing Program. • Identify in-lieu fee rates that support the City’s Local Housing Trust Fund for affordable housing development while not negatively impacting the financial feasibility of new market-rate residential development.
• Address administration difficulties with the Existing Program to align fee calculations, fee adjustments, and other local methodologies with industry best practices. • Communicate potential alternatives to the Existing Program with respect to financial feasibility, such as use of State Density Bonus Law (“SDBL”) and the availability of waivers and concessions.

Key Study Findings
Through the analysis in this Study, several key findings were identified that informed the recommendations. Key findings relate to in-lieu fee rates, calculation methodologies, and the financial feasibility of residential development projects.

Permitted Inclusionary Housing Units and Collected In-Lieu Fees The inclusionary housing requirements have successfully created affordable housing units for Moderate- and Middle-Income households and have generated funds used to support affordable housing from collected in-lieu fees.

In-Lieu Fees and Inflation
The in-lieu fee rate for AUD Program rental projects has not been updated since adoption of the rental inclusionary housing requirement in July 2019. This indicates the collected in-lieu fee payments have not kept pace with the cost to construct inclusionary units that are funded by these collected fees. Had the fee rate been indexed for inflation, the current in-lieu fee would be approximately $31.72/sf.2
Multiple and Complex In-Lieu Fee Calculations Methods
The City uses a variety of calculation methods to determine in-lieu fee payment amounts depending on a project’s tenure. In particular, the method for ownership projects is complex and could be more effectively administrated if aligned with fee calculations for rental projects, 2 Estimate based on the Consumer Price Index for All Urban Consumers (CPI-U) for the “Pacific” region between July 2019 and September 2025.

Inclusionary Housing and In-Lieu Fee Study | Executive Summary 7 as is done in other cities. In-most jurisdictions surveyed, in-lieu fees for both ownership and rental projects are charged on a per residential square foot basis, applied to the entirety of the project.

Financial Feasibility Challenges under Existing Program This Study evaluated the financial feasibility of local development projects via the preparation of static pro-forma models. Overall, this Study found that all residential development prototypes are infeasible under the Existing Program. Smaller projects of less than 10 units tend to be less feasible on a per square foot basis than larger projects with 10 or more units.

As financial feasibility is challenging for development in the current economic climate, the City has seen an uptick in the number of projects utilizing State Density Bonus Law (“SDBL”), as it improves financial feasibility in the studied development prototypes. Applicants utilizing SDBL are also entitled to concessions and incentives as defined under State law, which allow applicants to deviate from design standards and/or development regulations.

Study Recommendations
The key findings inform 10 recommendations to update the Existing Program. The recommendations fall into three major categories: program-related, policy-related, and administration-related.
• Program-related recommendations are updates to the Existing Program requirements, such as in-lieu fee rates, citywide applicability, and recalibrated requirements for large and small projects.
• Policy-related recommendations are updates designed to encourage housing development and provide in-lieu fee payment options.
• Administration-related recommendations are updates designed to simplify and clarify functions associated with administering the Existing Program.

Inclusionary Housing and In-Lieu Fee Study | Executive Summary 8 Table 1: Recommendations for Updates to the Existing Program Program-Related Policy-Related Administration-Related
A. Apply Inclusionary Housing
Requirements to All Rental
Projects with 5+ units
B. Maintain Current
Inclusionary Housing
Requirements
C. Update the In-Lieu Fee Rate
for Rental Projects with 10+
units
D. Set an In-Lieu Fee Rate for
Ownership Projects with 10+
units
E. Set a Lower In-Lieu Fee Rate
for “Small” Rental and
Ownership Projects
F. Count Rental Inclusionary
Units as Bonus Density
G. Consider Options for InLieu Fee Payments to Fulfill Inclusionary Requirements
G.1. Consider In-Lieu
Fee Payment for All
Fractional
Inclusionary
Requirements
G.2. Consider In-Lieu
Fee Payment for All
Inclusionary
Requirements
H. Simplify In-Lieu Fee
Calculations for Ownership
Projects
I. Implement Automatic
Annual In-Lieu Fee Rate
Adjustments
J. Adjust Target AMI for
Moderate-Income Rents
from 100% to 110%
The recommendations are structured to work together in updating the Existing Program, although each recommendation can proceed as a standalone change. Incorporating all recommendations from the Study into the inclusionary housing ordinance would have the greatest impact on generating inclusionary housing units and in-lieu fee payments while balancing development feasibility.

Program-Related Recommendations
The five program-related recommendations update the variable requirements for inclusionary housing while the Existing Program structure remains unchanged.

A. Apply Inclusionary Housing Requirements to All Rental Projects with 5+ units This Study recommends expanding the inclusionary housing requirements to all rental projects of five or more units developed in the City, not solely those using the AUD Program. This would mean that non-AUD rental projects inland and all rental projects in the coastal zone would be subject to the inclusionary housing requirements.

Inclusionary Housing and In-Lieu Fee Study | Executive Summary 9 B. Maintain Current Inclusionary Housing Requirements
• Rental Projects
This Study recommends maintaining the Existing Program’s inclusionary housing percentage and income category for rental projects (i.e., no change to the current requirement that 10 percent of units in rental projects be set aside for ModerateIncome households). • Ownership Projects
This Study recommends maintaining the Existing Program’s inclusionary housing percentage and income categories for ownership projects (i.e., no change to the current requirements that 15 percent of units in ownership projects be set aside for Middle-Income or Upper Middle-Income, as appropriate, households).

C. Update the In-Lieu Fee Rate for Rental Projects with 10+ Units This Study recommends setting the in-lieu fee rate for rental projects at $50.00 per net square foot of residential space for fractional unit requirements in rental projects with 10 or more units.

This recommendation would help the City account for construction cost increases since adoption of the $25.00 per net sf fee in 2019, and more accurately reflect the cost of constructing an inclusionary unit with collected funds.

D. Set an In-Lieu Fee Rate for Ownership Projects with 10+ Units This Study recommends setting the in-lieu fee rate for ownership projects to $50.00 per net square foot of residential space for fractional unit requirements in ownership projects of 10 or more units.

Setting the ownership in-lieu fee rate based on the net square footage of the proposed project would align the ownership requirements with the existing rental inclusionary housing requirements and methodologies. This also supports simplifying administration of the Existing Program.

E. Set a Lower In-Lieu Fee Rate for “Small” Rental and Ownership Projects This Study recommends setting a lower in-lieu fee rate of $35.00 per net square foot for “small” ownership and rental projects with fewer than ten units. Small projects face financial feasibility challenges when compared to larger projects with 10 or more units, as described in the Financial Feasibility Analysis chapter, due to factors such as reduced economies of scale.

As such, this Study does not recommend the $50.00 per net square foot fee rate that is being proposed for larger projects.

Inclusionary Housing and In-Lieu Fee Study | Executive Summary 10 Policy-Related Recommendations
There is one policy-related recommendation and one option to consider, both intended to encourage housing development.

F. Count Rental Inclusionary Units as Bonus Density
This Study recommends that the City exclude inclusionary units from maximum density calculations for rental projects. This recommendation would align the ownership and rental inclusionary housing requirements to count all inclusionary units as bonus density (i.e., ownership units in the Existing Program are already entitled a bonus density for on-site units).

G. Consider Options for In-Lieu Fee Payments to Fulfill Inclusionary Requirements This Study recommends the City consider expanding compliance options for inclusionary housing requirements with in-lieu fee payments. This recommendation proposes two options that are standalone; only one option can be implemented.

Option G.1 Consider In-Lieu Fee Payment for All Fractional Inclusionary Requirements Consider allowing in-lieu fee payment for all fractional inclusionary requirements, regardless of the total number of units proposed in the project or the tenure of the units (i.e., on projects with 10 or more units, do not require an additional unit for fractions of 0.5 or more). This recommendation would apply the in-lieu fee rates proposed in Recommendations C (rental projects) and D (ownership projects).

Option G.2 Consider In-Lieu Fee Payment for All Inclusionary Requirements Consider allowing all inclusionary housing requirements to be fulfilled with an in-lieu fee payment, without requiring any onsite inclusionary units. This recommendation would apply an in-lieu fee rate up to $72.00 per square foot.

Administration-Related Recommendations
The three administration-related recommendations simplify and clarify processes and calculations used to administer the Existing Program.

H. Simplify In-Lieu Fee Calculations for Ownership Projects This Study recommends simplifying the methodology for calculating in-lieu fee amounts for ownership projects by aligning it with the methodology in place for rental projects. This recommendation would apply in-lieu fee requirements for ownership projects on a net residential square foot basis, rather than a per-unit basis.

I. Implement Automatic Annual In-Lieu Fee Rate Adjustments This Study recommends that the City implement a system for automatically adjusting the recommended in-lieu fee rates annually to help account for inflationary increases in the cost of construction.

Inclusionary Housing and In-Lieu Fee Study | Executive Summary 11 J. Adjust Target AMI for Moderate-Income Rents from 100% to 110% This Study recommends adjusting the Target Income for maximum rent calculations for Moderate-Income inclusionary units. This recommendation would align the City with methodology used by the State by applying a target of 110 percent of AMI for ModerateIncome rent calculations.

Inclusionary Housing and In-Lieu Fee Study | Introduction 12

INTRODUCTION
The City of Santa Barbara is situated in one of the highest-cost regions in the country, where market-rate housing is often unaffordable3 for Lower-, Moderate-, and Middle-Income households. The City has sought to address these challenges through a variety of policies, programs, and actions over the years, including inclusionary housing requirements for some units in new market-rate housing developments to be made affordable.

This Inclusionary Housing and In-Lieu Fee Study (“Study”) analyzes the existing inclusionary housing requirements for ownership and rental housing developments (“Existing Program”) to assist the City of Santa Barbara in considering changes to the program. The Existing Program is broadly summarized as follows:
• Ownership projects with 10 or more units require 15 percent of units to be sold at prices affordable to Middle-Income4 households. The ownership inclusionary units are allowed above a site’s maximum density (as bonus density). • Ownership projects of two through nine units may designate one unit as affordable to Middle-Income households3 or pay a prorated in-lieu fee based on the number and size of the proposed units.
• Ownership projects of one unit are not subject to any inclusionary housing requirements.
• Rental projects pursuant to the Average Unit-Size Density Incentive Program (AUD Program)5 with 10 or more units require 10 percent of the units onsite as affordable to Moderate-Income households.
• Rental projects pursuant to the AUD Program with five to nine units may designate one unit as affordable to Moderate-Income households or pay an in-lieu fee rate of $25.00 per net residential square foot.
• Rental projects pursuant to the AUD Program with four or fewer units are not subject to any inclusionary housing requirements.
• Rental projects not utilizing the AUD Program are not subject to inclusionary housing requirements.
3 Housing costs are considered affordable if they do not exceed 30 percent of a household income, as established by the US Department of Housing and Urban Development (HUD). 4 For Residential Lot Subdivisions for the construction of single unit homes, units may be sold to Upper-MiddleIncome households. 5 When the AUD Program was first adopted in 2013, the City could not require inclusionary units for rental housing due to a 2009 court decision. In response to changes in state law, an inclusionary requirement for AUD rental projects was added in 2019.

Inclusionary Housing and In-Lieu Fee Study | Introduction 13 This Study helps the City of Santa Barbara implement programs from the 2023—2031 Housing Element. Each of these programs calls for economic feasibility analyses to support associated amendments to the zoning ordinance, as well as meet Housing Element Goal #2: Prioritize Affordable Housing and Goal #8: Fund Affordable Housing. • Program HE-12: Prioritize Deed-Restricted Affordable Housing • Program HE-13: Evaluate Inclusionary Housing Ordinance Study Objectives
The objectives of this Study are:
• Implement goals, policies, and programs from the 2023—2031 Housing Element that encourage affordable and market rate housing units in support of the City’s Regional Housing Needs Allocation (“RHNA”).
• Identify opportunities to align the separate ownership and rental inclusionary housing requirements into one Inclusionary Housing Program.
• Evaluate the Existing Program’s inclusionary requirements and in-lieu fee rates under current market conditions and development standards.
• Analyze the extent to which current in-lieu fee rates reflect the cost to build inclusionary units as required under the Existing Program. • Identify in-lieu fee rates that support the City’s Local Housing Trust Fund for affordable housing development while not negatively impacting the financial feasibility of new market-rate residential development.
• Address administration difficulties with the Existing Program, to align fee calculations, fee adjustments, and other local methodologies with industry best practices. • Communicate potential alternatives to the Existing Program with respect to financial feasibility, such as use of State Density Bonus Law (“SDBL”) and the availability of waivers and concessions.

Study Organization
The Study is organized as follows:
• The Introduction chapter outlines the objectives and framework for the Inclusionary Housing and In-Lieu Fee Study, residential development trends, and the current state of housing affordability in the City of Santa Barbara.

Inclusionary Housing and In-Lieu Fee Study | Introduction 14 • The Existing Program chapter provides an overview of the City’s Existing Program and key findings related to recommended changes to the Existing Program. • The Development Prototypes chapter outlines a series of baseline multi-unit residential development prototypes consisting of two ownership prototypes and three rental prototypes, all of varying size and density. Two additional prototypes are versions of the baseline prototypes using State Density Bonus Law (California Government Code Sections §65915 - 65918).
• The Financial Feasibility Analysis chapter evaluates the financial feasibility of the prototypes defined in the previous chapter to explore the extent to which inclusionary requirements are commensurate with local market conditions and development standards. This chapter also compares the financial feasibility of prototypes using State Density Bonus Law.
• The ln-Lieu Fee Analyses chapter analyzes potential changes to the in-lieu fees calculation methods and rates. The Construction Cost analysis calculates potential inlieu fee rates based on the cost to construct an inclusionary unit under the City’s Existing Program requirements. The Fee Equivalent analysis calculates in-lieu fee rates equal to the net impact to the project of providing onsite inclusionary units as required under the Existing Program.
• The Benchmark Analysis chapter provides an overview of inclusionary housing requirements in jurisdictions that have comparable market conditions and are in proximity to Santa Barbara.
• The Recommendations chapter presents policy options and recommendations based on the analysis in the preceding chapters.
• Appendix A: Assumptions and Formulas
Appendix A provides background data and information that informs assumptions related to maximum affordable rent and sales prices, utility allowances, and fee calculations. This appendix includes formulas in the pro-formas used to analyze financial feasibility.
• Appendix B: Input from Practitioners
Appendix B summarizes community engagement that informed this Study, conducted as a series of one-on-one interviews with professionals in the Santa Barbara development community. The interviews focused on detailed assumptions for the financial feasibility analysis, and solicited general feedback on the impact that Inclusionary Housing and In-Lieu Fee Study | Introduction 15 changes to the City’s Existing Program might have on development feasibility in Santa Barbara.
• Appendix C: Residential Pro-Formas
Appendix C provides detailed pro-formas for the residential development prototypes.

This appendix explains the key assumptions that informed the residential pro-formas. • Appendix D: Residential Nexus Analysis
Appendix D provides a nexus analysis for the in-lieu fee that quantifies the estimated relationship between new market-rate residential development in Santa Barbara, the need for workforce housing, and the public cost to construct housing that is affordable to lower-income workers. A nexus analysis is not necessarily required to establish an in-lieu fee under recent state legislation, but it is a basis for evaluating potential in-lieu fee amounts.
• Appendix E: Overview of IMPLAN
Appendix E provides additional clarification on the IMPLAN input-output model that informed the Residential Nexus Analysis.

Residential Development Trends
Despite strong fundamentals including high rents and sales prices, as well as a lack of development impact fees when compared to neighboring communities, residential development in Santa Barbara faces multiple headwinds. Beyond the local and regional context, state and federal factors impact residential development feasibility. Federally, high interest rates implemented since 2022 have raised the cost of debt and equity, while more recently imposed tariffs on construction materials increase the cost to build, all of which contribute to higher development costs overall. Since 2020, the cost of construction materials has climbed by more than 40 percent, according to Associated Builders and Contractors, a national trade association that releases reports based on data from the Bureau of Labor Statistics.6 Additionally, tariffs on steel, aluminum, and lumber further increase the cost of construction materials. Regionally, the rebuilding effort associated with the Los Angeles area fires may also contribute to increased local development costs due to regional demand for labor and materials.

Development is inherently risky, and the increased perception of risk from high interest rates, uncertain tariffs on materials, and regional need for construction labor has required higher return on investment for projects to proceed.
6 https://www.independent.com/2025/04/30/trumps-tariff-war-has-santa-barbara-contractors-on-alert/ Inclusionary Housing and In-Lieu Fee Study | Introduction 16 Local Trends
Looking at one-year residential trends for all of Santa Barbara County, the total number of permitted units in multi-unit residential projects for all jurisdictions and the County increased from 179 in 2023 to 368 in 2024, according to Annual Progress Report (APR) data published by the California Department of Housing and Community Development (HCD). Comparatively, permitted units in multi-unit residential projects in the City of Santa Barbara remained consistent from 2023 to 2024, increasing by just one unit (89 to 90), with an increase to 109 permitted units in 2025. The County rezoned 28 sites for higher density residential development to meet their RHNA. Many of the County sites are large acreage and able to accommodate hundreds of units in a single project. By contrast, the City of Santa Barbara was able to meet RHNA using existing zoning and redevelopment of relatively small sites.

Figure 1: Annual Permitted Units in Multi-unit Projects, City of Santa Barbara and Santa Barbara County
Note: Permitted units in structures of two or more units Source: Annual Progress Report (APR) data published by HCD, 2018-2024 Increasingly, multi-unit residential projects are utilizing SDBL in the City of Santa Barbara. In the current 2023—2031 Housing Element Planning cycle7, 409 units have been permitted in 21 multi-unit residential projects, as of December 31, 2025. Of these, almost half of the permitted units (174 units in six projects) are using SDBL. This aligns with legislative changes by the State to SDBL.
7 The 2023-2031 Housing Element planning cycle counts units issued a building permit after June 30, 2022. The most recent housing production numbers are through December 31, 2025. 0 100
200
300
400
500
600
700
800
900
1000
2018 2019 2020 2021 2022 2023 2024
City of Santa Barbara Santa Barbara County (All jurisdictions) Inclusionary Housing and In-Lieu Fee Study | Introduction 17 Rental Data
This Study evaluated local market conditions for newly-built (2017 – first quarter of 2025) rental residential construction in the City of Santa Barbara using data from CoStar. Key highlights from the rental evaluation include:
• Approximately 387 dwelling units have been constructed across 12 properties between 2017 and 2025.
• The average unit size is approximately 790 square feet across all unit types (studio, one-, two-, and three-bedroom).
• Two-bedroom units have been the most prolific in recent construction, making up 64 percent of all new units. Studio and one-bedroom units are the next most common new unit type (17 percent and 15 percent, respectively). The remaining four percent of new units are three-bedroom units.
• In early 2025 (January-March), studio units had an average monthly rent of $3,559, one-bedroom units had rents of $3,731 per month, two-bedroom units had rents of $4,360 per month, and three-bedroom units had rents of $4,744.

The average asking rents per square foot for newly-built (2017-2025) rental units informed the feasibility analysis and recommendations because this Study focuses on the financial feasibility of new residential development.

Inclusionary Housing and In-Lieu Fee Study | Introduction 18 Table 2: Multifamily Market Overview, Newly-Built 2017-2025, City of Santa Barbara Source: CoStar, 2025; BAE, 2025
As shown in Figure 2 below, average asking rents have steadily increased over the past few years, rising from $3,271 per month for all bedroom types in early 2018 to $4,129 per month in early 2025, an increase of 26 percent.

Figure 2: Multifamily Asking Rent per Unit, Q1 2018 to Q1 2025, City of Santa Barbara
Note: Includes all bedroom counts.

Source: CoStar, 2025; BAE, 2025
South Coast Rent Survey
The City of Santa Barbara annually publishes a South Coast Rent Survey in April to provide an overview of the local rental housing market.

City of Santa Barbara
All Unit
Studio 1 BR 2 BR 3 BR Types
Inventory, Q1 2025 (units) 66 58 248 15 387
% of Units 17.1% 15.0% 64.1% 3.9% 100.0%
Occupied Units 64 55 220 14 353
Vacant Units 2 3 28 1 34
Vacancy Rate 3.0% 5.2% 11.3% 6.7% 8.8%
Avg. Unit Size (sf) 557 661 852 1,020 790
Avg. Asking Rents, Q2 2024 - Q1 2025
Avg. Asking Rent per unit, Q1 2025 $3,559 $3,731 $4,360 $4,744 $4,129 Avg. Asking Rent per unit, Q2 2024 $3,619 $3,631 $4,085 $4,544 $3,943 % Change Q2 2024 - Q1 2025 -1.7% 2.8% 6.7% 4.4% 4.7%
Avg. Asking Rent psf, Q1 2025 $6.74 $5.67 $5.15 $4.65 $5.39 Avg. Asking Rent psf, Q2 2024 $6.86 $5.52 $4.82 $4.45 $5.15 $3,271 $3,422 $3,425 $3,463 $3,651 $3,822 $3,890 $4,129 $0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
$4,500
Q1 2018 Q1 2019 Q1 2020 Q1 2021 Q1 2022 Q1 2023 Q1 2024 Q1 2025 Inclusionary Housing and In-Lieu Fee Study | Introduction 19 Similar to the CoStar data used in this Study, the Rent Survey analyzes median rents by housing type and number of bedrooms. The two methodologies diverge by distinguishing data by building age; CoStar further segregates unit rents by building age to isolate rents in newlybuilt buildings while the Rent Survey does not distinguish asking rents by structure age.

Because the rents from the South Coast Rent Survey combine all units regardless of age into rent averages, the rents are lower than those available from CoStar for newly-built residential units. For example, the 2025 Rent Survey has an average monthly rent of $3,836 for a twobedroom apartment while CoStar data for newly-built two-bedroom apartments has a monthly rent of $4,360—a monthly difference of more than $500 for a newly-constructed, two-bedroom unit.

As this Study focuses on the financial feasibility of new residential development, CoStar data for newly-built units is used for all analysis to more accurately reflect asking rents for the newly-built units.

Ownership Data
This Study uses sales data from Redfin to evaluate recent market conditions (December 2023- December 2024) for ownership projects in the City of Santa Barbara. Key highlights from the ownership data include:
• Over 100 condominiums sold (108 transactions) within the City of Santa Barbara during the 12-month period from December 2023 through December 2024. • The median sales price of a two-bedroom condominium was $1,129,750, excluding deed-restricted units. The median unit size of these two-bedroom units was approximately 1,358 square feet.
• The median sales price of a three-bedroom condominium was $1,390,000. Studio and one-bedroom condominiums sold for a median price of $860,000.

The median sale price of a two-bedroom condominium unit informs the in-lieu fee rate for ownership projects.

For ownership pro-formas, BAE isolated a subset of two-bedroom condominium sales in condominium buildings constructed after 2007 to inform the in-lieu fee calculation. The sample size of newer condominium buildings is relatively small due to lack of construction. The median sales price of a two-bedroom condominium unit in a newer (2007+) building was $1,862,000. This is a price of approximately $1,117 per square foot.

Inclusionary Housing and In-Lieu Fee Study | Introduction 20 Housing Affordability
In the City of Santa Barbara, market-rate housing is often unaffordable for Lower-, Moderate-, and Middle-Income households. Housing costs are considered affordable if a household’s housing costs do not exceed 30 percent of their household income, as established by the US Department of Housing and Urban Development (HUD).

HUD and the California Department of Housing and Community Development (HCD) categorize households based on percentages of the Area Median Income (AMI). Both the state and the City utilize a target AMI percentage when calculating affordable sale prices and monthly rents for each income category. In all instances, the City’s target AMI percentage is lower than the upper percentage amount for each income category. See Appendix A: Assumptions and Formulas for more about AMI and affordable housing sale price and rent calculations.

Table 3 below compares housing costs for Moderate- and Middle-Income households, the two AMI categories served by the Existing Program’s inclusionary requirements. The table shows the housing costs for newly-built market-rate units in the City of Santa Barbara (data from Table 2) compared to affordable housing costs calculated using data from HUD and the City of Santa Barbara. The affordability of newly-built market-rate units for households of all income groups is challenging, since housing costs for all market-rate units exceed the maximum affordable housing costs in all instances.

For example, a Moderate-Income household of three can afford maximum housing costs of $2,549 per month (rent and utility costs equal to 30% of household income). However, the average market-rate housing costs for new two-bedroom unit is $4,535 per month (marketrate rent and utility costs). This calculates to an affordability gap of $1,986 per month (difference between affordable housing costs and market-rate housing costs).

Table 3: Affordability of New Market-Rate Residential Units by Target AMI Notes:
(a) Displays average asking rents by unit size in newly-constructed buildings (2017-2025) within the City of Santa Barbara. (b) Utility allowance effective Jan. 2025 published by the Housing Authority of the City of Santa Barbara. 1 Person 2 Person 3 Person 4 person
(Studio) (1 bed) (2 bed) (3 bed)
Market Rate Rent (a) $3,559 $3,731 $4,360 $4,744
Utility Costs (b) $97 $134 $175 $241
Total Market Rate Housing Cost (c) $3,656 $3,865 $4,535 $4,985 Moderate-Income (80-120% AMI)
Household Income (120% of Median) (d) $95,172 $108,768 $122,364 $135,960 Max. Affordable Monthly Housing Cost (100% Target) (e) $1,700 $2,124 $2,549 $2,833 Amount Above (Below) Market Rate Housing Cost ($1,956) ($1,741) ($1,986) ($2,152) Middle-Income (120-160% AMI)
Household Income (160% of Median) (d) $126,896 $145,024 $163,152 $181,280 Max. Affordable Monthly Housing Cost (120% Target) (e) $2,039 $2,549 $3,059 $3,399 Amount Above (Below) Market Rate Housing Cost ($1,617) ($1,316) ($1,476) ($1,586) Inclusionary Housing and In-Lieu Fee Study | Introduction 21 Utility allowances include: "Basic" Electric, Gas, Water, Sewer, and Trash. (c) Housing Cost equals the Monthly Rents plus the Utility Costs. (d) City of Santa Barbara Income Limits published April 2025, based on HUD AMI of $113,300. (e) Rent Limits effective April 1, 2025, published by the City of Santa Barbara.

Source: City of Santa Barbara, 2025.

The relationship between production of housing units and the increased need for affordable housing in the City was established in the 2017 Nexus and Economic Study that informed adoption of the rental inclusionary housing requirements. This relationship between construction of new market-rate residential units and the need for affordable housing is explained and re-analyzed in Appendix D: Residential Nexus Analysis. The residential nexus analysis assumes that new households in Santa Barbara will spend some of their money within the local economy, thereby supporting employment for new workers, a portion of which will need affordable housing.

Inclusionary Housing and In-Lieu Fee Study | Existing Program 22

EXISTING PROGRAM
The City’s inclusionary housing requirements (“Existing Program”) apply to ownership residential development projects as well as rental residential development projects utilizing the Average Unit Size Density Incentive Program (AUD Program). Ownership inclusionary requirements focus on Middle-Income and Upper-Middle-Income households, while rental inclusionary requirements focus on Moderate-Income households.

The inclusionary housing requirements have successfully created affordable housing units for Moderate- and Middle-Income households and have generated funds used to support affordable housing from collected in-lieu fees.

Inclusionary Housing Requirements for Ownership Projects The ownership inclusionary housing requirements apply to all ownership projects (SBMC Chapter 30.160 and Chapter 28.43). At the time of ordinance adoption in 2004, the lack of housing options for Middle- and Upper-Middle-Income households was considered a major issue affecting the City, as these households struggled to own homes in the local market and are not served by local, state, or federal affordable housing programs.

The ownership inclusionary requirement applies to newly built units and to ownership units created though conversion to condominiums. Ownership projects with 10 or more units must provide 15 percent of units at sale prices affordable to Middle-Income households. Ownership projects with two through nine units are required to provide one unit as an owner-occupied Middle-Income unit or pay a prorated in-lieu fee based on the number and size of the proposed units. Ownership projects with one unit have no inclusionary housing requirement. The ownership inclusionary units can be provided as bonus units that are allowed above the density allowed (bonus density).

The target affordability for ownership inclusionary units is Middle-Income households with a target income of 120 percent AMI. Projects subdividing land to create detached ownership units have similar inclusionary housing requirements focused on Upper-Middle Income households with a target affordability of 160 percent AMI.

Residential lot subdivisions to create 10 or more parcels, where individual houses are not proposed to be constructed, are required to pay an in-lieu fee amount equal to 15 percent of the number of units that could be permitted on the lots. Residential lot subdivisions creating two to nine parcels, where individual houses are not proposed to be constructed, can either provide an owner-occupied Middle-Income unit or pay an in-lieu fee amount prorated for the number of units that could be permitted on the lots. Alternatively, residential lot subdivision projects have the option to utilize alternative compliance means such as offsite units, land Inclusionary Housing and In-Lieu Fee Study | Existing Program 23 dedication, or any combination proposed by an applicant and approved by the Planning Commission.

Inclusionary Housing Requirements for Rental Projects
The rental inclusionary housing requirements apply only to rental projects using the AUD Program (SBMC Section 30.150.110). Adopted much later than the ownership inclusionary housing requirements, rental inclusionary was added to the AUD Program in 2019 to require inclusionary units for Moderate-Income households (targeting 100 percent AMI). Rental inclusionary requirements address a need for Moderate-Income units that was not being met by market-rate development or nonprofit housing entities at the time of ordinance adoption.8 Inclusionary housing requirements for AUD Program rental projects with 10 or more units is 10 percent of units onsite at rents affordable to Moderate-Income households. AUD Program rental projects with five to nine units may build an onsite unit affordable to Moderate-Income households or pay a prorated in-lieu fee of $25.00 per net residential square foot. AUD Program rental projects consisting of four or fewer units are not subject to the inclusionary housing requirement. Rental inclusionary units are required within the allowed site density and are not bonus density units.

There are no inclusionary housing requirements for rental projects in the coastal zone or rental projects that use base density (i.e. that are not proposed under the AUD Program).

In-Lieu Fee Calculations
In-lieu fee calculation methods differ depending on project tenure. Having two calculation methods presents complication in administration for staff and uncertainty for project applicants.

In-lieu fee calculations for rentals are more straightforward than ownership calculations.

Rental in-lieu fee amounts are calculated based on a project’s total units and residential square footage. Rental projects use a standardized in-lieu fee rate of $25.00 per net square foot. See Appendix A for the calculation formula and an example in-lieu fee amount calculation.

In-lieu fee calculations for ownership projects are more complex and must be completely recalculated by staff for every ownership project. The in-lieu fee amount is informed by sale prices of two-bedroom condominium units in the four most recent calendar quarters, which requires new sales data for each calculation. Additionally, the in-lieu fee calculation accounts 8 In 2017-2019, the research and analysis of residential development trends found that market-rate developments using the AUD Program were producing above-moderate income units and nonprofit housing providers were developing lower-income units.

Inclusionary Housing and In-Lieu Fee Study | Existing Program 24 for average unit size (square feet) of the proposed project units, difference in sale price of an income-restricted unit to a market-rate unit, developer profit, and the total number of units proposed in the project. See Appendix A for the calculation formula and an example in-lieu fee amount calculation.

All inclusionary housing requirements are calculated based on a project’s size. This “sliding scale” approach aligns the amount of onsite inclusionary units and/or the in-lieu fee amount to the size of a project. Smaller projects with fewer units have a lower inclusionary housing requirement than larger projects because the inclusionary requirement is a percentage of total units. By default, 10 (rental) or 15 (ownership) percent of fewer total units will always result in a lower inclusionary housing requirement than projects with a higher quantity of units. For example, a rental project of 11 units has an inclusionary requirement of 1.1 equating to one onsite unit and a fractional in-lieu fee amount for the remaining 0.1. On the opposite end of the spectrum, a rental project of 94 units has an inclusionary requirement of 9.4 equating to nine onsite units and a fractional in-lieu fee amount for the remaining 0.4. Additionally, the inlieu fee amount is further assessed on a “sliding scale” because the building size (net square feet) affects the calculated in-lieu fee amount.

In benchmarked jurisdictions, in-lieu fee amounts for inclusionary housing requirements are typically charged on a per residential square foot basis, such as rental in-lieu fee amounts in the City. See the Benchmark Analysis chapter for more information about comparative jurisdictions and their inclusionary housing requirements.

In-Lieu Fees and Inflation
Since adopted in 2019, in-lieu fee amounts for rental units have used the same rate of $25 per square foot, which has not kept pace with inflation. While the ordinance allows for annual adjustments, it is not automatic and is tied to a source that requires a paid subscription to the Engineering News Record Building Cost Index for the City of Los Angeles.

In July 2019, the Consumer Price Index for All Urban Consumers (CPI-U) for the “Pacific” region was 105.397. In September 2025, the most recent month for which data was available, the CPI-U had risen to 133.724, for an increase of 26.9 percent.9 Had the in-lieu fee been implemented with an automatic adjustment to account for inflation based on the CPI-U for the “Pacific” region, the equivalent fee as of September 2025 would be approximately $31.72 per square foot of residential space. See the full calculation in Appendix A.
9 https://data.bls.gov/timeseries/CUUR0490SA0
Inclusionary Housing and In-Lieu Fee Study | Development Prototypes 25

DEVELOPMENT PROTOTYPES
This Study is based on a series of residential development prototypes, which are representative of existing multi-unit development in the City of Santa Barbara. Development prototypes do not reflect conditions at a specific site. The prototype assumptions are based on project information such as typical unit types from recent developments in the City, informed by staff, and refined through a series of one-on-one interviews with local development practitioners.

Site Selection
To align with development trends in the City, the development prototypes were driven by typical parcel sizes and associated zoning development standards in Medium-High Density, High Density, and Priority Housing Overlay areas.

Medium-High Density site
A parcel size of 9,000 sf (0.21 acres) is assumed in the Residential Multi-Unit (R-M) zone. The Medium-High Density tier allows for ownership and rental projects with maximum densities that range from 15 to 27 dwelling units an acre (du/acre) and maximum average unit sizes that range from 1,450 to 905 sf per unit, respectively.

High Density site
A parcel size of 15,000 sf (0.34 acres) is assumed in the Commercial General (C-G) zone. The High Density tier allows for ownership and rental projects with maximum densities that range from 28 to 36 du/acre and maximum average unit sizes that range from 1,245 sf to 970 sf per unit, respectively.

Priority Housing Overlay sites
Parcel sizes of 15,000 sf or 30,000 sf (0.34 acres and 0.69 acres, respectively) are assumed in the Commercial General (C-G) zones. The Priority Housing Overlay is available only for rental housing, employer-sponsored housing, or limited-equity housing cooperative projects and allows the highest densities in the city with maximum densities that range from 37 to 63 du/acre and maximum average unit sizes ranging from 970 to 811 sf per unit, respectively.

Baseline Prototypes
“Baseline” residential development prototypes comply with the City’s zoning standards. For the purposes of this Study, most baseline prototypes are assumed at densities just below the maximum allowed to align with methodology used in the Suitable Sites Inventory in the 2023— 2031 Housing Element. Baseline prototypes generally achieve the maximum average unit size to which they are entitled.

Inclusionary Housing and In-Lieu Fee Study | Development Prototypes 26 Lot coverage, circulation efficiencies, and other inputs were estimated based on a review of Title Sheets associated with similar projects in the City. • A prototype’s “Net Residential Area” is generally consistent with “Net Residential” or “Net Leasable” square footage and forms the basis for applying in-lieu fee rates to baseline prototypes. Net residential floor area is limited by the maximum average unit size associated with the prototype’s density under the AUD Program. • “Gross Residential Area” is estimated from summing all building area associated with the “R” code classification for residential area, along with “Non-Livable” floor area associated with Storage, Mechanical, Utility, and other categories, lending an implied circulation factor for each prototype.
• Ground-floor podiums for vehicle parking and ancillary commercial space are included in some prototypes.
• No Baseline Prototype features a building height that exceeds 48 feet. • Prototypes whose proposed roof and impervious flatwork is estimated to exceed 15,000 square feet are also presumed to comply with Tier 4 storm water management program (SWMP) requirements.

Prototype I: Ownership Townhome Prototype
Prototype I is a small ownership development on a 9,000 sf site in the Medium-High Density area with four residential units averaging 1,131 sf. All units have two bedrooms and are configured in a two-story townhome-style arrangement above private garages directly underneath each unit (three stories with a total building height of 32 feet).

The inclusionary housing requirement is satisfied with an in-lieu fee payment. With four residential units, Prototype I pays a prorated in-lieu fee amount of $96,971.

Prototype II: Ownership Prototype
Prototype II is an ownership development on a 15,000 sf site in the High Density area with 15 residential units averaging 970 sf, two of which are Middle-Income inclusionary units allowed above maximum density. The two-bedroom units are arranged across three stories atop a podium parking garage (four stories with a total building height of 45 feet).

The inclusionary housing requirement is satisfied with onsite units. Prototype II includes 15 percent of project units at prices affordable to Middle-Income households, resulting in two inclusionary units and 13 market-rate units.

Prototype III: Rental Townhome Prototype
Prototype III is a small AUD Program rental development on a 9,000 sf site in the Medium-High Density area with five residential units averaging 905 sf. There are four two-bedroom units and Inclusionary Housing and In-Lieu Fee Study | Development Prototypes 27 one three-bedroom unit configured in a townhome-style arrangement above private garages directly underneath each unit (three stories with a total building height of 32 feet).

The inclusionary housing requirement is satisfied with an in-lieu fee payment. With five residential units, Prototype III pays a prorated (0.5) in-lieu fee payment of $113,125.

Prototype IV: Rental Mixed-Use Prototype
Prototype IV is a rental development on a 15,000 sf site in the Priority Housing Overlay area with 20 residential units averaging 811 sf, two of which are Moderate-Income inclusionary units. The five one-bedroom units and 15 two-bedroom units are arranged across three stories atop a podium parking garage (four stories with a total building height of 48 feet). This prototype is mixed-use and includes 1,096 sf of commercial space on the ground floor.

The inclusionary housing requirement is satisfied with onsite units. Prototype IV includes 10 percent of project units at rental prices affordable to Moderate-Income households, resulting in two inclusionary units and 18 market-rate units.

Prototype V: Rental Mixed-Use Large Prototype
Prototype V is a rental development on a 30,000 sf site in the Priority Housing Overlay area with 43 units averaging 811 sf, four of which are Moderate-Income inclusionary units. The 11 onebedroom units and 32 two-bedroom units are arranged across three stories atop a podium parking garage (four stories with a total building height of 48 feet). This prototype is mixed-use and includes 1,869 sf of commercial space on the ground floor.

The inclusionary housing requirement is satisfied with onsite units and a fractional in-lieu fee payment. Prototype V includes 10 percent of project units at rental prices affordable to Moderate-Income households, resulting in four inclusionary units and 39 market-rate units. The prorated (0.3 units) in-lieu fee payment is $60,825.

Density Bonus Prototypes
This Study also evaluated density bonus prototypes to compare financial feasibility for projects utilizing State Density Bonus Law. The density bonus prototypes are variations on the baseline prototypes which include additional density. Similar to the baseline prototypes, density bonus prototypes were informed by review of Title Sheets associated with similar projects submitted to the City in regard to average unit size, height, and parking treatments.

Density bonus prototypes utilize additional density only and not additional building area, unless parking podiums on the ground floor are removed entirely and replaced with residential units. Evidence of this approach is borne out by projects that have eliminated parking entirely on the ground floor to accommodate bonus units, for example, rather than reduce average unit size. This also represents a conservative approach to estimating financial feasibility, as other requested concessions could have the impact of increasing buildable area if approved.

Inclusionary Housing and In-Lieu Fee Study | Development Prototypes 28 Prototype SDBL-I: Rental Mixed-Use Density Bonus Prototype Prototype SDBL-I, based on Prototype V, is a rental development on a 30,000 sf site in the Priority Housing Overlay area with 59 units averaging 614 sf. This prototype includes five units affordable to Very-Low-Income households and is eligible for a 32.5 percent density bonus (resulting density of 84 du/acre). The 15 studio units, 30 one-bedroom units, and 14 twobedroom units are arranged across three stories atop a podium parking garage (four stories with a total building height of 48 feet). This prototype is mixed-use and includes 1,869 sf of commercial space on the ground floor.

No Moderate-Income units are provided since the inclusionary housing requirement is being met by the five Very-Low-Income units for SDBL.

Prototype SDBL-II: Rental Density Bonus Prototype
Prototype SDBL-II, based on Prototype V, is a rental development on a 30,000 sf site in the Priority Housing Overlay area with 66 units averaging 811 sf. This prototype includes seven units affordable to Very-Low-Income households and is eligible for a 50 percent density bonus (resulting density 95 du/acre). The 17 studio units, 33 one-bedroom units, and 16 twobedroom units are arranged across four stories (total building height of 60 feet). No parking is provided.

No Moderate-Income units are provided since the inclusionary housing requirement is being met by the seven Very-Low-Income units for SDBL.

Adaptive Reuse
Adaptive reuse is the process of converting buildings to accommodate new uses. In contrast to development built from the ground up, which can be modeled with some degree of predictability, such as the seven development prototypes in this Study, no adaptive reuse project is alike. Building form and floorplate layout; the extent to which a building requires seismic reinforcement, fire sprinklers, potential remediation; and a host of other factors all contribute to the economic viability (or lack thereof) of a reuse to housing.

Due to the inherent difficulty in identifying a “prototypical” adaptive reuse project to test financial feasibility, this Study does not explore the financial feasibility of modified inclusionary housing requirements for adaptive reuse projects. Generally speaking, however, it should be Inclusionary Housing and In-Lieu Fee Study | Development Prototypes 29 noted that adapting existing commercial buildings into residential units tends to be more expensive than new construction.10
It can be inferred that adaptive reuse projects might not perform as well financially as a comparative “new build.” Many cities have either pared back inclusionary requirements for adaptive reuse projects, such as the City of Los Angeles, or provided additional financial support to encourage the turning over of underperforming uses, such as property tax abatements in the cities of New York City, Washington, D.C., and Boston.

During the course of this Study, the City of Santa Barbara amended the inland zoning ordinance to facilitate adaptive reuse projects creating housing by adding SMBC Section 30.185.045, Adaptive Reuse Projects. The ordinance incentivizes reuse to housing with development standard incentives for maximum residential density, minimum automobile parking stall requirements, open yard requirements, and setbacks, with further incentivization by exempting rental inclusionary housing requirements for adaptive reuse projects within the Central Business District proposing fewer than 40 total units. 10 Adaptive Reuse Challenges and Opportunities in California. Turner Center for Housing Innovation, UC Berkeley, November 2021.

Inclusionary Housing and In-Lieu Fee Study | Development Prototypes 30 Table 4: Summary of Residential Prototypes, Baseline and Density Bonus Sources: City of Santa Barbara; BAE, 2025.

Prototype I Prototype II Prototype III Prototype IV Prototype V Prototype SDBL-I Prototype SDBL-II Owner 2-9 units Owner 10+ units Rental 5-9 units Rental 10+ units Rental 10+ units Rental 10+ units Rental 10+ units Townhome Condominium Townhome Rental Mixed-Use Mixed-Use (Large) Mixed-Use (Large) No Parking Zone R-M C-G R-M C-G C-G C-G C-G
General Plan Land Use Medium-High High Medium-High AUD Priority AUD Priority AUD Priority AUD Priority Maximum Density (du/acre) 27 36 27 63 63 63 63
SDBL Utilization None None None None None 32.50% 50.0%
Buildout Assumptions
Site Size (sf) 9,000 15,000 9,000 15,000 30,000 30,000 30,000 Lot Coverage Assumptions 32.4% 95.3% 32.4% 95.3% 90.6% 90.6% 66.2% GF Building Footprint (sf) 2,913 14,302 2,913 14,302 27,181 27,181 19,854 Unit Assumptions
Maximum "Base" Units 6.0 13.0 6.0 22.0 44.0 44.0 44.0
Actual Units 4.0 15.0 5.0 20.0 43.0 59.0 66.0
Max Avg. Unit Size (sf) 1450 970 905 811 811 n/a n/a
Actual Avg. Unit Size (sf) 1131 970 905 811 811 614 811 Residential Circ adj. (%) 85.0% 80.0% 85.0% 85.0% 85.0% 88.4% 85.0% Total Residential (sf, net) 4,525 14,550 4,525 16,220 34,873 36,250 53,526 Total Residential (sf, gross) 5,324 18,188 5,324 19,082 41,027 41,027 62,972 GF Commercial (sf, gross) 0 0 0 1,096 1,869 1,869 0
Gross Building Area (sf) 5,324 18,188 5,324 20,178 42,896 42,896 62,972 Max Building Height (ft) 45 45 45 48 48 48 60
Actual Height 32 45 32 48 48 48 60
Vehicle Parking Spaces (#) 8 24 5 24 45 45 0
Baseline Prototypes Density Bonus Prototypes
Inclusionary Housing and In-Lieu Fee Study | Financial Feasibility Analysis 31

FINANCIAL FEASIBILITY ANALYSIS
This chapter evaluates the financial feasibility of five baseline residential development prototypes that comply with the existing inclusionary housing requirements and development standards, and two residential development prototypes utilizing SDBL. The financial feasibility analysis models a residential development from the developer’s perspective since the production of market-rate units, and the associated inclusionary housing units or in-lieu fees, requires developer interest to construct the project.

Financial Feasibility Methodology
The financial feasibility for each prototype was analyzed using static pro-forma models. Static pro-forma models are a form of financial feasibility analysis that developers often use as an initial screen to conceptually test financial viability for a development concept. In their simplest form, a static pro-forma can inform a “go or no go” decision to construct a project.

The pro-formas are structured to calculate the Residual Land Value (RLV) associated with each prototype. This financial feasibility method solves for the land price a well-informed, capable developer could afford to pay for a site and earn a market responsive return on investment.

The RLV analysis maintains profit as an fixed percentage in the pro-formas to compare the financial feasibility of development prototypes consistently. The profit assumptions reflect the return threshold that a developer would likely require when deciding whether to pursue a project, based on the level of risk associated with each development prototype. The analysis estimates the market value of the project, hard costs and soft costs to construct the project, and developer profit to solve for the RLV.

Residual Land Value = Total Project Value – Total Project Costs – Developer Profit The factors influencing financial feasibility are dynamic, and development activity and market conditions are highly cyclical. Hard costs can fluctuate due to changes in construction labor availability and costs, material costs, and a multitude of other factors. Similarly, a project’s revenue (value) can increase or decrease depending on the availability of housing supply in the local market, changes in the attractiveness of a project’s location, or other factors impacting sale and rent prices. The minimum threshold for investments can also fluctuate based on federal interest rates and trends in real estate capital markets—recognizing that real estate development must compete against all other investment options. In almost all instances, a development must generate a competitive profit that corresponds to the comparatively higher risk of development in order for a developer to pursue a project.

Inclusionary Housing and In-Lieu Fee Study | Financial Feasibility Analysis 32 There is no universal financial feasibility methodology that applies to all circumstances.

Standard feasibility analyses commonly calculate RLV or return on cost (ROC)11. Additionally, no single metric of financial feasibility, such as RLV or ROC, is best for every situation. Nor can a feasibility method account for every detail of a development’s financials or predict future costs, revenues, or other factors impacting development. Because this Study analyzes development prototypes and not an actual development proposal, a static pro-forma rather than a more detailed cash flow analysis solving for an internal rate of return, is appropriate to model prototypical initial feasibility.

Any change in the factors and assumptions that informed the pro-formas and the feasibility analysis could enable more housing development projects to become financially feasible. For example, a lowering of the cap rate or an increase in rents (following trends in Figure 2) could potentially make a prototype feasible.

A full list of assumptions for the financial feasibility analysis, including cost assumptions, affordability thresholds, as well as the pro-forma models prepared for this analysis, are provided in Appendix C: Residential Pro-Formas.

Financial Feasibility Thresholds
Prototypes are considered financially feasible, marginally feasible, or not feasible, depending on the resulting RLV. Prototypes achieving or exceeding the site’s prevailing land cost (based on cost per square foot of comparable land sales) are considered “likely feasible.” Prototypes whose RLV does not quite achieve the prevailing land cost may be considered “marginally feasible,” and could become feasible under more favorable conditions, such as discounted land value, participation with a longer term property owner, or maintaining an existing revenuegenerating use on a portion of the project site, such as a self-storage facility. Prototypes with a negative RLV or an RLV below the typical range of land costs are considered “not likely feasible.”
• Likely feasible if RLV > land cost
• Not likely feasible if RLV < land cost
For each density tier (Medium-High, High, Priority Housing Overlay), the land cost assumption is informed by recent sales in the City of Santa Barbara (Appendix A: Assumptions and Formulas) as well as conversations with local developers (Appendix B: Input from Practitioners).

The RLV thresholds used to determine financial feasibility in this Study are:
11 Return on Cost (ROC) is a point-in-time analysis comparing financial performance (Net Operating Income) and total cost to construct. It measures the value of the development against market conditions.

Inclusionary Housing and In-Lieu Fee Study | Financial Feasibility Analysis 33 • Medium-High and High Density area: RLV of $125 per site square foot • Priority Housing Overlay area: RLV of $150 per site square foot If a developer is able to acquire land for a price that is lower than the residual land value associated with their project, the difference between the residual land value and the actual sale price essentially represents additional profit.

The pro-forma feasibility analysis reflects current market conditions relevant to the generalized and prototypical residential developments in this Study. Financial performance of development projects shifts over time as changes occur in economic conditions. Project-specific conditions like existing land uses, property owner motivations and acquisition/holding costs, access to financing, area-specific land use regulations, and costs for construction labor and materials will benefit or challenge a development’s financial feasibility. Many of these factors are outside City control and all have a great impact on feasibility of development that the City is unable to influence.

Baseline Prototypes
No baseline prototypes utilizing the Existing Program are identified as feasible under current market conditions. Market conditions are subject to fluctuation; changes in construction costs, interest rates, financing terms, capitalization rates, and other macroeconomic conditions outside of City control all impact local development feasibility. As a point in time analysis, this Study does not consider economic conditions that may benefit development feasibility in the future nor the economic conditions that supported development feasibility in the past.

Ownership projects utilizing the Existing Program are not likely feasible under current market conditions.
• Ownership Townhome Prototype (Prototype I) in the Medium-High Density area has an RLV of $81/sf. This does not meet the financial feasibility threshold of $125/sf.

Prototype I is not likely feasible.
• Ownership Prototype (Prototype II) in the High Density area has an RLV of $57/sf. This does not meet the financial feasibility threshold of $125/sf. Prototype II is not likely feasible.

Rental projects utilizing the Existing Program are not likely feasible under current market conditions.
• Rental Townhome Prototype (Prototype III) in the Medium-High Density area has an RLV of $42/sf. This does not meet the financial feasibility threshold of $125/sf.

Prototype III is not likely feasible.
• Rental Mixed-Use Prototype (Prototype IV) in the Priority Housing Overlay area has an RLV of $97/sf. This does not meet the financial feasibility threshold of $150/sf.

Prototype IV is not likely feasible.

Inclusionary Housing and In-Lieu Fee Study | Financial Feasibility Analysis 34 • Rental Mixed-Use Large Prototype (Prototype V) in the Priority Housing Overlay area has an RLV of $82/sf. This does not meet the financial feasibility threshold of $150/sf.

Prototype V is not likely feasible.

Table 5 displays the financial feasibility outcomes of the five baseline prototypes that comply with the City’s zoning standards.

Inclusionary Housing and In-Lieu Fee Study | Financial Feasibility Analysis 35 Table 5: Summary of Residential Development Feasibility, Existing Program Sources: City of Santa Barbara; BAE, 2025
Prototype I Prototype II Prototype III Prototype IV Prototype V Owner 2-9 units Owner 10+ units Rental 5-9 units Rental 10+ units Rental 10+ units Townhome Condominium Townhome Rental Mixed-Use Mixed-Use (Large) Site Size (sf) 9,000 15,000 9,000 15,000 30,000
Building Size (sf, gross) 5,324 18,188 5,324 20,178 42,896 Residential Area (sf, net) 4,525 14,550 4,525 16,220 34,873 Avg. Unit Size (sf, net) 1,131 970 905 811 811
Total Units 4 15 5 20 43
Summary of Existing Requirement
Affordability Requirement 15% Middle 15% Middle 10% Moderate 10% Moderate 10% Moderate Prototype Requirement In-Lieu (2-9 units) Onsite, Round Up In-Lieu (5-9 units) Onsite Onsite + Fractional Fee Unit Obligation 0.60 1.95 0.50 2.00 4.30
Compliance Method In-Lieu Fee 2 Middle Income In-Lieu Fee 2 Mod Income 4 Mod+Fract Fee Fee (if required) $96,971 n/a $113,125 n/a $60,825
Total Development Costs, Excluding Land
Total Dev Cost (TDC) $4,074,622 $13,375,355 $3,258,365 $12,143,275 $26,570,367 TDC per Unit $1,018,656 $891,690 $651,673 $607,164 $617,916 TDC per Gross Building sf $765 $735 $612 $602 $619
Residual Land Value Analysis
Capitalized Value (Rental) N/A N/A $3,635,969 $13,602,754 $29,028,303 Net Sales Rev (For Sale) $4,801,314 $14,224,755 N/A N/A N/A Residual Land Value (RLV) $726,692 $849,400 $377,604 $1,459,480 $2,457,937 RLV per site sf $81 $57 $42 $97 $82
RLV Threshold per site sf $125 $125 $125 $150 $150
Financially Feasible? Not Likely Feasible Not Likely Feasible Not Likely Feasible Not Likely Feasible Not Likely Feasible Inclusionary Housing and In-Lieu Fee Study | Financial Feasibility Analysis 36 Prototype I: Ownership Townhome Prototype
Not Likely Feasible
The Ownership Townhome Prototype (Prototype I) is not likely financially feasible under current market conditions.

The prototype has a total development cost of $4.07 million, not including land, and net sale proceeds totaling $4.80 million. After accounting for developer profit, the RLV for this prototype is approximately $81/sf.

Prototype II: Ownership Condominium Prototype
Not Likely Feasible
Ownership Condominium Prototype (Prototype II) is not likely financially feasible under current market conditions.

The prototype has a total development cost of $13.38 million, not including land, and net sale proceeds totaling $14.22 million. After accounting for developer profit, the RLV for this prototype is approximately $57/sf.

Prototype III: Rental Townhome Prototype
Not Likely Feasible
Rental Townhome Prototype (Prototype III) is not likely financially feasible under current market conditions.

The prototype has a total development cost of $3.26 million, not including land, and a capitalized value totaling $3.64 million. After accounting for developer profit, the RLV for this prototype is approximately $42/sf.

Prototype IV: Rental Mixed-Use Prototype
Not Likely Feasible
Rental Mixed-Use Prototype (Prototype IV) is not likely financially feasible under current market conditions.

The prototype has a total development cost of $12.14 million, not including land, and a capitalized value totaling $13.60 million. After accounting for developer profit, the RLV for this prototype is $97/sf.

Prototype V: Rental Mixed-Use Large Prototype
Not Likely Feasible
Rental Mixed-Use Large Prototype (Prototype V) is not likely financially feasible under current market conditions.

Inclusionary Housing and In-Lieu Fee Study | Financial Feasibility Analysis 37 The prototype has a total development cost of $26.57 million, not including land, and a capitalized value totaling $29.03 million. After accounting for developer profit, the RLV for this prototype is approximately $82/sf.

Density Bonus Prototypes
Unlike the baseline prototypes, prototypes that utilize SDBL are likely more financially feasible than those meeting local zoning standards, even when factoring in the deeper affordability requirements.

Table 6 below displays the financial feasibility outcomes of prototypes utilizing SDBL.

Prototype SDBL-I: Rental Mixed-Use Density Bonus Prototype Likely Feasible
Rental Mixed-Use Density Bonus Prototype (Prototype SDBL-I), based on Prototype V, is likely feasible under current market conditions. Prototype SDBL-I includes 10 percent of project units at rental prices affordable to Very-Low-Income households to receive 32.5 increased density from SDBL, resulting in five affordable units and 54 market-rate units.

The prototype has a total development cost of $26.46 million, not including land, and a capitalized value totaling $31.17 million. After accounting for developer profit, the RLV for this prototype is approximately $157/sf. This exceeds the financial feasibility threshold of $150/sf, and is therefore likely feasible.

Prototype SDBL-II: Rental Density Bonus Prototype
Likely Feasible
Rental Density Bonus Prototype (Prototype SDBL-II), based on Prototype V, is likely feasible based on current market conditions. Prototype SDBL-II includes 15 percent of project units at rental prices affordable to Very-Low-Income households to receive 50 percent increased density from SDBL, resulting in seven affordable units and 59 market-rate units.

The prototype has a total development cost of $35.07 million, not including land, and a capitalized value totaling $40.66 million. After accounting for developer profit, the RLV for this prototype is approximately $187/sf. This exceeds the financial feasibility threshold of $150/sf, and is therefore likely feasible.

Inclusionary Housing and In-Lieu Fee Study | Financial Feasibility Analysis 38 Table 6: Summary of Residential Development Feasibility, Baseline vs SDBL Source: BAE, 2025.

Prototype V Prototype SDBL-I Prototype SDBL-II
Rental 10+ units Rental 10+ units Rental
Mixed-Use (Large) Mixed-Use (Large) No Parking
Site Size (sf) 30,000 30,000 30,000
Building Size (sf, gross) 42,896 42,896 62,972
Residential Area (sf, net) 34,873 36,250 53,526
Avg. Unit Size (sf, net) 811 614 811
Total Units 43 59 66
Summary of Existing Requirement
Affordability Requirement 10% Moderate 10% VLI 15% VLI
Prototype Requirement Onsite + Fractional Fee
Unit Obligation 4.30 5.00 7.00
Compliance Method 4 Mod+Fract Fee n/a n/a
Fee (if required) $60,825 n/a n/a
Total Development Costs, Excluding Land
Total Dev Cost (TDC) $26,570,367 $26,460,245 $35,066,474 TDC per Unit $617,916 $448,479 $531,310
TDC per Gross Building sf $619 $617 $557
Residual Land Value Analysis
Capitalized Value (Rental) $29,028,303 $31,173,076 $40,662,185 Net Sales Rev (For Sale) N/A N/A N/A
Residual Land Value (RLV) $2,457,937 $4,712,832 $5,595,711 RLV per site sf $82 $157 $187
RLV Threshold per site sf $150 $150 $150
Financially Feasible? Not Likely Feasible Likely Feasible Likely Feasible Baseline Density Bonus
Inclusionary Housing and In-Lieu Fee Study | In-Lieu Fee Analyses 39

IN-LIEU FEE ANALYSES
This chapter analyzes potential inclusionary housing in-lieu fee rates the City may charge.

In-lieu fees are an alternative to providing onsite inclusionary units within a project, though the extent to which the in-lieu fee option is available for multi-unit residential projects varies. • Ownership projects of two to nine units pay a prorated in-lieu fee. • AUD Program rental projects with five to nine units pay a prorated in-lieu fee. • AUD Program rental projects with 10 or more units only pay a prorated in-lieu fee based on fractional inclusionary housing requirements below 0.5.

A relatively high in-lieu fee rate tends to incentivize construction of onsite inclusionary units because the in-lieu fee payment exceeds the cost to provide the inclusionary units. Conversely, a low in-lieu fee rate tends to incentivize paying the in-lieu fee rather than providing the inclusionary units. This chapter specifically explores two possible methodologies for setting the in-lieu fee rates, as described below:
• Construction Cost Analysis
The Construction Cost methodology calculates the cost for a developer to construct an onsite inclusionary unit within the project, expressed as a fee rate per square foot.

Some jurisdictions use this approach to set their in-lieu fee rates to ensure that the revenue from an in-lieu fee is sufficient to support the construction of an affordable unit off site.
• Fee Equivalent Analysis
The Fee Equivalent methodology calculates the in-lieu fee rate that would have the same resulting project feasibility as the cost to the developer to construct an onsite inclusionary unit. This approach estimates the in-lieu fee rate that is approximately equivalent in cost to providing inclusionary units within a market-rate project under the Existing Program.

The Residential Nexus Analysis in Appendix D identifies the “legal maximum fee” by documenting the nexus relationship between the construction of new market-rate residential units, the need for affordable housing, and the need for funds to construct affordable housing.

The Residential Nexus Analysis estimates the fee rate needed to make the in-lieu fee payment commensurate with the revenue needed to address the estimated affordable housing need associated with the construction of new market-rate development. It is the highest legally defensible amount the City could charge for in-lieu fee rates.

Inclusionary Housing and In-Lieu Fee Study | In-Lieu Fee Analyses 40 Across all analyses conducted, the possible spread of in-lieu fee rates is shown below in Table 7 and Table 8.

Inclusionary Housing and In-Lieu Fee Study | In-Lieu Fee Analyses 41 Table 7: Spread of In-Lieu Fee Rates by Methodology for Rental Projects with 10+ units Current Fee Fee Equivalent Analysis Construction Cost Analysis Maximum Nexus-Based Fee

Fee per net sf
(residential)
$25.00/sf $33.66/sf to $34.91/sf $72.52 to $73.66/sf $91.41/sf

Notes

Paying an in-lieu fee is
not currently allowed
for rental projects with
10 or more units,
unless it is for a
fraction below 0.5.

Setting an in-lieu fee rate of
$34.91/sf, for example, has the
equivalent impact on a prototype’s
RLV as providing four ModerateIncome units, plus a fractional fee (Prototype V).

Setting an in-lieu fee rate of $73.66/sf, for
example, is roughly equivalent to the “cost” of
providing four Moderate-Income units
(Prototype V).

Setting an in-lieu fee rate of
$91.41/sf is the legal
maximum that could be
charged for rental projects, as
concluded in the Residential
Nexus Analysis (Appendix D).

Table 8: Spread of In-Lieu Fee Rates by Methodology for Ownership Projects with 10+ units Current Fee Fee Equivalent Analysis Construction Cost Analysis Maximum Nexus-Based Fee

Fee per net sf
(residential)
n/a
Current in-lieu fee
rates are calculated on
a per unit basis.
$72.54/sf $83.00/sf $72.53/sf

Notes

Paying an in-lieu fee is
generally not currently
allowed for ownership
projects with 10 or
more units projects ,
unless alternate
compliance methods
are pursued via SBMC
Section 30.160.080.

Setting an in-lieu fee rate of
$72.54/sf has the equivalent
impact on a prototype’s RLV as
providing two Middle-Income units
(Prototype II).

Setting an in-lieu fee rate of $83.00/sf is
roughly equivalent to the “cost” of providing
two Middle-Income units (Prototype II).

Setting an in-lieu fee rate of
$72.53/sf is the legal
maximum that could be
charged for ownership projects,
as concluded in the Residential
Nexus Analysis (Appendix D).

The comparatively lower
ownership fee is due primarily
to the dilution effect of larger
unit sizes compared to rental
projects.

Inclusionary Housing and In-Lieu Fee Study | In-Lieu Fee Analyses 42 Construction Cost Analysis
Many jurisdictions base their inclusionary in-lieu fee rates on the cost for a developer to construct an inclusionary unit, often through a formula that is tied to the cost of construction.

This construction cost methodology estimates the needed subsidy (e.g., “affordability gap”) to construct inclusionary housing units.

Conceptually, charging inclusionary housing in-lieu fees that are equal to the cost of constructing an inclusionary unit ensures that the revenue from an in-lieu fee rate is sufficient to support the construction of an affordable unit off site. As such, total development costs used in this analysis also account for the cost of land to capture the full construction cost of an affordable unit.

The in-lieu fee rates for each prototype for the construction cost analysis are shown in Table 9 below. All fees are based on a per square foot basis of net residential area.

Ownership Projects
The cost to construct the inclusionary units in ownership projects is based on the per-unit construction cost, including land, minus the restricted sale price for the inclusionary units. • For Ownership Townhome Prototype (Prototype I), the estimated in-lieu fee rate using the construction cost methodology is $113.14/sf.
• For Ownership Condominium Prototype (Prototype II), the estimated in-lieu fee rate using the construction cost methodology is $83.00/sf.

Rental Projects
The cost to construct the inclusionary units in rental projects is based on the per-unit construction cost, including land, minus the amount of debt service that an inclusionary unit can support.
• For Rental Townhome Prototype (Prototype III), the estimated in-lieu fee rate using the construction cost methodology is $79.83/sf.
• Rental Mixed-Use Prototype (Prototype IV), the estimated in-lieu fee rate using the construction cost methodology is $72.52/sf.
• Rental Mixed-Use Large Prototype (Prototype V), the estimated in-lieu fee rate using the construction cost methodology is $73.66/sf.

Inclusionary Housing and In-Lieu Fee Study | In-Lieu Fee Analyses 43 Table 9: In-Lieu Fee Rates by Construction Cost Analysis Notes:
(a) Refers to the number of inclusionary units required by the Existing Program. (b) Equal to the per-unit development cost shown in the pro-formas provided in Appendix C, minus any in-lieu fee amounts for partial units or land. (c) Average monthly rent per inclusionary unit based on rents shown in the pro-formas provided in Appendix C. Prototype III uses Prototype IV values. (d) Supportable loan amount is based on assumed loan terms: 1.15 Debt Coverage Ratio, 6.0%, interest rate, 30 year term. (e) Average net sales revenue per inclusionary unit is based on net sales revenues shown in the pro-formas provided in Appendix C. Prototype I uses Prototype II values. (f) For rental prototypes, the in-lieu fee per inclusionary unit is equal to the total development cost minus the supportable debt per inclusionary unit.

For ownership prototypes, in-lieu fee per inclusionary unit is equal to the total development cost minus the average net sales revenue per inclusionary unit. (g) Equals in-lieu fee rate multiplied by the Unit Obligation.

Prototype I Prototype II Prototype III Prototype IV Prototype V Owner 2-9 units Owner 10+ units Rental 5-9 units Rental 10+ units Rental 10+ units Townhome Condominium Townhome Rental Mixed-Use Mixed-Use (Large) Site Size (sf) 9,000 15,000 9,000 15,000 30,000
Building Size (sf, gross) 5,324 18,188 5,324 20,178 42,896 Residential Area (sf, net) 4,525 14,550 4,525 16,220 34,873 Avg. Unit Size (sf, net) 1,131 970 905 811 811
Total Units 4 15 5 20 43
Summary of Existing Requirement
Affordability Requirement 15% Middle 15% Middle 10% Moderate 10% Moderate 10% Moderate Prototype Requirement In-Lieu (2-9 units) Onsite, Round Up In-Lieu (5-9 units) Onsite Onsite + Fractional Fee Unit Obligation (a) 0.60 1.95 0.50 2.00 4.30
Compliance Method In-Lieu Fee 2 Middle Income In-Lieu Fee 2 Mod Income 4 Mod+Fract Fee Fee (if required) $96,971 n/a $113,125 n/a $60,825
Fee Analysis
TDC per Unit (exc. land and fees) (b) $994,413 $891,690 $629,048 $607,164 $616,501 Land per unit $281,250 $150,000 $225,000 $112,500 $104,651 TDC per Unit including Land $1,275,663 $1,041,690 $854,048 $719,664 $721,152 Rental Prototypes
Avg. Monthly Rent / Inclusionary Unit (c) n/a n/a $2,181 $2,181 $2,118 Monthly Net Operating Income / Unit n/a n/a $907 $907 $853 Supportable Debt / Inclusionary Unit (d) n/a n/a $131,555 $131,555 $123,745 For-Sale Prototypes
Avg. Net Sales Revenue per Inc Unit (e) $422,370 $422,370 n/a n/a n/a In-Lieu Fee Per Inclusionary Unit (f) $853,293 $619,320 $722,493 $588,109 $597,407 Total In-Lieu Fee Amount (g) $511,976 $1,207,675 $361,246 $1,176,217 $2,568,849 In-Lieu Fee (sf, net residential) $113.14 $83.00 $79.83 $72.52 $73.66 equals Total In-Lieu Fee Amount / Net Project Area (sf) Inclusionary Housing and In-Lieu Fee Study | In-Lieu Fee Analyses 44 Fee Equivalent Analysis
The Fee Equivalent Analysis represents the hypothetical in-lieu fee amount that would be equal to the net cost to the developer of providing inclusionary units onsite. Specifically, this analysis calculates the hard-coded hypothetical in-lieu fee that (when applied) in the pro-forma model would yield an identical RLV as the same prototype with the onsite inclusionary units instead.

When alternate compliance methods may allow in-lieu fee payments to meet the entirety of an inclusionary housing requirement, setting the in-lieu fee rate commensurate with the fee equivalent amount neither incentivizes nor disincentivizes onsite unit creation. To the developer, a fee equivalent results in the same project financials. In-lieu fee rates that are higher than fee equivalent will generally incentivize developers to provide inclusionary units onsite because onsite units would be less expensive to the project. In-lieu fee rates that are lower than fee equivalent will generally incentivize developers to pay the in-lieu fee since the in-lieu fee amount would be less expensive.

The in-lieu fee amounts for each prototype based on the Fee Equivalent Analysis are shown in Table 10. All fees are applied on a per square foot basis of net residential area. The analysis incorporates all costs, including land, to comply with the Existing Program. • For ownership projects, the estimated fee equivalent is $72.54/sf (Prototype II). • For rental projects, the estimated fee equivalent ranges from $33.66 to $34.91/sf (Prototypes IV and Prototype V, respectively).

Table 10: In-Lieu Fee Rates by Fee Equivalent
Source: BAE, 2025.

Prototype II Prototype IV Prototype V
Owner 10+ units Rental 10+ units Rental 10+ units
Condominium Mixed-Use Mixed-Use (Large)
Residential Area (sf, net) 14,550 16,220 34,873
Avg. Unit Size (sf, net) 970 811 811
Total Units 15 20 43
Development Program, In-Lieu Fee Scenario
Affordability Requirement 15% Middle 10% Moderate 10% Moderate Prototype Requirement Onsite, Round Up Onsite Onsite + Fractional Fee Unit Obligation 1.95 2.00 4.30
Compliance Method 2 Middle Income 2 Mod Income 4 Mod+Fract Fee Fee (if required) n/a n/a $60,825
Equivalent Fee Analysis
In-Lieu Fee (sf, net residential) $72.54 $33.66 $34.91
Inclusionary Housing and In-Lieu Fee Study | Benchmark Analysis 45

BENCHMARK ANALYSIS
This Benchmark Analysis chapter provides an overview of inclusionary housing requirements in jurisdictions that have comparable market conditions and are in proximity to Santa Barbara.

In-lieu fee rates and inclusionary requirements reflect each jurisdiction's approach to balancing affordable housing production with development feasibility by aligning inclusionary housing requirements and in-lieu fee rates with housing policy objectives and local market conditions. They do not necessarily reflect likely feasibility outcomes without evidence of units built or fee revenue paid, an important consideration to weigh.

This Study explores in-lieu fee rates in the following jurisdictions:
• Santa Barbara County
• City of Goleta
• City of Ventura
• City of Santa Monica
• City of San Luis Obispo
Nearly all benchmarked jurisdictions have limited ability for a developer to satisfy all inclusionary housing requirements through payment of an in-lieu fee alone. These restrictions may include requiring City Council approval to pay an in-lieu fee for the entirety of the inclusionary housing requirement, allowing in-lieu fee payments only for the purpose of meeting a fractional unit requirement, or only allowing in-lieu fee payments for smaller projects.

In-Lieu Fee Rate Comparison – Rental Projects
Figure 3 below illustrates a hypothetical inclusionary housing in-lieu fee rate applied to Prototype V if it were allowed across comparable jurisdictions. Since in-lieu fee payments are assessed using different methodologies in each benchmarked jurisdiction, this comparison normalizes all in-lieu fee rates based on an assumed project size (total unit quantity and net square feet) to identify an in-lieu fee rate per net square foot.

The City’s in-lieu fee rate for rental projects is currently lower than that of other benchmarked jurisdictions, with the exception of San Luis Obispo.

Inclusionary Housing and In-Lieu Fee Study | Benchmark Analysis 46 Figure 3: Theoretical Rental In-Lieu Fee Rate per net square foot, applied to Prototype V
Sources: Santa Barbara County; City of Santa Monica; City of San Luis Obispo; City of Goleta; City of Ventura; BAE, 2025 Notes:
(a) The County of Santa Barbara assumes a fee of $232,700 per unit for the 2.5 percent Very-Low-Income requirement applied to 1.075 units, a fee of $232,700 per unit for the 2.5 percent Low-Income requirement applied to 1.75 units, and a fee of $869,100 per unit for the 5.0 percent Moderate-Income requirement applied to 2.15 units. The total fee is $2.37 million, which is then divided by 34,873 net square feet. The Workforce requirement is waived. (b) The City of Santa Monica assumes a fee per gross square foot of $41.39, which is applied to 41,027 gross square feet for a total fee of $1.7 million, which is then divided by the net square footage. (c) The City of Ventura calculation assumes a fee per net square foot of $38.80. (d) The City of Goleta calculation assumes a fee per net square foot of $7.24 (Extremely-Low-Income), $6.50 (Very-LowIncome), $12.26 (Low-Income), and $7.60 (Moderate-Income) for a combined fee of $33.60 per net square foot. (e) The City of Santa Barbara calculation assumes a fee per net square foot of $25.00 (f) The City of San Luis Obispo calculation applies a fee per net square foot of $20.80.

Santa Barbara County
Santa Barbara County has the same inclusionary housing requirements for both ownership and rental projects. Inclusionary units are income-restricted for a 90-year term.

Projects with 20 or more units require a total of up to 15 percent of total units as onsite, income-restricted units at multiple income categories: Very-Low-Income, Low-Income, Moderate-Income, and workforce (120-200 percent). One moderate unit is required for projects with five to 19 units. There is no inclusionary housing requirement for projects of four or fewer units. In 2025 the workforce requirement was waived for rental projects, however, resulting in a total 10 percent inclusionary requirement.

Developers may opt to pay an in-lieu fee rather than constructing onsite inclusionary units. The in-lieu fee amount is calculated on a per-unit fee structure, with fees ranging from $ 232,700 to $869,100 per unit depending on project location and income category. $67.93
$48.91
$38.80
$33.60
$25.00
$20.80
Santa Barbara
(County)
Santa Monica Ventura (City) Goleta Santa Barbara
(City)
San Luis
Obispo (City)
Inclusionary Housing and In-Lieu Fee Study | Benchmark Analysis 47 Adaptive Reuse
Santa Barbara County does not currently have an adaptive reuse policy in place.

City of Goleta
The City of Goleta has inclusionary housing requirements for both ownership and rental projects. Inclusionary units are income-restricted for a 55-year term but can be reduced to a 30-year term by City Council.

Projects with five or more units are required to provide 20 percent of total units as incomerestricted onsite at multiple income categories: Extremely-Low-Income, Very-Low-Income, LowIncome, Moderate-Income, and Above-Moderate-Income. In-lieu fee payments are required for larger projects for any fractional inclusionary housing remainder at each income category, although a project can elect to provide additional Low-Income inclusionary units instead of paying the fractional in-lieu fee amount. Projects of two to four units pay an in-lieu fee amount.

There are separate in-lieu fee rates for small (two to four units) projects and large (five or more units) projects. In-lieu fee rates for larger projects are further specified based on tenure (rental or ownership) and income category of the inclusionary requirement.

Alternative compliance methods for larger projects include lowered inclusionary housing requirements (down to 15 percent of total units) upon finding that the developer will provide a public benefit exceeding the inclusionary requirements (e.g. public park or open space) or payment of an in-lieu fee only if on-site construction is deemed infeasible.

Adaptive Reuse
Although Goleta’s Industrial Districts chapter of the zoning code (Chapter 17.10) briefly mentions the term “adaptive reuse” as one of the goals of Industrial Districts, the ordinance does not establish a dedicated adaptive reuse program with procedures, exemptions, or incentives.

City of Santa Monica
The City of Santa Monica has inclusionary housing requirements for both ownership and rental projects. Inclusionary units are income-restricted for a 55-year term.

Projects consisting of six or more dwelling units must provide 15 percent of units as on-site inclusionary units, distributed across Very-Low-Income, Low-Income, and Moderate-Income levels. Projects of two to five units can provide an on-site inclusionary unit or pay an in-lieu fee.

Santa Monica calculates in-lieu fees for projects with five or fewer units per gross square foot using the in-lieu fee rate of $43.91 for rental projects and $51.30 for ownership projects.

Similar to the City of Santa Barbara, rounding rules for the inclusionary requirements of Inclusionary Housing and In-Lieu Fee Study | Benchmark Analysis 48 projects proposing six or more units round up to the next whole number if 0.5 or above and require a fractional in-lieu fee payment for a remainder below 0.5.

Larger projects (over 20 units) may opt to provide inclusionary units off-site at 20 percent of total units. These off-site units must be affordable to Very-Low- or Low-Income households.

Any multiunit project may request a waiver for alternative compliance through dedication of land to affordable housing.

Adaptive Reuse
The City of Santa Monica adopted an Adaptive Reuse Ordinance (Section 9.31.035) in October 2024. The ordinance encourages the conversion of existing buildings to housing by exempting such projects from the City’s Affordable Housing Production Program (Chapter 9.64). While this effectively streamlines adaptive reuse as a primarily market-rate housing tool, the ordinance does allow projects to be developed as 100 percent affordable housing or as “extremely affordable adaptive reuse projects” under state law, which could also unlock additional statelevel incentives like density bonuses. In practice, the policy lowers barriers to reuse and boosts overall housing supply, but affordable housing will only result when developers voluntarily pursue it.

City of San Luis Obispo
The City of San Luis Obispo has inclusionary housing requirements for both ownership and rental projects. Inclusionary units are income-restricted for a 45-year term if ownership and a 55-year term if rental.

Ownership Projects
Ownership projects have an inclusionary housing requirement of 10 percent of total units evenly split for Low-Income and Moderate-Income households. Projects have the option to provide an onsite unit or pay an in-lieu fee amount based on net square feet. The in-lieu fee rate is $25.95 per net square foot.

Rental Projects
Rental projects have an inclusionary housing requirement of six percent of total units evenly split for Very-Low-Income and Low-Income households. Projects have the option to provide an onsite unit or pay an in-lieu fee amount based on net square feet. The in-lieu fee rate is $20.80 per net square foot.

Adaptive Reuse
San Luis Obispo does not currently have an adaptive reuse policy in place.

Inclusionary Housing and In-Lieu Fee Study | Benchmark Analysis 49 City of Ventura
The City of Ventura has inclusionary housing requirements for both ownership and rental projects. Inclusionary units are income-restricted for a 45-year term if ownership and a 55-year term if rental.

Ownership Projects
Ownership projects of seven or more units have a 10 percent inclusionary housing requirement. Projects may provide a Moderate-Income unit onsite; Very-Low-Income unit offsite; pay an in-lieu fee amount; dedicate land; or acquire, rehabilitate, and preserve existing units (20 percent project units). The in-lieu fee rate is $36.90 per net square foot.

Rental Projects
Rental projects of seven or more units have a 15 percent inclusionary housing requirement.

Projects of seven to 20 units may provide Very-Low-Income and Low-Income units onsite; VeryLow-Income units offsite; pay an in-lieu fee amount; dedicate land; or acquire, rehabilitate, and preserve existing units (20 percent of project units). Projects of 21 or more units have the same compliance options but may only pay an in-lieu fee amount if onsite units are an “extreme hardship.” The in-lieu fee rate is $38.80 per net square foot.

Adaptive Reuse
The city’s 2021-2029 Housing Element references a future Adaptive Reuse Ordinance, but an ordinance has not yet been passed.

Inclusionary Housing and In-Lieu Fee Study | Recommendations 50

RECOMMENDATIONS
The following chapter provides 10 recommendations for targeted updates to the Existing Program. The recommendations fall into three major categories: program-related, policyrelated, and administration-related. • Program-related recommendations are updates to the Existing Program requirements, such as in-lieu fee rates, citywide applicability, and recalibrated requirements for large and small projects.
• Policy-related recommendations are updates designed to encourage housing development and provide in-lieu fee payment options.
• Administration-related recommendations are updates designed to simplify and clarify functions associated with administering the Existing Program.

Table 11: Recommendations for Updates to the Existing Program Program-Related Policy-Related Administration-Related
A. Apply Inclusionary Housing
Requirements to All Rental
Projects with 5+ units
B. Maintain Current
Inclusionary Housing
Requirements
C. Update the In-Lieu Fee Rate
for Rental Projects with 10+
units
D. Set an In-Lieu Fee Rate for
Ownership Projects with 10+
units
E. Set a Lower In-Lieu Fee Rate
for “Small” Rental and
Ownership Projects
F. Count Rental Inclusionary
Units as Bonus Density
G. Consider Options for InLieu Fee Payments to Fulfill Inclusionary Requirements
G.1. Consider In-Lieu
Fee Payment for All
Fractional
Inclusionary
Requirements
G.2. Consider In-Lieu
Fee Payment for All
Inclusionary
Requirements
H. Simplify In-Lieu Fee
Calculations for Ownership
Projects
I. Implement Automatic
Annual In-Lieu Fee Rate
Adjustments
J. Adjust Target AMI for
Moderate-Income Rents
from 100% to 110%
Inclusionary Housing and In-Lieu Fee Study | Recommendations 51 The recommendations are structured to work together in updating the Existing Program, although each recommendation was analyzed and can proceed as a standalone change to the inclusionary housing requirements.

Where applicable, recommendations are framed within the context of their relative impact on financial feasibility. Impacts to a prototype’s residual land value (RLV) are classified as “minimal” (0 to 5 percent impact); “marginal” (5 to 10 percent impact); or “significant” (impact greater than 10 percent).

Incorporating all recommendations from the Study into the inclusionary housing ordinance would have the greatest impact on generating inclusionary housing units and in-lieu fee payments while balancing development feasibility.

Program-Related Recommendations
The five program-related recommendations update the variable requirements for inclusionary housing while the Existing Program structure remains unchanged. The recommendations maintain consistency in overall inclusionary requirements and adjust in-lieu fee rates for inflation, costs, and project size.

A. Apply Inclusionary Housing Requirements to All Rental Projects with 5+ units This Study recommends expanding the inclusionary housing requirements to all rental projects of five or more units developed in the City, not solely those using the AUD Program. This would mean that non-AUD rental projects inland and all rental projects in the coastal zone would be subject to the inclusionary housing requirements.

Recommendation A would increase the number of projects citywide subject to inclusionary housing requirements. This could generate additional Moderate-Income restricted units and revenue for the Local Housing Trust Fund, but would impact financial feasibility for rental projects not utilizing the AUD Program.

B. Maintain Current Inclusionary Housing Requirements
Rental Projects
This Study recommends maintaining the Existing Program’s inclusionary housing percentage and income category for rental projects (i.e., no change to the current requirement that 10 percent of units in rental projects be set aside for Moderate-Income households).

Maintain Focus on Moderate-Income Households
• This Study considered requiring deeper affordability (e.g., Low-Income or Very-LowIncome). However, requiring inclusionary units with deeper affordability levels would reduce the financial feasibility of projects, and could trigger automatic SDBL density bonus and therefore the associated concessions, incentives, and waivers of Inclusionary Housing and In-Lieu Fee Study | Recommendations 52 development standards. This could potentially create more lower income units but could result in fewer Moderate-Income units to meet the Regional Housing Needs Allocation (“RHNA”).
• This Study considered requiring shallower affordability (e.g., Middle-Income). While this would improve the financial feasibility of projects (because affordable rents would be higher for these units), it would not help the City comply with its RHNA obligations for Moderate-Income households.
• This Study recommends maintaining the Moderate-Income affordability requirement for rental inclusionary units. Moderate-Income affordable units have more limited funding sources (Federal, State, local, or non-profits) available to subsidize the project, and therefore they are a difficult category to obtain other than through inclusionary requirements. Maintaining the Existing Program’s requirement supports meeting RHNA numbers for Moderate-Income households.

Maintain the 10 Percent Requirement
• This Study recommends maintaining the 10 Percent Moderate-Income affordability requirement for rental inclusionary units because it balances the findings from the financial feasibility analysis with the need to produce affordable housing. • This Study considered a higher percentage requirement (e.g., 15 percent) of units set aside for Moderate-Income households. The financial feasibility analysis indicates that increasing the required inclusionary percentage would significantly decrease financial feasibility for relevant prototypes as follows:
o For example, Prototype IV: Rental Mixed-Use Prototype would remain not likely feasible, and RLV would decrease by 23 percent, from $97 to $75 per site sf. o For example, Prototype V: Rental Mixed-Use Large Prototype would remain not likely feasible, and RLV would decrease by 24 percent, from $82 per site sf to $62 per site sf.

A higher percentage requirement (e.g., 15 percent) may also have the unintended effect of making SDBL an even more attractive alternative. SDBL projects have primarily provided lower-income units (e.g., Very-Low-Income or Low-Income), but not Moderate-Income units, based on recent project applications reviewed by the City. • This Study considered a lower percentage requirement (e.g., 5 percent) of units set aside for Moderate-Income households. The financial feasibility analysis indicates that reducing the required inclusionary percentage would increase financial feasibility for Inclusionary Housing and In-Lieu Fee Study | Recommendations 53 relevant prototypes. However, reducing the inclusionary requirement to this level would negatively impact the City’s ability to achieve RHNA requirements for Moderate-Income units. In addition, best practices generally support maintaining stable inclusionary housing requirements, rather than making frequent, market-driven adjustments, in order to preserve predictability and transparency for the development community.

Once reduced, higher inclusionary requirements are difficult to reinstate, even under improved feasibility conditions, as developers would incorporate the lower standards into their long-term project planning and financial assumptions.

Ownership Projects
This Study recommends maintaining the Existing Program’s inclusionary housing percentage and income categories for ownership projects (i.e., 15 percent of units in ownership projects set aside for Middle-Income or Upper Middle-Income, as appropriate, households).

Maintain Focus on Middle-Income/Upper-Middle-Income Households • This Study considered requiring deeper affordability (e.g., Moderate-Income). However, requiring inclusionary units with deeper affordability levels would reduce the financial feasibility of projects, and could trigger automatic SDBL density bonus and therefore the associated concessions, incentives, and waivers of development standards. This could potentially create more Moderate-Income units, but would not assist in creating Middle- and Upper-Middle-Income units, which are income categories not currently being served by the ownership market.

Maintain the 15 Percent Requirement
• This Study recommends maintaining the existing percentage requirement (e.g., 15 percent) of inclusionary housing units set aside for Middle-Income households because it balances the findings from the financial feasibility analysis with the need to produce affordable housing, although not at an income category recognized by the state or in RHNA reporting.
• The financial feasibility analysis indicates that the existing inclusionary percentage of 15 percent for ownership projects set aside for Middle-Income households is not financially feasible under current market conditions. As such, this Study did not consider a higher percentage requirement (e.g., 20 percent) of inclusionary housing units set aside for Middle-Income households.
• This Study considered a lower percentage requirement (e.g., 5 percent) of units set aside for Middle-Income households. However, as noted above, reductions in established inclusionary requirements are not generally in line with best practices, as lower requirements can be difficult to reverse once incorporated into developers’ financial assumptions.

Inclusionary Housing and In-Lieu Fee Study | Recommendations 54 C. Update the In-Lieu Fee Rate for Rental Projects with 10+ Units This Study recommends setting the in-lieu fee rate for rental projects at $50.00 per net square foot of residential space for fractional unit requirements in rental projects with 10 or more units.
• This recommendation would help the City account for construction cost increases since adoption of the $25.00 per net square foot fee rate in 2019, and more accurately reflect the cost of constructing an inclusionary unit with collected funds. • The maximum legal in-lieu fee rate that could be charged for rental projects, as shown in the Residential Nexus Analysis (Appendix D), is $91.41 per net square foot. Setting the in-lieu fee rate higher than this amount could pose legal challenges for the City. • The financial feasibility analysis indicates that an in-lieu fee rate of $50.00 per net square foot would minimally decrease financial feasibility for applicable prototypes. o For example, the RLV for Prototype V: Rental Mixed-Use Large Prototype would decrease by two percent, from $82 to $80 per site sf.
o For example, the RLV for Prototype IV: Rental Mixed-Use Prototype would not change since this prototype does not pay an in-lieu fee. • The recommended rental in-lieu fee rate of $50.00 per net square foot could generate additional revenue for the Local Housing Trust Fund, and is unlikely to materially impact whether new development gets built based on the minimal impact on RLV. o In the case of Prototype V: Rental Mixed-Use Large Prototype, Recommendation C would require a higher in-lieu fee payment of $121,650, up from $60,825 under the Existing Program.

In-Lieu Fee Payment = Fractional Remainder ÷ Total Inclusionary Requirement x In-Lieu Fee Rate x Net Floor Area
Fractional Remainder = 0.3
Total Inclusionary Requirement = 4.3
In-Lieu Fee Rate = $50.00 per square foot
Net Floor Area = 34,873 sf

0.3 ÷4.3 x $50.00 per sf x 34,873 sf = $121,650
In-Lieu Fee Payment = $121,650
Inclusionary Housing and In-Lieu Fee Study | Recommendations 55 D. Set an In-Lieu Fee Rate for Ownership Projects with 10+ Units This Study recommends setting the in-lieu fee rate for ownership projects to $50.00 per net square foot of residential space for fractional unit requirements in ownership projects of 10 or more units.
• Setting the ownership in-lieu fee rate based on the net square footage of the proposed project would align the ownership requirements with the existing rental inclusionary housing requirements and methodologies. This also supports simplifying administration of the Existing Program.
• The financial feasibility analysis indicates that an ownership in-lieu fee rate of $50.00 per net square foot would improve financial feasibility for projects that would be newlyeligible for paying on a fractional unit, such as Prototype II. • The maximum legal in-lieu fee rate that could be charged for ownership projects, as shown in the Residential Nexus Analysis (Appendix D), is $72.53 per net square foot.

Setting the in-lieu fee rate higher than this amount could pose legal challenges for the City.
• Possible benefits to implementing Recommendation D could include generating additional revenue for the Local Housing Trust Fund.

E. Set a Lower In-Lieu Fee Rate for “Small” Rental and Ownership Projects This Study recommends setting a lower in-lieu fee rate of $35.00 per net square foot for “small” ownership and rental projects with fewer than 10 units. • “Small” projects are defined as those proposing fewer than 10 units; the lower in-lieu fee rate would apply to ownership projects with two to nine units and rental projects with five to nine units.
• Small projects face financial feasibility challenges when compared to larger projects with 10 or more units due to factors such as reduced economies of scale. As such, this Study does not recommend the $50.00 per net square foot fee that is being proposed for larger projects in Recommendations C (rental projects) and D (ownership projects). • The recommended in-lieu fee rate for smaller projects is based in part on the current fee rate of $25.00 per net square foot of residential space, adopted in 2019 for rental AUD projects, adjusted for inflation. The recommended $35.00 per net square foot inlieu fee rate could help the City account for cost increases and more accurately reflect the cost of constructing an inclusionary unit with collected funds.

Inclusionary Housing and In-Lieu Fee Study | Recommendations 56 • The financial feasibility analysis indicates that implementing Recommendation E could marginally to significantly decrease financial feasibility for applicable prototypes:
o For example, Prototype I: Ownership Townhome Prototype would remain not likely feasible, and have a decreased RLV of 9.9 percent, from $81 to $73 per site sf.
o For example: Prototype III: Rental Townhome Prototype would remain not likely feasible and have a decreased RLV of 14 percent, from $42 to $36 per site sf. • There is no identified precedent in the benchmarked jurisdictions of Santa Barbara County, City of Goleta, City of Santa Monica, City of San Luis Obispo, and City of Ventura for setting a lower fee for small projects, but there is precedent in other California cities (such as the City of Sunnyvale and the City of Berkeley).

Policy-Related Recommendations
There is one policy-related recommendation and one option to consider, both intended to encourage housing development. The recommendation aligns the rental and ownership program, while the option offers two variations to allow broader use of in-lieu fee payments.

F. Count Rental Inclusionary Units as Bonus Density
This Study recommends that the City exclude inclusionary units from maximum density calculations for rental projects. This recommendation would align the ownership and rental inclusionary housing requirements to count all inclusionary units as bonus density (i.e., ownership units in the Existing Program are already entitled a bonus density for on-site units). • Counting rental inclusionary units as bonus density would benefit total rental units created in all projects that require onsite inclusionary units. o For example, Prototype IV: Rental Mixed-Use Prototype, with an obligation of two Moderate-Income inclusionary units, could provide 22 total units (versus 20 units under current requirements).
o For example, Prototype V: Rental Mixed-Use Large Prototype, with an obligation of four Moderate-Income inclusionary units, could provide 47 units (versus 43 units under current requirements).
• The financial feasibility analysis indicates that implementing Recommendation F would significantly improve financial feasibility for applicable prototypes:

Inclusionary Housing and In-Lieu Fee Study | Recommendations 57 o For example, the RLV for Prototype IV: Rental Mixed-Use Prototype would increase by 28 percent from not likely feasible ($97 per site sf) to marginally feasible ($124 per site sf).
o For example, the RLV for Prototype V: Rental Mixed-Use Large Prototype would increase by 38 percent from $82 to $113 per site sf, although it would remain not likely feasible.

G. Consider Options for In-Lieu Fee Payments to Fulfill Inclusionary Requirements This Study recommends the City consider expanding compliance options for inclusionary housing requirements with in-lieu fee payments. This recommendation proposes two options that are standalone; only one option can be implemented. • Option G.1 Consider In-Lieu Fee Payment for All Fractional Inclusionary Requirements Consider allowing in-lieu fee payment for all fractional inclusionary requirements, regardless of the total number of units proposed in the project or the tenure of the units (i.e., on projects with 10 or more units, do not require an additional unit for fractions of 0.5 or more). This recommendation would apply the in-lieu fee rates proposed in Recommendations C (rental projects) and D (ownership projects). The Existing Program already allows small projects with fewer than 10 units the option to fulfill inclusionary housing requirements with an in-lieu fee payment; this recommendation would allow projects of all sizes this compliance option. o This option would simplify program requirements as well as reduce program application and administration complexities.
 For example: Prototype II, with an obligation of 1.95 Middle-Income units, provides two onsite units as affordable to Middle-Income households under the Existing Program due to rounding conventions for ownership projects in place under the Existing Program.  Option G.1 to allow a fee of $50.00 per net sf of residential space to be paid on the fractional remainder of 0.95 would significantly improve financial feasibility for Prototype II, with RLV increasing by 23 percent from $57 per site sf to $70 per site sf.
o Compared to projects with no fractional requirement, projects with a fractional unit requirement face greater feasibility constraints because the cost of providing the affordable unit when rounding up. Allowing an in-lieu fee payment for all fractional units could mitigate this feasibility challenge for projects with fractional requirements.

Inclusionary Housing and In-Lieu Fee Study | Recommendations 58 o The requirement to round fractional inclusionary unit obligations up to the next whole unit for projects of ten or more units may, in some cases, discourage developers from maximizing unit counts in order to avoid triggering an additional inclusionary unit (e.g. building 24 units instead of 25 units).

Allowing an in-lieu fee payment alternative would reduce this incentive and support more efficient residential project sizing.
o Expanding compliance options for in-lieu fee payments to meet inclusionary housing requirements may increase flexibility for a developer—a project can provide an onsite unit or pay the in-lieu fee amount—and could generate additional revenue for the Local Housing Trust Fund. This option could also be seen as a benefit to a developer; since fewer inclusionary units are constructed within the multi-unit residential project, and there is no 90-year relationship with the City to manage the inclusionary units.
o Consequences of this option may be a possible decrease in the number of onsite inclusionary units created in multi-unit residential developments, since some projects that would have to provide one additional inclusionary unit would no longer be required to do so.
• Option G.2 Consider In-Lieu Fee Payment for All Inclusionary Requirements Consider allowing all inclusionary housing requirements to be fulfilled with an in-lieu fee payment, without requiring any onsite inclusionary units. This recommendation would apply a different set of in-lieu fee rates than those in Recommendations C (rental projects), D (ownership projects), and E (small projects). o A “fee-out” option is not common. Nearly all benchmarked jurisdictions impose restrictions on a developer’s ability to satisfy all inclusionary housing requirements through payment of an in-lieu fee alone. These restrictions may include requiring City Council approval to pay an in-lieu fee for the entirety of the inclusionary housing requirement, allowing in-lieu fee payments only for the purpose of meeting a fractional unit requirement (currently allowed in the Existing Program for projects of nine or fewer options, increase to all projects under Option G.1), or only allowing in-lieu fee payments for smaller projects. o Option G2 was not evaluated for financial feasibility; rather, it is presented as a range illustrating the minimum fee amount needed to construct the inclusionary unit(s) and the maximum legally allowable fee amount.

Inclusionary Housing and In-Lieu Fee Study | Recommendations 59 o Construction-Cost-Based Fee Rate: The minimum in-lieu fee rates derived from the construction cost analysis, which reflects the cost to construct an inclusionary unit.
 $72.52 to $73.66 per net residential sf for rental projects  $83.00 per net residential sf for ownership projects
o Nexus-Based Fee Rate: From a legal perspective, the maximum in-lieu fee rate possible would need to be set below those calculated in the Residential Nexus Analysis (Appendix D).
 $91.41 per net residential sf for rental projects
 $72.53 per net residential sf for ownership projects
o Possible Method for Setting In-Lieu Fee Rates for Projects that Waive all Onsite Inclusionary Requirements: To the extent that the City chooses to allow projects to address the entire inclusionary requirement through payment of an in-lieu fee, consider setting a single in-lieu fee rate of up to $72.00 per net square foot for both rental and ownership projects. This fee rate is consistent with the fee based on construction cost for rental projects and the Nexusbased fee for ownership projects. While the Nexus Analysis supports a fee of up to $91.41 per net residential square foot for rental projects, applying the same rate to both rental and ownership projects avoids charging rental units more than ownership units. Because rental housing is generally more affordable, fees for rental units are typically equal to or lower than those for ownership units, reducing the potential for favoring ownership housing over rental housing.
o Benefits to expanding options for in-lieu fee payments to meet inclusionary housing requirements could include generating additional revenue for the Local Housing Trust Fund, and allowing increased flexibility for a project to either pay the in-lieu fee amount or construct onsite inclusionary units. This option could also be seen as a benefit to a developer; since no inclusionary units are constructed within the multi-unit residential project, and there is no 90-year relationship with the City to manage the inclusionary units. o This option could reduce the production of Moderate- and Middle-Income units, as developers might choose to pay an in-lieu fee instead of providing units at these affordability levels on site, with the resulting revenues directed to the Local Housing Trust Fund, which is predominantly used to support the production and preservation of lower income affordable units.

Inclusionary Housing and In-Lieu Fee Study | Recommendations 60 Administration-Related Recommendations
The three administration-related recommendations simplify and clarify processes and calculations used to administer the Existing Program. These recommendations benefit staff by reducing the differences between the rental and ownership inclusionary administration processes to make one inclusionary housing program. These same recommendations will also benefit developers by simplifying calculations within the program and with other affordable housing programs.

H. Simplify In-Lieu Fee Calculations for Ownership Projects This Study recommends simplifying the methodology for calculating in-lieu fee amounts for ownership projects by aligning it with the methodology currently in place for rental projects.

This recommendation would apply in-lieu fee requirements for ownership projects on a net residential square foot basis, rather than a per-unit basis. • The recommended in-lieu fee calculation formula for ownership projects is the current calculation formula used for rental projects.

In-Lieu Fee Payment = Fractional Remainder ÷ Total Inclusionary Requirement x InLieu Fee Rate x Net Floor Area • Recommendation H would reduce the administrative burden for City staff, and minimize confusion among applicants. This recommendation works in tandem with Recommendations C (rental projects), D (ownership projects), and E (“small” projects).

I. Implement Automatic Annual In-Lieu Fee Rate Adjustments This Study recommends that the City implement a system for automatically adjusting the recommended in-lieu fee rates annually to help account for inflationary increases in the cost of construction.
• The current rental in-lieu fee rate of $25.00 per net sf of residential space has not been updated since adoption of the rental inclusionary housing requirements in July 2019. Had the in-lieu fee been implemented with an automatic adjustment to account for inflation based on the Consumer Price Index for All Urban Consumers (CPI-U) for the “Pacific” region, the equivalent fee as of September 2025 would be approximately $31.72 per sf of residential space.12
12 https://data.bls.gov/timeseries/CUUR0490SA0
Inclusionary Housing and In-Lieu Fee Study | Recommendations 61 • The recommended automatic annual in-lieu fee rate adjustment calculation is based on the change in the CPI-U for the “Pacific” region, available from the U.S. Bureau of Labor Statistics.13
o Inflation Adjustment Calculation:

Change in Inflation Rate = Current Inflation Rate – Previous Inflation Rate Inflation Adjustment = Change in Inflation Rate ÷ Previous Inflation Rate Example: Inflation Adjustment Calculation:

Change in Inflation Rate = Current Inflation Rate – Previous Inflation Rate Current Inflation Rate (CPI-U September 2025) = 133.724 Previous Inflation Rate (CPI-U July 2019) = 105.397
133.724 – 105.397 = 28.327
Change in Inflation Rate = 28.327
Inflation Adjustment = Change in Inflation Rate ÷ Previous Inflation Rate Change in Inflation Rate = 28.327
Previous Inflation Rate (CPI-U July 2019) = 105.397

28.327 ÷ 105.397 = 26.9 percent increase
Inflation Adjustment = 1.269
o Adjusted In-Lieu Fee Rate Calculation:

Adjusted In-Lieu Fee Rate = Current In-Lieu Fee Rate x Inflation Adjustment Example: In-Lieu Fee Rate Adjustment Calculation:

Adjusted In-Lieu Fee Rate = Current In-Lieu Fee Rate x Inflation Adjustment Current In-Lieu Fee Rate = $25.00 per square foot
Inflation Adjustment = 1.269
$25.00 x 1.269 = $31.72
Adjusted In-Lieu Fee Rate = $31.72 per square foot
• Recommendation I maintains in-lieu fee rates over time to remain proportionally consistent with inflating costs. This recommendation would align future in-lieu fee payments collected in the Local Housing Trust Fund to better support inflating construction costs for affordable units. If local rents do not increase at the same rate as the CPI-U, financial feasibility may decrease.
13 https://data.bls.gov/timeseries/CUUR0490SA0
Inclusionary Housing and In-Lieu Fee Study | Recommendations 62 J. Adjust Target AMI for Moderate-Income Rents from 100% to 110% This Study recommends adjusting the Target Income for maximum rent calculations for Moderate-Income inclusionary units. This recommendation would align the City with methodology used by the State by applying a target of 110 percent of AMI for ModerateIncome rent calculations. • The financial feasibility analysis indicates that Recommendation J would marginally increase financial feasibility.
o For example, Prototype IV: Rental Mixed-Use Prototype would remain not likely feasible but would have an increased RLV of seven percent, from $97 to $104 per site sf.
o For example, Prototype V: Rental Mixed-Use Large Prototype would remain not likely feasible but would have an increased RLV of seven percent, from $82 to $88 per site sf.
• Recommendation J would increase maximum monthly rent required from a tenant in an inclusionary unit.
• The lack of alignment between City programs and those used by state and federal agencies is posing complications for applicants and staff, especially when rents for inclusionary units may be calculated differently than HUD (Federal) and CTCAC (State) standards.
• Additional variables in the City’s methodology for calculating income limits and maximum rents for inclusionary and affordable units should also be evaluated to better align with existing methodologies used for State and Federally funded affordable units, such as the City-specific Unit Size Adjustment Factor (USAF).

Inclusionary Housing and In-Lieu Fee Study | Appendix A: Assumptions and Formulas 63 APPENDIX A: ASSUMPTIONS AND FORMULAS
Income
The City of Santa Barbara bases its household income limits on Area Median Income (AMI) figures supplied by the United States Department of Housing and Urban Development (HUD), published each year in April. Table 12 below displays income limits for the City of Santa Barbara, effective in 2025, based on an AMI of $113,300.

Table 12: City of Santa Barbara Income Limits, effective April 2025

Unit Monthly Rents and Sale Prices
Market-Rate Rents
Market-Rate rents used in this Study are based on Q1 2025 date from CoStar for newly-built (2017-2025) multiunit residential properties. The dataset includes approximately 387 units in 12 buildings. Price per square foot values, shown in Table 13 below, were used to calculate market-rate rents based on prototype unit sizes for each residential pro-forma.

Inclusionary Housing and In-Lieu Fee Study | Appendix A: Assumptions and Formulas 64 Table 13: Multifamily Market Overview, Newly-Built 2017-2025, City of Santa Barbara Source: CoStar, 2025; BAE, 2025
Market-Rate Sales Prices
Market-rate ownership unit sale prices used in this Study are based on condominium sales in newer buildings (built 2007 or later) from Redfin. The sample size of newer condominium buildings is comparatively small—only 3 locations—due to lack of recent condominium construction. Price per square foot values, shown in Table 14 below, were used to calculate market-rate sale prices based on prototype unit sizes for each residential pro-forma.

Table 14: Sales Prices in Newer (2007+) Condominiums, City of Santa Barbara Source: Redfin, 2025; BAE, 2025.

City of Santa Barbara
All Unit
Studio 1 BR 2 BR 3 BR Types
Inventory, Q1 2025 (units) 66 58 248 15 387
% of Units 17.1% 15.0% 64.1% 3.9% 100.0%
Occupied Units 64 55 220 14 353
Vacant Units 2 3 28 1 34
Vacancy Rate 3.0% 5.2% 11.3% 6.7% 8.8%
Avg. Unit Size (sf) 557 661 852 1,020 790
Avg. Asking Rents, Q2 2024 - Q1 2025
Avg. Asking Rent per unit, Q1 2025 $3,559 $3,731 $4,360 $4,744 $4,129 Avg. Asking Rent per unit, Q2 2024 $3,619 $3,631 $4,085 $4,544 $3,943 % Change Q2 2024 - Q1 2025 -1.7% 2.8% 6.7% 4.4% 4.7%
Avg. Asking Rent psf, Q1 2025 $6.74 $5.67 $5.15 $4.65 $5.39 Avg. Asking Rent psf, Q2 2024 $6.86 $5.52 $4.82 $4.45 $5.15 Address Sale Price Size (sf) Price per sf
601 E Micheltorena St $1,550,000 1281 $1,210
3718 State Street $1,850,000 1627 $1,137
105 De La Guerra $1,875,000 1820 $1,030
105 De La Guerra $1,995,000 1819 $1,097
Median Sale Price $1,862,500
Median Sale ppsf $1,116.91
Inclusionary Housing and In-Lieu Fee Study | Appendix A: Assumptions and Formulas 65 Affordable Rents
Maximum affordable rents are calculated by City staff based on the annual income limits published by HUD (see Table 15).

The residential pro-formas use the City’s maximum rent calculation method.

Table 15: Maximum Rents for Low- and Moderate-Income Households

Affordable Sale Prices
Affordable sale prices for ownership units are calculated annually by the City following procedures in the Affordable Housing Policies and Procedures. See Table 16.

Inclusionary Housing and In-Lieu Fee Study | Appendix A: Assumptions and Formulas 66 Table 16: Maximum Sales Prices by Income Level, City of Santa Barbara, 2025 Utility Allowances
Utility allowances are based on data published by the U.S. Department of Housing and Urban Development (HUD), effective January 2025, as shown in Table 17 below. Utility allowances used in this Study are based on a blended electric and natural gas using Basic Electricity, All Natural Gas, Water, Sewer, and Trash.

Inclusionary Housing and In-Lieu Fee Study | Appendix A: Assumptions and Formulas 67 Table 17: Utility Allowance Table, City of Santa Barbara, 2025

Inclusionary Housing and In-Lieu Fee Study | Appendix A: Assumptions and Formulas 68 In-Lieu Fee Calculations
Existing Program
In-Lieu Fee Calculation for Ownership
The in-lieu fee amount for ownership projects is prorated based on project size. The amount is based on the Estimated Production Cost of a two-bedroom unit, the average unit size of market-rate units, and the number of proposed units. City staff calculates the in-lieu fee rate.

The ownership in-lieu fee calculation method is provided in SBMC Chapter 30.160, Inclusionary Housing, and the Affordable Housing Policies and Procedures.

The following is a sample in-lieu fee calculation for Prototype I: Ownership Townhome.

The Estimated Production Cost of a two-bedroom unit is $1,129,750 as shown below in Table 18 (SBMC 30.160.070.B).

Estimate Production Cost Calculation Formula (SBMC 30.160.070.B) Median Sales Price of 2-bedroom Condo – Developer Profit – Affordable Sale Price for LowIncome Household Example Calculation (Existing Program): Estimated Production Cost Estimated Production Cost = Median Sales Price of 2-bedroom Condo – Developer Profit – Affordable Sale Price for Low-Income Household
Median Sales Price of 2-bedroom Condominium Unit = $1,129,750 (see Table 18) Developer Profit = 15% ($1,129,750 x 15% = $169,462.50) Affordable Sale Price for Low-Income household = $152,200 (see Table 16) $1,129,750 - $169,462.50 - $152,200 = $808,088
Inclusionary Housing and In-Lieu Fee Study | Appendix A: Assumptions and Formulas 69 Table 18: Median 2-br Condominium Sales Price, Q1 2025, City of Santa Barbara Notes: Based on previous 12 month sales within City of Santa Barbara as of Q1 2025.

Excludes sales prices associated with deed-restricted units.

Source: Redfin, 2025; BAE, 2025.

Condominium Address Sales Price # Beds # Baths Size (sf) Year Built Price per sf 401 Chapala St #405 $3,650,000 2 2 1969 2008 $1,854.00
929 Laguna St #D $2,402,000 2 2.5 1901 2007 $1,264.00
350 Chapala St #301 $2,100,000 2 2 1868 2003 $1,124.00
208 Santa Barbara St #D $2,050,000 2 2.5 1954 2003 $1,049.00 105 W De la Guerra St #Q $1,995,000 2 2.5 1819 2007 $1,097.00 105 W De la Guerra St #R $1,875,000 2 2.5 1820 2007 $1,030.00 362 Por la Mar Cir $1,850,000 2 2 1100 1996 $1,682.00
3718 State St #315 $1,850,000 2 2 1627 2019 $1,137.00
400 E Pedregosa St #C $1,800,000 2 2 1655 1962 $1,088.00 105 W De la Guerra St #P $1,765,000 2 2.5 1809 2007 $976.00 216 Santa Barbara St #B $1,660,000 2 2.5 1696 2004 $979.00 212 Santa Barbara St #B $1,610,000 2 2.5 1696 2004 $949.00 2754 Miradero Dr $1,595,000 2 2 1604 1963 $994.00
271 Calle Esperanza $1,465,000 2 2.5 1499 1997 $977.00
18 E Valerio St $1,340,000 2 2.5 1343 1980 $998.00
50 Barranca Ave #10 $1,295,000 2 2 1973
15 W Arrellaga St #1 $1,280,000 2 2 1578 1987 $811.00
2824 Miradero Dr $1,250,000 2 2 1358 1963 $920.00
2090 Cliff Dr $1,246,000 2 2.5 1582 1983 $788.00
513 Coronel Pl #2 $1,175,000 2 2.5 1484 2003 $792.00
2525 State St #20 $1,150,000 2 1.5 1368 1967 $841.00
2633 State St #1 $1,132,000 2 2 1392 1958 $813.00
101 Oceano Ave #12 $1,127,500 2 2 892 1959 $1,264.00
1026 E De la Guerra St #2 $1,112,000 2 2 1375 1981 $809.00 2732 Miradero Dr $1,099,000 2 2 1184 1963 $928.00
2732 Miradero Dr Unit A $1,099,000 2 2 1184 1963 $928.00 1924 Bath St #B $1,050,000 2 2 690 1924 $1,522.00
325 Ladera St #5 $975,000 2 2 1090 1987 $894.00
12 W Constance Ave #4 $975,000 2 2 1392 1958 $700.00
2821 Miradero Dr #D $949,000 2 1.5 1088 1964 $872.00
972 Miramonte Dr #3 $940,500 2 1.5 1104 1973 $852.00
3340 McCaw Ave #205 $930,000 2 2 1246 1974 $746.00
1225 E Cota St #B $925,000 2 2 1170 1987 $791.00
3639 San Remo Dr #18 $915,000 2 2 1049 1963 $872.00
520 E De la Guerra St #C $910,000 2 1.5 1271 1985 $716.00 1600 Garden St #29 $905,000 2 2 1076 1968 $841.00
2648 State St #29 $900,000 2 2 1311 1968 $686.00
25 Ocean View Ave #A2 $898,149 2 1.5 1286 1981 $698.00
611 W Sola St #9 $890,000 2 1.5 1110 1983 $802.00
1121 Chino St #3 $890,000 2 1.5 1112 1977 $800.00
3663 San Remo Dr #1g $880,000 2 2 1123 1968 $784.00
2525 State St #16 $875,000 2 2 1400 1968 $625.00
1600 Garden St #32 $799,000 2 2 889 1968 $899.00
2727 Miradero Dr #305 $760,000 2 2 1063 1969 $715.00
Median 2 br Sales Price $1,129,750
Inclusionary Housing and In-Lieu Fee Study | Appendix A: Assumptions and Formulas 70 When market-rate units have an average unit size smaller than 1,700 square feet, the Estimated Production Cost is appropriately adjusted. (SBMC 30.160.070.D) • 15 percent reduction when average market-rate unit sizes are 1,400 to 1,699 sf • 20 percent reduction when average market-rate unit sizes are 1,100 to 1,399 sf • 25 percent reduction when average market-rate unit sizes are 800 to 1,099 sf • 30 percent reduction when average market-rate unit sizes are less than 800 sf Adjusted Estimated Production Cost Calculation Formula (SBMC 30.160.070.D) Estimated Production Cost – (Estimated Production Cost x Adjustment Percent) Example Calculation (Existing Program): Adjusted Estimated Production Cost Estimated Production Cost – (Estimated Production Cost x Adjustment Percent) Estimated Production Cost = $808,088
Adjustment Percent = 20% reduction
$808,088 – ($808,088 x 20%) = $646,470
The ownership in-lieu fee rate for projects of two to nine units is five percent of the adjusted Estimated Production Cost. (SBMC 30.160.030.A.2)
In-Lieu Fee Rate for Two to Nine Unit Project Calculation Formula (SBMC 30.160.030.A.2) Adjusted Estimated Production Cost x 5%
Example Calculation (Existing Program): In-Lieu Fee Rate for Two to Nine Unit Projects Adjusted Estimated Production Cost x 5%
Adjusted Estimated Production Cost = $646,470
$646,470 x 5% = $32,324
The in-lieu fee amount for projects of two to nine units is the In-Lieu Fee Rate multiplied by one less than the number of units proposed in the project. (SBMC 30.160.030.A.2) In-Lieu Fee Amount for Two to Nine Unit Project Calculation Formula (SBMC 30.160.030.A.2) In-Lieu Fee Rate for Two to Nine Unit Project x (Total Proposed Units – 1 Unit) Example Calculation (Existing Program): In-Lieu Fee Amount for Two to Nine Unit Projects In-Lieu Fee Rate for Two to Nine Unit Project x (Total Proposed Units – 1 Unit) In-Lieu Fee Rate for Two to Nine Unit Project = $32,324 Total Proposed Units = 4 units
$32,324 x (4 units – 1 unit) = $96,971
Inclusionary Housing and In-Lieu Fee Study | Appendix A: Assumptions and Formulas 71 In-Lieu Fee Calculation for Rental
The in-lieu fee amount for AUD Program rental projects is prorated based on project size. The amount is based on the in-lieu fee rate, inclusionary housing requirement, and net residential area of the project.

There is one formula used for all rental in-lieu fee amounts. (SBMC 30.150.120.C) Rental In-Lieu Fee Amount Calculation Formula (SBMC 30.150.120.C) Fractional Inclusionary Requirements / Total Inclusionary Requirement x In-Lieu Fee Rate x Net Floor Area
The in-lieu fee rate for all AUD Program rental projects is $25.00 per square foot. (SBMC

30.150.120.B)
The inclusionary housing requirement is 10 percent of the total proposed units. The in-lieu fee amount is based on the fractional remainder of the inclusionary housing requirement divided by the total inclusionary housing requirement. For projects of five to nine units, the fractional inclusionary requirement and total inclusionary requirement are always the same number. For projects of 10 or more units, the fractional inclusionary requirement will always be less than

0.5, since any inclusionary requirement calculation with a remainder of 0.5 or above is rounded up to the next whole number for onsite units.

The following are sample in-lieu fee calculations for Prototype III: Rental Townhome and Prototype V: Rental Mixed-Use Large.

Example Calculation (Existing Program): Rental In-Lieu Fee Amount for Prototype III Fractional Inclusionary Requirements / Total Inclusionary Requirement x In-Lieu Fee Rate x Net Floor Area
Fractional Inclusionary Requirement = 0.5
Total Inclusionary Requirement = 0.5
In-Lieu Fee Rate = $25.00 per square foot
Net Floor Area = 4,525 square feet

0.5 / 0.5 x $25/sf x 4,525 sf = $113,125
Example Calculation (Existing Program): Rental In-Lieu Fee Amount for Prototype V Fractional Inclusionary Requirements / Total Inclusionary Requirement x In-Lieu Fee Rate x Net Floor Area
Fractional Inclusionary Requirement = 0.3
Total Inclusionary Requirement = 4.3
In-Lieu Fee Rate = $25.00 per square foot
Net Floor Area = 34,873 square feet

0.3 / 4.3 x $25/sf x 34,873 sf = $60,825
Inclusionary Housing and In-Lieu Fee Study | Appendix A: Assumptions and Formulas 72 In-Lieu Fee Rates and Inflation
The ownership in-lieu fee rate maintains a relationship with inflation and current costs because it is based on unit sales prices from the preceding four quarters.

The rental in-lieu fee rate is a static value of $25.00 per square foot and has not kept pace with inflation and current costs. The rate has remained $25.00 since it was adopted in 2019.

To keep pace with inflation, based on the Consumer Price Index for all Urban Consumers (CPIU) for the “Pacific” region, which is readily available from the U.S. Bureau of Labor Statistics, the rate would have increased 26.9 percent since adoption up to $31.72 per square foot (July 2019 to September 2025).
o Inflation Adjustment Calculation:

Change in Inflation Rate = Current Inflation Rate – Previous Inflation Rate Inflation Adjustment = Change in Inflation Rate ÷ Previous Inflation Rate Example: Inflation Adjustment Calculation:

Change in Inflation Rate = Current Inflation Rate – Previous Inflation Rate Current Inflation Rate (CPI-U September 2025) = 133.724 Previous Inflation Rate (CPI-U July 2019) = 105.397
133.724 – 105.397 = 28.327
Change in Inflation Rate = 28.327
Inflation Adjustment = Change in Inflation Rate ÷ Previous Inflation Rate Change in Inflation Rate = 28.327
Previous Inflation Rate (CPI-U July 2019) = 105.397

28.327 ÷ 105.397 = 26.9 percent increase
Inflation Adjustment = 1.269
o Adjusted In-Lieu Fee Rate Calculation:

Adjusted In-Lieu Fee Rate = Current In-Lieu Fee Rate x Inflation Adjustment Example: In-Lieu Fee Rate Adjustment Calculation:

Adjusted In-Lieu Fee Rate = Current In-Lieu Fee Rate x Inflation Adjustment Current In-Lieu Fee Rate = $25.00 per square foot
Inflation Adjustment = 1.269
$25.00 x 1.269 = $31.72
Adjusted In-Lieu Fee Rate = $31.72 per square foot
Inclusionary Housing and In-Lieu Fee Study | Appendix A: Assumptions and Formulas 73 Estimated Construction Cost for an Affordable Unit
The estimated average construction cost for an affordable unit in Santa Barbara County is based on cost estimates provided in ten applications for tax credit funding that were submitted in 2023 and 2024 for proposed affordable housing developments in Santa Barbara, Ventura, and San Luis Obispo County. Cost information from applications was inflated to 2025 estimates based on the RS Means Historical Cost Index. Based on the information from these applications, the estimated average cost to construct an affordable housing unit in Santa Barbara County is approximately $757,000, as shown in Table 19 below.

This may underestimate the cost of constructing new affordable units in Santa Barbara; for example, the Housing Authority recently estimated that the cost to construct affordable housing in Santa Barbara averages approximately $1 million per unit. To the extent that the estimate of $757,000 understates the true average cost of constructing an affordable unit in Santa Barbara, this analysis may underestimate the fee that could be supported based on the nexus analysis.

Inclusionary Housing and In-Lieu Fee Study | Appendix A: Assumptions and Formulas 74 Table 19: LIHTC Completed Project Sample for Construction Cost Source: BAE, 2025.

Project Name
City
Tax Credit Type Target
Application Year Awarded? Pop. Units Category Project Project - Adjusted Per Unit College Community Courts (24-467) Yes Large Family 57 Total $42,275,756 $43,778,252 $768,040 Ventura Acquisition $640,426 $663,187 $11,635
4% Hard Costs $26,144,574 $27,073,762 $474,978
2024 Soft Costs $15,490,756 $16,041,303 $281,426
Bella Vista (24-172) Yes Large Family 48 Total $51,044,489 $52,858,628 $1,101,221 Santa Barbara Acquisition $6,227,000 $6,448,310 $134,340 9% Hard Costs $35,209,723 $36,461,089 $759,606
2024 Soft Costs $9,607,766 $9,949,229 $207,276
Arroyo Terrace (24-017) Yes Large Family 63 Total $36,598,716 $37,899,447 $601,579 Arroyo Grande Acquisition $3,318,000 $3,435,923 $54,538 9% Hard Costs $23,161,146 $23,984,301 $380,703
2024 Soft Costs $10,119,570 $10,479,223 $166,337
Monterey Senior (24-018) Yes Senior 55 Total $37,575,544 $38,910,992 $707,473 San Luis Obispo Acquisition $4,426,000 $4,583,302 $83,333 9% Hard Costs $22,400,096 $23,196,203 $421,749
2024 Soft Costs $10,749,448 $11,131,487 $202,391
Buellton Garden Apartments (23-497) Yes Large Family 89 Total $61,889,914 $65,053,408 $730,937 Buellton Acquisition $2,065,741 $2,171,331 $24,397
4% Hard Costs $41,624,035 $43,751,641 $491,591
2023 Soft Costs $18,200,138 $19,130,435 $214,949
Patterson Point (23-667) Yes Special Needs 24 Total $18,836,671 $19,799,505 $824,979 Goleta Acquisition $2,940,000 $3,090,278 $128,762
4% Hard Costs $9,430,151 $9,912,172 $413,007
2023 Soft Costs $6,466,520 $6,797,055 $283,211
Cleaver & Clark (23-030) Yes Large Family 53 Total $40,971,733 $43,065,997 $812,566 Grover Beach Acquisition $2,992,360 $3,145,314 $59,346
9% Hard Costs $25,110,015 $26,393,510 $497,991
2023 Soft Costs $12,869,358 $13,527,173 $255,230
Martha Garden Apartments (23-56) Yes Special Needs 40 Total $19,706,740 $20,714,047 $517,851 San Luis Obispo Acquisition $3,438,000 $3,613,733 $90,343 9% Hard Costs $10,062,485 $10,576,827 $264,421
2023 Soft Costs $6,206,255 $6,523,487 $163,087
Bridge Street Family Apartments (23-55) Yes Large Family 31 Total $25,001,889 $26,279,857 $847,737 San Luis Obispo Acquisition $2,700,000 $2,838,010 $91,549 9% Hard Costs $13,653,889 $14,351,805 $462,961
2023 Soft Costs $8,648,000 $9,090,041 $293,227
Village Senior Apartments (23-119) Yes Special Needs 50 Total $35,886,254 $37,720,575 $754,411 Special Needs Acquisition $3,155,101 $3,316,374 $66,327 9% Hard Costs $20,930,000 $21,999,834 $439,997
2023 Soft Costs $11,801,153 $12,404,367 $248,087
Weighted Avg Total (Adjusted) $757,021
Development Costs
Inclusionary Housing and In-Lieu Fee Study | Appendix A: Assumptions and Formulas 75 Financial Feasibility Methodology
Financial feasibility was determined via the preparation of static pro-forma models for each development prototype, included in Appendix C.

Residual Land Value
The pro-formas calculate the Residual Land Value (RLV) for each development prototype. The RLV represents how much the developer can afford to pay for land after accounting for development costs (hard and soft) and developer profit. RLV is equal to the market value of the completed project net of total development costs and developer profit.

Residual Land Value Calculation Formula
Value of Completed Project – Total Development Cost – Developer Profit • The value of a completed ownership project is the total revenue from unit sales minus the marketing costs.
• The value of a completed rental project is the annual sum of the collected monthly rents minus the vacancy rate and operating costs (the net operating income), divided by the capitalization (“cap”) rate. The cap rate is a common metric used to estimate the value of a property based on its Net Operating Income (NOI), and varies based on property type, location, and other property-specific characteristics. • Total development costs include both hard costs and soft costs.

Example Calculation: Prototype I: Ownership Townhome RLV Value of Completed Project – Total Development Cost – Developer Profit Value of Completed Project = Total Revenue – Marketing Costs Total Revenue = $5,054,014
Marketing Costs = 5% Total Revenue (5% x $5,054,014 = $252,701) $5,054,014 – $252,701 = $4,801,313
Total Development Cost = Hard Costs + Soft Costs
Hard Costs = $2,981,765
Soft Costs = $561,385
$2,981,765 + $561,385 = $3,543,150
Developer Profit = 15% Total Development Cost (15% x $3,543,150 = $531,472) $4,801,313 – $3,543,150 – $531,472 = $726,692
Example Calculation: Prototype III: Rental Townhome RLV Value of Completed Project – Total Development Cost – Developer Profit Value of Completed Project = (Annual Rents Collected – Vacancy – Operating Costs) / Capitalization Rate
Annual Rents Collected = $272,418
Vacancy = 5% Annual Rents (5% x $272,418 = $13,621)
Inclusionary Housing and In-Lieu Fee Study | Appendix A: Assumptions and Formulas 76 Operating Costs = 30% Annual Rents (30% x $272,418 = $81,725) Capitalization Rate = 4.87%
($272,418 – $13,621 – $81,725) / 4.87% = $3,635,969
Total Development Cost = Hard Costs + Soft Costs
Hard Costs = $2,462,500
Soft Costs = $499,650
$2,462,500 + $499,650 = $2,962,150
Developer Profit = 10% Total Development Cost (10% x $2,962,150 = $296,215) $3,635,969 – $2,962,150 – $296,215 = $377,604
Financial Feasibility Thresholds
Determination of financial feasibility for the development prototypes depend on comparable land values. Land valuation assumptions are based on recent sales in the City of Santa Barbara, as well as conversations with local developers.

Prototypes are considered financially feasible if they achieve the following RLV thresholds:
• RLV of $125.00 per site square foot ($125/sf) for projects in the Medium-High Density and High Density areas, which allows for densities up to 27 du/acre and 36 du/acre, respectively.
• RLV of $150.00 per site square foot ($150/sf) for projects in the Priority Housing Overlay, which allows for densities up to 63 du/acre.
• Prototypes achieving an RLV of between $125 and $150/sf in the Priority Housing Overlay are considered marginally feasible. These marginally feasible prototypes could be made feasible under more favorable conditions, such as a discounted land value or participation with a longer term property owner.

Table 20: Comparable Land Sales, Santa Barbara
Note: Includes land sales since 2023, including those with proposed multifamily use, or location near downtown Santa Barbara.

Source: CoStar, 2025; Santa Barbara County Assessor, 2024; BAE, 2025 Sale Price Price
Address City Ac. Sq. Ft. Year Sale Price per Acre psf
428 Anacapa St Santa Barbara 0.15 6,534 2023 $1,500,000 $10,000,000 $229.57 102 W De La Guerra St Santa Barbara 0.59 25,700 2023 $4,578,750 $7,760,593 $178.16 117 E Ortega St Santa Barbara 1.06 46,174 2023 $7,815,600 $7,373,208 $169.27 1317 Punta Gorda St Santa Barbara 0.55 23,958 2022 $3,850,000 $7,000,000 $160.70 Camino Pescadero Unincorporated 0.82 35,719 2023 $3,950,000 $4,817,073 $110.58 105 San Angelo Ave Unincorporated 1.30 56,628 2024 $3,070,000 $2,361,538 $54.21 4085 State St Unincorporated 1.71 74,488 2023 $3,025,000 $1,769,006 $40.61 Avg. $5,868,774 $134.73
Inclusionary Housing and In-Lieu Fee Study | Appendix B: Input from Practitioners 77 APPENDIX B: INPUT FROM PRACTITIONERS
BAE conducted a series of one-on-one interviews with nine professionals in the Santa Barbara development community to help inform this Study. The interviews included members from the private sector as well as non-profit and affordable housing providers including the Housing Authority of the City of Santa Barbara. The interviews focused on collecting detailed assumptions for the financial feasibility analysis, as well as soliciting general feedback on the impact that changes to the City’s Existing Program might have on development feasibility in Santa Barbara.

Accordingly, BAE sought information related to inputs for pro-formas including construction costs (hard and soft), developer profit thresholds, operating expenses, capitalization rates, land values, and other financial assumptions.

The interviews also helped inform the development prototypes, including factors such as optimal unit size and mix, parking ratios, amenities, and other factors. To this end, local practitioners also provided information on development programs and design features for numerous conceptual, planned, and completed residential projects, which also informed the prototypes.

As requested by City Staff, BAE also solicited more specific information where applicable, including the cost of design solutions related to Tier 4 stormwater mitigation regulations, the impact of affordability covenant length (e.g., 55 versus 90 years) on development strategies, and projected costs associated with the adaptive reuse of commercial buildings.

Financial Feasibility of Residential Development
Many interviewees noted that financial feasibility remains a significant challenge for new residential development in the City of Santa Barbara.

Contributing factors include persistently high interest rates that have made the cost of borrowing higher than in previous development cycles. Banks have also tightened their lending criteria, making it more difficult for developers to secure financing. Some developers noted that the lack of financing has indeed paused some residential projects in the City’s residential pipeline, requiring applicants to pursue extensions for their entitlements.

Practitioners also noted significant increases in construction costs, due to factors such as construction labor shortages, materials costs and the potential effect of tariffs. For the residential projects that are moving forward, developers noted that there are often unique factors at play. A forthcoming residential development comprised of “microunits,” for example, is only financially feasible due to the cross-subsidy of a more lucrative commercial component (e.g., storage space).

Inclusionary Housing and In-Lieu Fee Study | Appendix B: Input from Practitioners 78 Site Availability
Practitioners reported that obtaining suitable development sites can also represent a key obstacle to producing new housing in Santa Barbara. Santa Barbara is mostly built out with few vacant sites, which means that developers often must purchase property with an existing income-generating use in order to pursue redevelopment. Property owners can be unwilling to sell an income-producing property to make the site available for redevelopment, and due to small lot sizes, many projects also require combining multiple lots to make development feasible. Stakeholders cited challenges in obtaining sites as a barrier to feasibility, particularly for projects along State Street.

Experience with Existing Inclusionary Program
While the City’s Inclusionary Program for rental units has been in effect since 2019, some practitioners noted that they have not yet been subject to the Program, as their applications were submitted prior to ordinance implementation. As such, some local developers still do not have direct experience working with City staff to prepare and submit the required Affordable Housing Plans and related marketing materials.

Onsite Unit versus Fee Options
Nearly all practitioners indicated that if given the choice, they would prefer to pay an in-lieu fee rather than provide onsite affordable units under current requirements.

It should be noted that even if the in-lieu fee rates were raised to equal the net cost of providing onsite affordable units as required under the Existing Program, most practitioners’ preference would be to “fee out” by paying an in-lieu fee and not providing onsite units.

Explanations included factors such as the additional paperwork involved in executing the covenant, perceived difficulty in finding qualified applicants at the appropriate income level, and the inability to capture market rents over the covenant period. Over the long-term, property owners are also required to file reports with the City annually and upon each change in occupancy to ensure compliance with the affordability conditions.

Given the strong preference for paying an in-lieu fee versus providing onsite units, the City may wish to ensure that any updated fee rates are appropriately calibrated to meet City goals.

Affordability Covenant Lengths
Santa Barbara requires a 90-year affordability term for inclusionary units. These affordability terms are longer than those required by the State of California, which generally requires 55- year affordability covenants for projects built pursuant to the State Density Bonus Law.

Most development practitioners indicated that covenant length differences on their own are not likely to influence development decisions, especially when compared to the many incentives offered by the State. If incentives granted under AUD Program and/or a local density bonus program were to match those already granted by the State, the City could face a Inclusionary Housing and In-Lieu Fee Study | Appendix B: Input from Practitioners 79 situation in which covenant length played more of a role in developer decisions. However, this is not currently the case.

AUD Program
Generally speaking, applicants reported taking advantage of the maximum unit size to which they are entitled under the AUD Program. More broadly, some stakeholders noted that the AUD Program has essentially implemented a “cap” on net rentable residential floor-area-ratio (FAR) by regulating the maximum average unit size. However, due to the fact that non-leasable floor area (e.g. amenity space) does not count towards maximum building area, this can have the unintended consequence of layouts that are not as efficient, with comparatively high buildingwide “circulation factors.” Parking Requirements
Many interviewees expressed that they generally aim to provide one parking space per unit for residential projects, even if allowed to provide less. Others reported having undertaken projects with fewer than one space per unit and expressed a continued interest in lower parking ratios. Developers in Santa Barbara have generally avoided building underground parking due to the high cost of underground construction and issues with water tables, and some have used parking lifts to expand the amount of parking available in at-grade garages.

Storm Water Management Program - Tier 4 Requirements
Most new residential projects within the City of Santa Barbara must comply with the City’s Storm Water Management Program (SWMP). New residential projects are required to incorporate permanent storm water protection best management practices (BMPs), which are based on the quantity of “new or replaced” impervious surface.

Of particular note to this Study, “Tier 4” storm water regulations apply to impervious surface areas of 15,000 sf or more, and would likely apply to Prototypes V, SDBL-I, and SDBL-II. Given the high lot coverage of these prototypes, design solutions to comply with Tier 4 almost certainly require utilizing cisterns, large above ground rain barrels, and/or underground storage tanks.

Practitioners noted that permeable pavement, which is a less expensive BMP compared to underground storage tanks, is not always an option. Soil engineers, for example, often disallow permeable pavement treatments near the base of a building as they can accumulate moisture near the foundation. Practitioners noted that Tier 4 design solutions such as underground cisterns can add significant cost, impacting financial feasibility, for example, between $250,000 and $1 million in hard costs to the residential project. The updated regulations, which went into effect on March 1, 2021, apply to all projects, regardless of whether they require a discretionary permit.

Inclusionary Housing and In-Lieu Fee Study | Appendix B: Input from Practitioners 80 Potential for Condominium Development
Condominium development is less incentivized when compared to multi-unit rental development, due in part to lower allowable densities when compared to AUD Rental projects in the Priority Housing Overlay. Some stakeholders expressed an interest in condominium development if the standards were changed to allow condominium densities more similar to the allowable densities for rental developments in the Priority Housing Overlay. Stakeholders stated that condominiums can be attractive to a developer in part because the developer can build the units and sell them relatively quickly, whereas rental developments tend to require a longer holding period. Some stakeholders see condominiums as potential starter homes in Santa Barbara’s expensive for-sale market, though some expressed skepticism that even condominiums would be truly affordable.

State Density Bonus Law versus AUD Program
Nearly all interviewees indicated that State Density Bonus Law incentives are comparatively more attractive to pursue than development within the AUD Program and/or the City’s Local Density Bonus Program. State law requires local governments to grant “waivers” or reductions of development standards that would "physically preclude the construction of a development" at the densities or with the concessions/incentives permitted. Unlike incentives, waivers are not limited in number and are not tied to an implied showing of cost reduction. As such, many practitioners indicated that their projects would not be able to be realized without the utilization of these waivers.

Experience with Local Density Bonus Ordinance
Comparatively few practitioners interviewed were familiar with the City’s Local Density Bonus Program. Those that were familiar agreed that the local program is not currently competitive with the Statewide program, due in large part to the broad availability of waivers allowed by the State. As long as the ability to request such waivers is in place, one applicant reported it was “hard to imagine” using the existing Local Density Bonus Ordinance.

Inclusionary Housing and In-Lieu Fee Study | Appendix C: Residential Pro-Formas 81 APPENDIX C: RESIDENTIAL PRO-FORMAS
This appendix provides the detailed pro-formas for residential development prototypes used in the Inclusionary Housing and In-Lieu Fee Study based on the Existing Program. This appendix also includes a description of the key assumptions used in the residential pro-formas.

Key Assumptions
BAE developed the various modeling inputs and assumptions needed for the financial feasibility analysis based on interviews with residential developers who are active in the local area, data from industry publications and databases, experience with recent development projects in the local area, and other research. Developers vary somewhat in the categorization of various project costs, and therefore may show different cost figures for individual cost items even for projects with similar overall development costs. Any variation in the specific cost items described below would not affect the findings of this analysis provided that the total development costs for the prototype projects are consistent with total development costs for similar projects.

Hard Costs: Hard costs are all costs associated with the physical construction of a building, including all construction materials and labor (non-prevailing wage). This analysis uses a hard cost assumption of $425.00 per gross foot of residential and non-residential space for the rental prototypes, and $500.00 per gross square foot of residential space for the ownership prototypes.

For Prototype V, Prototype SDBL-I, and Prototype SDBL-II requiring Tier 4 storm water mitigation measures due to larger impervious surface areas, a cost premium (additional $17/sf gross building area) is applied based on feedback from local developers.

Parking is included as a separate cost item in order to estimate the specific cost of building parking in these projects. Based on stakeholder interviews, estimated cost for a podium parking space is approximately $40,000 per space.

Soft Costs: Soft costs may include design, legal, permitting and developer fees. This analysis assumes that soft costs are equal to approximately 15 percent of hard costs, as corroborated during interviews with local developers as well as BAE research. This soft cost estimate includes engineering, architecture, financing, and City fees for planning, permitting, and entitlements, but does not include the cost of inclusionary in-lieu fees, which are included as a separate line item in the pro-formas.

Affordable Residential Rents: The affordable rental rates used in this analysis are based on income limits for households at each income level, as published by the City of Santa Inclusionary Housing and In-Lieu Fee Study | Appendix C: Residential Pro-Formas 82 Barbara in April of each year, assuming an affordable rent equal to 30 percent of the total household income. Additional information on Affordable Rents can be found in Appendix A.

Market-Rate Residential Rents: Market-Rate rents used in this Study are based on Q1 2025 data from CoStar for newly-constructed (2017-2025) multiunit residential properties. The dataset includes approximately 387 units in 12 buildings. Price per square foot values were used to calculate market-rate rents based on prototype unit sizes for each residential pro-forma.

Market-Rate Residential Sale Prices: This analysis assumes that sale prices for marketrate units will average approximately $1,100.00 per net residential square foot for condominiums. This assumption is based on information provided by data from Redfin for sale prices among recently-sold condominiums in Santa Barbara.

Affordable Residential Sale Prices: The affordable sale prices used in this analysis are based on 2025 figures published by the City of Santa Barbara. Additional information on Affordable Residential Sales Prices can be found in Appendix A.

Residential Rental Operating Expenses: This analysis assumes an estimate of 30 percent of gross revenues per year for all residential rental units.

Developer Profit: Real estate development has higher risk compared to many other types of investment activity, so developers tend to seek higher profit threshold on real estate projects than other investment options as a requirement for deciding whether to pursue a project. As corroborated during interviews with local developers, this study assumes a 10 percent profit threshold (expressed as a percentage of total hard and soft costs) for rental prototypes, and a 15 percent profit threshold for ownership prototypes.

Inclusionary Housing and In-Lieu Fee Study | Appendix C: Residential Pro-Formas 83 Figure 4: Financial Feasibility under Existing Program, Prototype I: Ownership Townhome Prototype Notes:
(a) Per Santa Barbara Municipal Code Chapter 30.160, ownership projects with less than ten units pay an In-Lieu Fee. (b) Hard Costs include Site Prep work (e.g., grading, minor demolition), and assumes Tier 3 Stormwater Requirements. (c) Soft costs shown in this line include engineering, architecture, as well as City cost-recovery fees for planning, permitting, and entitlements, and financing. (d) Per Santa Barbara Unified Developer Fee Schedule, effective October 2024. (e) Based on sales of recently-sold (previous 12 months) condominiums in City of Santa Barbara, adjusted on a price-per-square foot basis to match prototype. (f) Per published 2025 Maximum Sales Prices by Bedroom Count for "Middle" Income (120-160% AMI), City of Santa Barbara (g) Per Santa Barbara Municipal Code Section 30.160.030, Developments of Less Than Ten Units But More Than One Unit –Payment of an In-Lieu Fee.

In-Lieu Fee shall equal 5% of the In-Lieu Fee specified by Subsection 30.160.070.B, Calculation of In-Lieu Fee, multiplied by the number of units less one unit Equals $1,129,750 x 0.85 - $152,200 = $808,087 x 0.8 x 0.05 x 3 Source: BAE, 2025.

Development Program Assumptions Cost and Income Assumptions Development Cost Analysis Site Size (acres) 0.21 Development Costs Hard Costs
Site Size (sf) 9,000 Construction Hard Costs Residential $2,661,765 Residential, per sf (includes Site Prep) $500.00 (b) Podium Parking $320,000 Total Dwelling Units 4 Podium Parking, per space $40,000 Underground Parking $0 Avg. Unit Size (net, sf) 1,131 Total Hard Costs $2,981,765 Hard Costs per Unit $745,441
Gross Building Area (sf) 5,324 Soft Costs (as a % of hard costs) 15% (c) Hard Costs per Gross Building sf $560 Net (% of gross res. area) 85%
Net (sf) 4,525 School Fee (per sf residential) $3.79 (d) Soft costs $447,265 School Fee $17,150
Total Parking Spaces 0 Market Rate Sales Prices (e) In-Lieu Fee $96,971 (g) Podium Spaces 8 Market-Rate 1 BR $830,000
Tuck-Under Spaces 0 Market-Rate 2 BR $1,263,504 Total Soft Costs $561,385 Parking Ratio (spaces per dwelling unit) 2.00 Market Rate 3 BR $1,395,000 Developer Profit $531,472
Unit Mix % # Middle-Income Sales Prices (f)
One-Bedroom 0% 0 Middle Income 1 BR $355,700 Total Development Costs (Excl. Land) $4,074,622 Two-Bedrooms 100% 4 Midldle Income 2 BR $444,600 Cost per residential sf $765 Three-Bedrooms 0% 0 Middle Income 3 BR $503,800 Cost per residential unit $1,018,656 Affordability Share Valuation Analysis
Market 100% 4 (a) Marketing and Sales Costs 5% Projected Revenue Middle/Upper Middle 0% 0 (% of Sale Price) Gross Sales from Market Rate Units $5,054,014 Sales from Moderate 1 BRs $0
Developer Profit 15% Sales from Moderate 2 BRs $0
Affordable Breakdown Aff Market (as % of total hard and soft costs) Sales from Moderate 3 BRs $0 One-Bedroom 0 0 Total Gross Revenue $5,054,014
Two-Bedrooms 0 4
Three-Bedrooms 0 0 Less Marketing Costs ($252,701)
Total 0 4 Less Total Development Costs ($4,074,622)
Residual Land Value (RLV) $726,692
RLV per Site sf $81
Feasibility Threshold per Site sf $125
Financially Feasible? No
Inclusionary Housing and In-Lieu Fee Study | Appendix C: Residential Pro-Formas 84 Figure 5: Financial Feasibility, Prototype I with Recommended Small Project In-Lieu Fee $35.00/sf Notes:
(a) Per Santa Barbara Municipal Code Chapter 30.160, ownership projects with less than ten units pay an In-Lieu Fee. (b) Hard Costs include Site Prep work (e.g., grading, minor demolition), and assumes Tier 3 Stormwater Requirements. (c) Soft costs shown in this line include engineering, architecture, as well as City cost-recovery fees for planning, permitting, and entitlements, and financing. (d) Per Santa Barbara Unified Developer Fee Schedule, effective October 2024. (e) Based on sales of recently-sold (previous 12 months) condominiums in City of Santa Barbara, adjusted on a price-per-square foot basis to match prototype. (f) Per published 2025 Maximum Sales Prices by Bedroom Count for "Middle" Income (120-160% AMI), City of Santa Barbara. (g) Based on recommended in-lieu fee calculation method and in-lieu fee rate. Calculation = 0.5 divided by 0.5 x $35 x 4,525 sf Source: BAE, 2025
Development Program Assumptions Cost and Income Assumptions Development Cost Analysis Site Size (acres) 0.21 Development Costs Hard Costs
Site Size (sf) 9,000 Construction Hard Costs Residential $2,661,765 Residential, per sf (includes Site Prep) $500.00 (b) Podium Parking $320,000 Total Dwelling Units 4 Podium Parking, per space $40,000 Avg. Unit Size (net, sf) 1,131 Total Hard Costs $2,981,765 Hard Costs per Unit $745,441
Gross Building Area (sf) 5,324 Soft Costs (as a % of hard costs) 15% (c) Hard Costs per Gross Building sf $560 Net (% of gross res. area) 85%
Net (sf) 4,525 School Fee (per sf residential) $3.79 (d) Soft costs $447,265 In-Lieu Fee $35.00 School Fee $17,150
Total Parking Spaces 0 In-Lieu Fee $158,375 (g)
Podium Spaces 8
Total Soft Costs $622,789
Parking Ratio (spaces per dwelling unit) 2.00 Market Rate Sales Prices (e) Market-Rate 1 BR $830,000 Developer Profit $540,683
Unit Mix % # Market-Rate 2 BR $1,263,504
One-Bedroom 0% 0 Market Rate 3 BR $1,395,000 Total Development Costs (Excl. Land) $4,145,237 Two-Bedrooms 100% 4 Cost per residential sf $779
Three-Bedrooms 0% 0 Middle-Income Sales Prices (f) Cost per residential unit $1,036,309 Middle Income 1 BR $355,700
Affordability Share Midldle Income 2 BR $444,600 Valuation Analysis Market 100% 4 (a) Middle Income 3 BR $503,800 Projected Revenue Middle/Upper Middle 0% 0 Gross Sales from Market Rate Units $5,054,014 Sales from Moderate 1 BRs $0
Marketing and Sales Costs 5% Sales from Moderate 2 BRs $0 Affordable Breakdown Aff Market (% of Sale Price) Sales from Moderate 3 BRs $0 One-Bedroom 0 0 Total Gross Revenue $5,054,014
Two-Bedrooms 0 4 Developer Profit 15%
Three-Bedrooms 0 0 (as % of total hard and soft costs) Less Marketing Costs ($252,701) Total 0 4 Less Total Development Costs ($4,145,237)
Residual Land Value (RLV) $656,076
RLV per Site sf $73
Feasibility Threshold per Site sf $125
Financially Feasible? No
RLV Existing $81
Inclusionary Housing and In-Lieu Fee Study | Appendix C: Residential Pro-Formas 85 Figure 6: Financial Feasibility under Existing Program, Prototype II: Ownership Condominium Prototype Notes:
(a) Includes the two required onsite units as "Bonus" density, as allowed for inclusionary ownership projects. (b) Per Santa Barbara Municipal Code Chapter 30.160, ownership projects with 10+ units to include fifteen percent (15%) of the units be sold at prices affordable to Middle-Income households.
(b) In determining the number of Inclusionary Units required by Chapter 30.160, Inclusionary Housing, any decimal fraction of 0.5 or more shall be rounded up. (c) Hard Costs include Site Prep work (e.g., grading, minor demolition), and assume Tier 3 Stormwater Requirements. (d) Soft costs shown in this line include engineering, architecture, as well as City cost-recovery fees for planning, permitting, and entitlements, and financing. (e) Per Santa Barbara Unified Developer Fee Schedule, effective October 2024. (f) Based on sales of recently-sold (previous 12 month) condominiums in City of Santa Barbara, adjusted on a price-per-square foot basis to match prototype. (g) Per published 2025 Maximum Sales Prices by Bedroom Count for "Middle" Income (120-160% AMI), City of Santa Barbara Source: BAE, 2025.

Development Program Assumptions Cost and Income Assumptions Development Cost Analysis Site Size (acres) 0.34 Development Costs Hard Costs
Site Size (sf) 15,000 Construction Hard Costs Residential $9,093,750 Residential, per sf $500.00 (c) Podium Parking $960,000 Total "Base" Units 13 Podium Parking, per space $40,000 Underground Parking $0 Total Dwelling Units 15 (a) Total Hard Costs $10,053,750 Avg. Unit Size (net, sf) 970 Hard Costs per Unit $670,250 Soft Costs (as a % of hard costs) 15% (d) Hard Costs per Gross Building sf $553 Gross Building Area (sf) 18,188
Net (% of gross res. area) 80% School Fee (per sf residential) $3.79 (e) Soft costs $1,508,063 Net (sf) 14,550 School Fee $68,931
Market Rate Sales Prices (f) In-Lieu Fee n/a
Total Parking Spaces 24 Market-Rate 1 BR n/a
Podium Spaces 24 Market-Rate 2 BR $1,083,402 Total Soft Costs $1,576,993 Tuck-Under Spaces 0 Market Rate 3 BR n/a
Parking Ratio (spaces per dwelling unit) 1.60 Developer Profit $1,744,611 Middle Income Sales Prices (g)
Unit Mix % # Middle Income 1 BR $355,700 Total Development Costs (Excl. Land) $13,375,355 One-Bedroom 0% 0 Midldle Income 2 BR $444,600 Cost per residential sf $735 Two-Bedrooms 100% 15 Middle Income 3 BR $503,800 Cost per residential unit $891,690 Three-Bedrooms 0% 0
Marketing and Sales Costs 5% Valuation Analysis
Affordability Share (% of Sale Price) Projected Revenue Middle/Upper Middle 15% 1.95 (b) Gross Sales from Market Rate Units $14,084,226 Middle/Upper Middle (adjusted) 2.0 (b) Developer Profit 15% Sales from Moderate 1 BRs $0 (as % of total hard and soft costs) Sales from Moderate 2 BRs $889,200 Affordable Breakdown Aff Market Sales from Moderate 3 BRs $0 One-Bedroom 0.0 0.0 Total Gross Revenue $14,973,426
Two-Bedrooms 2.0 13.0
Three-Bedrooms 0.0 0.0 Less Marketing Costs ($748,671)
Total 2.0 13.0 Less Total Development Costs ($13,375,355) Residual Land Value (RLV) $849,400
RLV per Site sf $57
Feasibility Threshold per Site sf $150
Financially Feasible? No
Inclusionary Housing and In-Lieu Fee Study | Appendix C: Residential Pro-Formas 86 Figure 7: Financial Feasibility, Ownership Prototype II: Recommended Option G1 Notes:
(a) Includes the two required onsite units as "Bonus" density, as allowed for inclusionary ownership projects. (b) Per SBMC Chapter 30.160, ownership projects with 10+ units to include fifteen percent (15%) of the units be sold at prices affordable to Middle-Income households. (b) Hypothetical scenario testing ability to pay a fractional fee instead of current requirements to round up any decimal fraction of 0.5 or more. (c) Hard Costs include Site Prep work (e.g., grading, minor demolition), and assume Tier 3 Stormwater Requirements. (d) Soft costs shown in this line include engineering, architecture, as well as City cost-recovery fees for planning, permitting, and entitlements, and financing. (e) Per Santa Barbara Unified Developer Fee Schedule, effective October 2024. (f) Based on sales of recently-sold (previous 12 month) condominiums in City of Santa Barbara, adjusted on a price-per-square foot basis to match prototype. (g) Per published 2025 Maximum Sales Prices by Bedroom Count for "Middle" Income (120-160% AMI), City of Santa Barbara. (h) Per Santa Barbara Municipal Code Chapter 30.160, to calculate Fractional In-Lieu Fee, divide the amount of the remainder (0.95) by total number of Inclusionary Units required (1.95), multiplied by the recommended in-lieu fee rate of $50. Multiply result by net residential square feet.

Source: BAE, 2025.

Development Program Assumptions Cost and Income Assumptions Development Cost Analysis Site Size (acres) 0.34 Development Costs Hard Costs
Site Size (sf) 15,000 Construction Hard Costs Residential $9,093,750 Residential, per sf $500.00 (c) Podium Parking $960,000 Total "Base" Units 13 Podium Parking, per space $40,000 Total Dwelling Units 15 (a) Total Hard Costs $10,053,750 Avg. Unit Size (net, sf) 970 Hard Costs per Unit $670,250 Soft Costs (as a % of hard costs) 15% (d) Hard Costs per Gross Building sf $553 Gross Building Area (sf) 18,188
Net (% of gross res. area) 80% School Fee (per sf residential) $3.79 (e) Soft costs $1,508,063 Net (sf) 14,550 In-Lieu Fee $50.00 School Fee $68,931
In-Lieu Fee $354,423 (h)
Total Parking Spaces 24
Podium Spaces 24 Market Rate Sales Prices (f) Total Soft Costs $1,931,416 Tuck-Under Spaces 0 Market-Rate 1 BR n/a
Parking Ratio (spaces per dwelling unit) 1.60 Market-Rate 2 BR $1,083,402 Developer Profit $1,797,775 Market Rate 3 BR n/a
Unit Mix % # Total Development Costs (Excl. Land) $13,782,941 One-Bedroom 0% 0 Middle Income Sales Prices (g) Cost per residential sf $758 Two-Bedrooms 100% 15 Middle Income 1 BR $355,700 Cost per residential unit $918,863 Three-Bedrooms 0% 0 Midldle Income 2 BR $444,600
Middle Income 3 BR $503,800 Valuation Analysis
Affordability Share Projected Revenue
Middle/Upper Middle 15% 1.95 (b) Marketing and Sales Costs 5% Gross Sales from Market Rate Units $15,167,628 Middle/Upper Middle (adjusted) 1.0 (b) (% of Sale Price) Sales from Middle-Income 1 BRs $0 Sales from Middle-Income 2 BRs $444,600
Fractional Unit Required 0.95 Developer Profit 15% Sales from Middle-Income 3 BRs $0 (as % of total hard and soft costs) Total Gross Revenue $15,612,228 Affordable Breakdown Aff Market
One-Bedroom 0.0 0.0 Less Marketing Costs ($780,611)
Two-Bedrooms 1.0 14.0 Less Total Development Costs ($13,782,941) Three-Bedrooms 0.0 0.0 Residual Land Value (RLV) $1,048,675 Total 1.0 14.0
RLV per Site sf $70
Feasibility Threshold per Site sf $150
Financially Feasible? No
RLV Base $57
Inclusionary Housing and In-Lieu Fee Study | Appendix C: Residential Pro-Formas 87 Figure 8: Financial Feasibility under Existing Program, Prototype III: Rental Townhome Prototype Notes:
(a) Per Santa Barbara Municipal Code Section 30.150.110, Inclusionary Requirements for Rental Housing Projects. (b) Hard Costs include Site Prep work (e.g., grading, minor demolition), and assume Tier 3 Stormwater Requirements. (c) Soft costs shown in this line include engineering, architecture, as well as City cost-recovery fees for planning, permitting, and entitlements, and financing. (d) Per Santa Barbara Unified Developer Fee Schedule, effective October 2024. (e) Based on rents for market-rate units in recently-constructed multifamily rental developments, according to CoStar. Rental rate shown is weighted based on the unit mix in the prototype.
(f) Per Maximum Rent levels for Target AMI of 100% (City of Santa Barbara), net Utilities. (g) Per Santa Barbara Municipal Code Section 30.150.120, to calculate Fractional In-Lieu Fee, divide the amount of the remainder by total number of Inclusionary Units required, multiplied by the current in-lieu fee rate of $25. Multiply result by net residential square feet. Calculation = 0.5 divided by 0.5 x $25 x 4,525 sf Source: BAE, 2025.

Development Program Assumptions Cost and Income Assumptions Development Cost Analysis Site Size (acres) 0.34 Development Costs Hard Costs
Site Size (sf) 9,000 Residential Hard Costs, per sf $425 (b) Residential $2,262,500 Podium Parking, per space $40,000 Commercial $0
Total Dwelling Units 5 Underground Parking, per space $70,000 Podium Parking $200,000 Commercial Space (sf, gross) 0 Underground Parking $0
Gross Residential Area (sf) 5,324 Soft Costs (as a % of hard costs) 15% (c) Parking Stackers $0 Gross Building Area (exc. parking, sf) 5,324 School Fee (per sf residential) $3.79 (d) Total Hard Costs $2,462,500 Residential Circulation eff (%) 85% In-Lieu Fee $25.00 Hard Costs per Unit $492,500 Net Residential (sf) 4,525
Average Unit Size (net, sf) 905 Operating Revenues & Expenses Soft Costs $369,375 Market Rate Studio, per Month $3,539 (e) School Fee $17,150 Market Rate 1 BR, per Month $3,771 In-Lieu Fee $113,125 (g) Total Parking Spaces 0 Market Rate 2 BR, per Month $4,455 Total Soft Costs $499,650 Surface Spaces 0 Market Rate 3 BR, per Month $4,883
Podium Spaces 5 Developer Profit $296,215
Underground Spaces 0 Moderate-Income Rental Prices (net utilities) (f) Parking Ratio (spaces/du) 1.00 Moderate Income Studio, per Month $1,604 Total Development Costs (Excl. Land) $3,258,365 Moderate Income 1 BR, per Month $1,990 Cost per non parking sf $612 Moderate Income 2 BR, per Month $2,372 Cost per residential unit $651,673 Unit Mix % # Moderate Income 3 BR, per Month $2,641
Studio 0% 0.0 Commercial Revenue ($/sf) $3.26 Valuation Analysis One-Bedroom 0% 0.0 Projected Revenue
Two-Bedrooms 80% 4.0 Vacancy Assumption 5% Gross Annual Income $272,418 Three-Bedrooms 20% 1.0 Less: Vacancy ($13,621)
Total 100% 5.0 Operating Expenses (% gross revenues) 30% Less: Operating Expenses ($81,725) Net Operating Income (NOI) $177,072
Affordable Units 10% 0.50 (a) Developer Profit (as % of total project costs) 10% Capitalized Project Value $3,635,969
Affordable Breakdown Aff Market Capitalization Rate 4.87% Less Total Development Costs ($3,258,365) Studio 0.0 0.0 Residual Land Value (RLV) $377,604
One-Bedroom 0.0 0.0
Two-Bedrooms 0.0 4.0 RLV per Site sf $42
Three-Bedrooms 0.0 1.0 Feasibility Threshold per Site sf $125 Financially Feasible? No
Inclusionary Housing and In-Lieu Fee Study | Appendix C: Residential Pro-Formas 88 Figure 9: Financial Feasibility, Rental Prototype III: Recommended Small Project In-Lieu Fee $35.00/sf Notes:
(a) Per Santa Barbara Municipal Code Section 30.150.110, Inclusionary Requirements for Rental Housing Projects. (b) Hard Costs include Site Prep work (e.g., grading, minor demolition), and assume Tier 3 Stormwater Requirements. (c) Soft costs shown in this line include engineering, architecture, as well as City cost-recovery fees for planning, permitting, and entitlements, and financing. (d) Per Santa Barbara Unified Developer Fee Schedule, effective October 2024. (e) Based on rents for market-rate units in recently-constructed multifamily rental developments, according to CoStar. Rental rate is weighted based on unit mix in the prototype. (f) Per Maximum Rent levels for Target AMI of 100% (City of Santa Barbara), net Utilities. (g) Per Santa Barbara Municipal Code Section 30.150.120, to calculate Fractional In-Lieu Fee, divide the amount of the remainder by total number of Inclusionary Units required, multiplied by the recommended in-lieu fee rate of $35. Multiply result by net residential square feet. Calculation = 0.5 divided by 0.5 x $35 x 4,525 sf Source: BAE, 2025.

Development Program Assumptions Cost and Income Assumptions Development Cost Analysis Site Size (acres) 0.34 Development Costs Hard Costs
Site Size (sf) 9,000 Residential Hard Costs, per sf $425 (b) Residential $2,262,500 Podium Parking, per space $40,000 Commercial $0
Total Dwelling Units 5 Underground Parking, per space $70,000 Podium Parking $200,000 Commercial Space (sf, gross) 0 Underground Parking $0
Gross Residential Area (sf) 5,324 Soft Costs (as a % of hard costs) 15% (c) Parking Stackers $0 Gross Building Area (exc. parking, sf) 5,324 Total Hard Costs $2,462,500 Residential Circulation eff (%) 85% School Fee (per sf residential) $3.79 (d) Hard Costs per Unit $492,500 Net Residential (sf) 4,525 In-Lieu Fee $35.00
Average Unit Size (net, sf) 905 Soft Costs $369,375
School Fee $17,150
Operating Revenues & Expenses In-Lieu Fee $158,375 (g)
Total Parking Spaces 0 Market Rate Studio, per Month $3,539 (e) Total Soft Costs $544,900 Surface Spaces 0 Market Rate 1 BR, per Month $3,771
Podium Spaces 5 Market Rate 2 BR, per Month $4,455 Developer Profit $300,740 Underground Spaces 0 Market Rate 3 BR, per Month $4,883 Parking Ratio (spaces/du) 1.00 Total Development Costs (Excl. Land) $3,308,140 Moderate-Income Rental Prices (net utilities) (f) Cost per non parking sf $621 Moderate Income Studio, per Month $1,604 Cost per residential unit $661,628 Unit Mix % # Moderate Income 1 BR, per Month $1,990
Studio 0% 0.0 Moderate Income 2 BR, per Month $2,372 Valuation Analysis One-Bedroom 0% 0.0 Moderate Income 3 BR, per Month $2,641 Projected Revenue Two-Bedrooms 80% 4.0 Commercial Revenue ($/sf) $3.26 Gross Annual Income $272,418 Three-Bedrooms 20% 1.0 Less: Vacancy ($13,621)
Total 100% 5.0 Vacancy Assumption 5% Less: Operating Expenses ($81,725) Net Operating Income (NOI) $177,072
Affordable Units 10% 0.50 (a) Operating Expenses (% gross revenues) 30% Capitalized Project Value $3,635,969
Affordable Breakdown Aff Market Developer Profit (as % of total project costs) 10% Less Total Development Costs ($3,308,140) Studio 0.0 0.0 Residual Land Value (RLV) $327,829
One-Bedroom 0.0 0.0 Capitalization Rate 4.87%
Two-Bedrooms 0.0 4.0 RLV per Site sf $36
Three-Bedrooms 0.0 1.0 Feasibility Threshold per Site sf $125 Financially Feasible? No
RLV Existing Fee $42
Inclusionary Housing and In-Lieu Fee Study | Appendix C: Residential Pro-Formas 89 Figure 10: Financial Feasibility under Existing Program, Prototype IV: Rental Mixed-Use Prototype Notes:
(a) Per Santa Barbara Municipal Code Section 30.150.110, Inclusionary Requirements for Rental Housing Projects. (b) Residential Hard Costs include Site Prep work (e.g., grading, minor demolition), and assume Tier 3 Stormwater Requirements. (c) Commercial Hard Costs include Commercial Shell and Tenant Improvements (d) Soft costs shown in this line include engineering, architecture, as well as City cost-recovery fees for planning, permitting, and entitlements, and financing. (e) Per Santa Barbara Unified Developer Fee Schedule, effective October 2024. (f) Based on rents for market-rate units in recently-constructed multifamily rental developments, according to CoStar. Rental rate shown is weighted based on unit mix of prototype. (g) Per Maximum Rent levels for Target AMI of 100% (City of Santa Barbara), net Utilities.

Source: BAE, 2025.

Development Program Assumptions Cost and Income Assumptions Development Cost Analysis Site Size (acres) 0.34 Development Costs Hard Costs
Site Size (sf) 15,000 Residential Hard Costs, per sf $425.00 (b) Residential $8,110,000 Commercial Hard Costs, per sf $425 (c) Commercial $465,795 Total Dwelling Units 20 Podium Parking, per space $40,000 Podium Parking $960,000 Commercial Space (sf, gross) 1,096 Underground Parking, per space $70,000 Underground Parking $0 Gross Residential Area (sf) 19,082 Total Hard Costs $9,535,795 GBA (excluding parking, sf) 20,178 Hard Costs per Unit $476,790 Residential Circulation eff (%) 85% Soft Costs (as a % of hard costs) 15% (d) Net Residential (sf) 16,220 School Fees (per sf residential) $3.79 (e) Soft Costs $1,430,369 Average Unit Size (net, sf) 811 School Fees (per sf commercial) $0.78 (e) School Fee $73,177 Total Soft Costs $1,503,546
Total Parking Spaces 24 Market-Rate Rental Prices (f)
Surface Spaces 0 Market Rate Studio, per Month $3,539 Developer Profit $1,103,934 Podium Spaces 24 Market Rate 1 BR, per Month $3,657
Underground Spaces 0 Market Rate 2 BR, per Month $4,455 Total Development Costs (Excl. Land) $12,143,275 Parking Ratio (spaces/du) 1.20 Market Rate 3 BR, per Month $4,883 Cost per non parking sf $602 Garage Size (sf) 10,362 Cost per residential unit $607,164 Moderate-Income Rental Prices (net utilities) (g)
Unit Mix % # Moderate Income Studio, per Month $1,604 Valuation Analysis Studio 0% 0.0 Moderate Income 1 BR, per Month $1,990 Projected Revenue One-Bedroom 25% 5.0 Moderate Income 2 BR, per Month $2,372 Gross Annual Income $1,019,160 Two-Bedrooms 75% 15.0 Moderate Income 3 BR, per Month $2,641 Less: Vacancy ($50,958) Three-Bedrooms 0% 0.0 Commercial Revenue ($/sf) $3.26 Less: Operating Expenses ($305,748) Total 100% 20.0 Net Operating Income (NOI) $662,454
Vacancy Assumption 5%
Affordable Units 10% 2.0 (a) Capitalized Project Value $13,602,754 Operating Expenses (% gross revenues) 30% Less Total Development Costs ($12,143,275) Affordable Breakdown Aff Market Residual Land Value (RLV) $1,459,480 Studio 0.0 0.0 Developer Profit (as % of total project costs) 10% One-Bedroom 1.0 4.0 RLV per Site sf $97
Two-Bedrooms 1.0 14.0 Capitalization Rate 4.87% Feasibility Threshold per Site sf $150 Three-Bedrooms 0.0 0.0 Financially Feasible? No
Total 2.0 18.0
Inclusionary Housing and In-Lieu Fee Study | Appendix C: Residential Pro-Formas 90 Figure 11: Financial Feasibility, Rental Prototype IV: Hypothetical 15% Moderate-Income Requirement Notes:
(a) Hypothetical inclusionary recommendation to change the minimum percent of required inclusionary housing. (b) Residential Hard Costs include Site Prep work (e.g., grading, minor demolition), and assume Tier 3 Stormwater Requirements. (c) Commercial Hard Costs include Commercial Shell and Tenant Improvements (d) Soft costs shown in this line include engineering, architecture, as well as City cost-recovery fees for planning, permitting, and entitlements, and financing. (e) Per Santa Barbara Unified Developer Fee Schedule, effective October 2024. (f) Based on rents for market-rate units in recently-constructed multifamily rental developments, according to CoStar. Rental rate shown is weighted based on unit mix of prototype. (g) Per Maximum Rent levels for Target AMI of 100% (City of Santa Barbara), net Utilities.

Source: BAE, 2025.

Development Program Assumptions Cost and Income Assumptions Development Cost Analysis Site Size (acres) 0.34 Development Costs Hard Costs
Site Size (sf) 15,000 Residential Hard Costs, per sf $425.00 (b) Residential $8,110,000 Commercial Hard Costs, per sf $425 (c) Commercial $465,795 Total Dwelling Units 20 Podium Parking, per space $40,000 Podium Parking $960,000 Commercial Space (sf, gross) 1,096 Underground Parking, per space $70,000 Gross Residential Area (sf) 19,082 Total Hard Costs $9,535,795 GBA (excluding parking, sf) 20,178 Hard Costs per Unit $476,790 Residential Circulation eff (%) 85% Soft Costs (as a % of hard costs) 15% (d) Net Residential (sf) 16,220 School Fees (per sf residential) $3.79 (e) Soft Costs $1,430,369 Average Unit Size (net, sf) 811 School Fees (per sf commercial) $0.78 (e) School Fee $73,177 Total Soft Costs $1,503,546
Total Parking Spaces 24 Market-Rate Rental Prices (f)
Surface Spaces 0 Market Rate Studio, per Month $3,539 Developer Profit $1,103,934 Podium Spaces 24 Market Rate 1 BR, per Month $3,657
Underground Spaces 0 Market Rate 2 BR, per Month $4,455 Total Development Costs (Excl. Land) $12,143,275 Parking Ratio (spaces/du) 1.20 Market Rate 3 BR, per Month $4,883 Cost per non parking sf $602 Garage Size (sf) 10,362 Cost per residential unit $607,164 Moderate-Income Rental Prices (net utilities) (g)
Unit Mix % # Moderate Income Studio, per Month $1,604 Valuation Analysis Studio 0% 0.0 Moderate Income 1 BR, per Month $1,990 Projected Revenue One-Bedroom 25% 5.0 Moderate Income 2 BR, per Month $2,372 Gross Annual Income $994,167 Two-Bedrooms 75% 15.0 Moderate Income 3 BR, per Month $2,641 Less: Vacancy ($49,708) Three-Bedrooms 0% 0.0 Commercial Revenue ($/sf) $3.26 Less: Operating Expenses ($298,250) Total 100% 20.0 Net Operating Income (NOI) $646,209
Vacancy Assumption 5%
Affordable Units 15% 3.0 (a) Capitalized Project Value $13,269,172 Operating Expenses (% gross revenues) 30% Less Total Development Costs ($12,143,275) Affordable Breakdown Aff Market Residual Land Value (RLV) $1,125,898 Studio 0.0 0.0 Developer Profit (as % of total project costs) 10% One-Bedroom 1.0 4.0 RLV per Site sf $75
Two-Bedrooms 2.0 13.0 Capitalization Rate 4.87% Feasibility Threshold per Site sf $150 Three-Bedrooms 0.0 0.0 Financially Feasible? No
Total 3.0 17.0
RLV per Site sf - 10% Requirement $97
Inclusionary Housing and In-Lieu Fee Study | Appendix C: Residential Pro-Formas 91 Figure 12: Financial Feasibility, Rental Prototype IV: Recommendation F (Count Rental Inclusionary as Bonus) Notes:
(a) Per Santa Barbara Municipal Code Section 30.150.110, Inclusionary Requirements for Rental Housing Projects. (b) Residential Hard Costs include Site Prep work (e.g., grading, minor demolition), and assume Tier 3 Stormwater Requirements. (c) Commercial Hard Costs include Commercial Shell and Tenant Improvements (d) Soft costs shown in this line include engineering, architecture, as well as City cost-recovery fees for planning, permitting, and entitlements, and financing. (e) Per Santa Barbara Unified Developer Fee Schedule, effective October 2024. (f) Based on rents for market-rate units in recently-constructed multifamily rental developments, according to CoStar. Rental rate shown is weighted based on unit mix of prototype. (g) Per Maximum Rent levels for Target AMI of 100% (City of Santa Barbara), net Utilities.

Source: BAE, 2025.

Development Program Assumptions Cost and Income Assumptions Development Cost Analysis Site Size (acres) 0.34 Development Costs Hard Costs
Site Size (sf) 15,000 Residential Hard Costs, per sf $425 (b) Residential $8,110,000 Commercial Hard Costs, per sf $425 (c) Commercial $465,795 Base Units 20 Podium Parking, per space $40,000 Podium Parking $960,000 Commercial Space (sf, gross) 1,096 Underground Parking, per space $70,000 Gross Residential Area (sf) 19,082 Total Hard Costs $9,535,795 GBA (excluding parking, sf) 20,178 Hard Costs per Unit $476,790 Residential Circulation eff (%) 85% Soft Costs (as a % of hard costs) 15% (d) Net Residential (sf) 16,220 School Fees (per sf residential) $3.79 (e) Soft Costs $1,430,369 Average Unit Size (net, sf) 737 School Fees (per sf commercial) $0.78 (e) School Fee $73,177 Total Soft Costs $1,503,546
Affordable Units 10% 2.0 (a)
Total Dwelling Units 22 Market-Rate Rental Prices (f)
Market Rate Studio, per Month $3,370 Developer Profit $1,103,934 Total Parking Spaces 24 Market Rate 1 BR, per Month $3,629 Surface Spaces 0 Market Rate 2 BR, per Month $4,120 Total Development Costs (Excl. Land) $12,143,275 Podium Spaces 24 Market Rate 3 BR, per Month $4,883 Cost per non parking sf $602 Underground Spaces 0 Cost per residential unit $607,164 Parking Ratio (spaces/du) 1.20 Moderate-Income Rental Prices (net utilities) (g) Garage Size (sf) 10,362 Moderate Income Studio, per Month $1,604 Valuation Analysis Moderate Income 1 BR, per Month $1,990 Projected Revenue Unit Mix % # Moderate Income 2 BR, per Month $2,372 Gross Annual Income $1,048,653 Studio 0% 0.0 Moderate Income 3 BR, per Month $2,641 Less: Vacancy ($52,433) One-Bedroom 32% 7.0 Commercial Revenue ($/sf) $3.26 Less: Operating Expenses ($314,596) Two-Bedrooms 68% 15.0 Net Operating Income (NOI) $681,624 Three-Bedrooms 0% 0.0 Vacancy Assumption 5%
Total 100% 22.0 Capitalized Project Value $13,996,390
Operating Expenses (% gross revenues) 30% Less Total Development Costs ($12,143,275) Affordable Breakdown Aff Market Residual Land Value (RLV) $1,853,115 Studio 0.0 0.0 Developer Profit (as % of total project costs) 10% One-Bedroom 1.0 6.0 RLV per Site sf $124
Two-Bedrooms 1.0 14.0 Capitalization Rate 4.87% Feasibility Threshold per Site sf $150 Three-Bedrooms 0.0 0.0 Financially Feasible? No
Total 2.0 20.0
RLV per Site sf Existing $97
Inclusionary Housing and In-Lieu Fee Study | Appendix C: Residential Pro-Formas 92 Figure 13: Financial Feasibility, Rental Prototype IV: 10% Moderate-Income w/ Recommended Target 110% AMI Notes:
(a) Per Santa Barbara Municipal Code Section 30.150.110, Inclusionary Requirements for Rental Housing Projects. (b) Residential Hard Costs include Site Prep work (e.g., grading, minor demolition), and assume Tier 3 Stormwater Requirements. (c) Commercial Hard Costs include Commercial Shell and Tenant Improvements (d) Soft costs shown in this line include engineering, architecture, as well as City cost-recovery fees for planning, permitting, and entitlements, and financing. (e) Per Santa Barbara Unified Developer Fee Schedule, effective October 2024. (f) Based on rents for market-rate units in recently-constructed multifamily rental developments, according to CoStar. Rental rate shown is weighted based on unit mix of prototype. (g) Per Maximum Rent levels for Target AMI of 110%, net Utilities.

Source: BAE, 2025.

Development Program Assumptions Cost and Income Assumptions Development Cost Analysis Site Size (acres) 0.34 Development Costs Hard Costs
Site Size (sf) 15,000 Residential Hard Costs, per sf $425 (b) Residential $8,110,000 Commercial Hard Costs, per sf $425 (c) Commercial $465,795 Total Dwelling Units 20 Podium Parking, per space $40,000 Podium Parking $960,000 Commercial Space (sf, gross) 1,096 Underground Parking, per space $70,000 Gross Residential Area (sf) 19,082 Total Hard Costs $9,535,795 GBA (excluding parking, sf) 20,178 Hard Costs per Unit $476,790 Residential Circulation eff (%) 85% Soft Costs (as a % of hard costs) 15% (d) Net Residential (sf) 16,220 School Fees (per sf residential) $3.79 (e) Soft Costs $1,430,369 Average Unit Size (net, sf) 811 School Fees (per sf commercial) $0.78 (e) School Fee $73,177 Total Soft Costs $1,503,546
Total Parking Spaces 24 Market-Rate Rental Prices (f)
Surface Spaces 0 Market Rate Studio, per Month $3,539 Developer Profit $1,103,934 Podium Spaces 24 Market Rate 1 BR, per Month $3,657
Underground Spaces 0 Market Rate 2 BR, per Month $4,455 Total Development Costs (Excl. Land) $12,143,275 Parking Ratio (spaces/du) 1.20 Market Rate 3 BR, per Month $4,883 Cost per non parking sf $602 Garage Size (sf) 10,362 Cost per residential unit $607,164 Moderate-Income Rental Prices (net utilities) (g)
Unit Mix % # Moderate Income Studio, per Month $2,085 Valuation Analysis Studio 0% 0.0 Moderate Income 1 BR, per Month $2,359 Projected Revenue One-Bedroom 25% 5.0 Moderate Income 2 BR, per Month $2,627 Gross Annual Income $1,026,646 Two-Bedrooms 75% 15.0 Moderate Income 3 BR, per Month $2,874 Less: Vacancy ($51,332) Three-Bedrooms 0% 0.0 Commercial Revenue ($/sf) $3.26 Less: Operating Expenses ($307,994) Total 100% 20.0 Net Operating Income (NOI) $667,320
Vacancy Assumption 5%
Affordable Units 10% 2.0 (a) Capitalized Project Value $13,702,661 Operating Expenses (% gross revenues) 30% Less Total Development Costs ($12,143,275) Affordable Breakdown Aff Market Residual Land Value (RLV) $1,559,386 Studio 0.0 0.0 Developer Profit (as % of total project costs) 10% One-Bedroom 1.0 4.0 RLV per Site sf $104
Two-Bedrooms 1.0 14.0 Capitalization Rate 4.87% Feasibility Threshold per Site sf $150 Three-Bedrooms 0.0 0.0 Financially Feasible? No
Total 2.0 18.0
RLV per Site sf - AMI 100% $97
Inclusionary Housing and In-Lieu Fee Study | Appendix C: Residential Pro-Formas 93 Figure 14: Financial Feasibility under Existing Program, Prototype V: Rental Mixed-Use Large Prototype Notes:
(a) Per Santa Barbara Municipal Code Section 30.150.110, Inclusionary Requirements for Rental Housing Projects. (b) Hard Costs include Site Prep work (e.g., grading, minor demolition), and assume Tier 4 Stormwater Requirements (additional $17/sf GBA for a $700,000 investment). (c) Includes Commercial Shell and Tenant Improvements
(d) Soft costs shown in this line include engineering, architecture, as well as City cost-recovery fees for planning, permitting, and entitlements, and financing. (e) Per Santa Barbara Unified Developer Fee Schedule, effective October 2024. (f) Based on rents for market-rate units in recently-constructed multifamily rental developments, according to CoStar. Rental rate shown is weighted based on unit mix of prototype. (g) Per Maximum Rent levels for Target AMI of 100% (City of Santa Barbara), net Utilities. (h) Per Santa Barbara Municipal Code Section 30.150.120, to calculate Fractional In-Lieu Fee, divide the amount of the remainder by total number of Inclusionary Units required, multiplied by the current in-lieu fee rate of $25. Multiply result by net residential square feet.

Source: BAE, 2025.

Development Program Assumptions Cost and Income Assumptions Development Cost Analysis Site Size (acres) 0.69 Development Costs Hard Costs
Site Size (sf) 30,000 Residential Hard Costs, per sf $443 (b) Residential $18,186,500 Commercial Hard Costs, per sf $443 (c) Commercial $828,373 Total Dwelling Units 43 Podium Parking, per space $40,000 Podium Parking $1,800,000 Commercial Space (sf, gross) 1,869 Underground Parking, per space $70,000 Underground Parking $0 Gross Residential Area (sf) 41,027 Total Hard Costs $20,814,873 GBA (excluding parking, sf) 42,896 Hard Costs per Unit $484,067 Residential Circulation eff (%) 85% Soft Costs (as a % of hard costs) 15% (d) Net Residential (sf) 34,873 School Fees (per sf residential) $3.79 (e) Soft Costs $3,122,231 Average Unit Size (net, sf) 811 School Fees (per sf commercial) $0.78 (e) School Fees $156,950 Fractional Fee $60,825 (h)
Total Parking Spaces 45 Total Soft Costs $3,340,006
Surface Spaces 0 Market-Rate Rental Prices
Podium Spaces 45 Market Rate Studio, per Month $3,303 (f) Developer Profit $2,415,488 Underground Spaces 0 Market Rate 1 BR, per Month $3,686 Parking Ratio (spaces/du) 1.05 Market Rate 2 BR, per Month $4,455 Total Development Costs (Excl. Land) $26,570,367 Garage Size (sf) 19,096 Market Rate 3 BR, per Month $4,883 Cost per non parking sf $619 Cost per residential unit $617,916
Unit Mix % # Moderate-Income Rental Prices (net utilities) (g) Studio 0% 0.0 Moderate Income Studio, per Month $1,604 Valuation Analysis One-Bedroom 25% 11.0 Moderate Income 1 BR, per Month $1,990 Projected Revenue Two-Bedrooms 75% 32.0 Moderate Income 2 BR, per Month $2,372 Gross Annual Income $2,174,890 Three-Bedrooms 0% 0.0 Moderate Income 3 BR, per Month $2,641 Less: Vacancy ($108,744) Total 0% 43.0 Commercial Revenue ($/sf) $3.26 Less: Operating Expenses ($652,467) Net Operating Income (NOI) $1,413,678
Affordable Units 10% 4.30 (a) Vacancy Assumption 5%
Capitalized Project Value $29,028,303
Affordable Breakdown Aff Market Operating Expenses (% gross revenues) 30% Less Total Development Costs ($26,570,367) Studio 0.0 0.0 Residual Land Value (RLV) $2,457,937
One-Bedroom 1.0 10.0 Developer Profit (as % of total project costs) 10% Two-Bedrooms 3.0 29.0 RLV per Site sf $82
Three-Bedrooms 0.0 0.0 Capitalization Rate 4.87% Feasibility Threshold per Site sf $150 Total 4.0 39.0 Financially Feasible? No
Inclusionary Housing and In-Lieu Fee Study | Appendix C: Residential Pro-Formas 94 Figure 15: Financial Feasibility, Rental Prototype V: Recommended In-Lieu Fee $50.00/sf Notes:
(a) Per Santa Barbara Municipal Code Section 30.150.110, Inclusionary Requirements for Rental Housing Projects. (b) Hard Costs include Site Prep work (e.g., grading, minor demolition), and assume Tier 4 Stormwater Requirements (additional $17/sf GBA for a $700,000 investment). (c) Includes Commercial Shell and Tenant Improvements
(d) Soft costs shown in this line include engineering, architecture, as well as City cost-recovery fees for planning, permitting, and entitlements, and financing. (e) Per Santa Barbara Unified Developer Fee Schedule, effective October 2024. (f) Based on rents for market-rate units in recently-constructed multifamily rental developments, according to CoStar. Rental rate shown is weighted based on unit mix of prototype. (g) Per Maximum Rent levels for Target AMI of 100% (City of Santa Barbara), net Utilities. (h) Per Santa Barbara Municipal Code Section 30.150.120, to calculate Fractional In-Lieu Fee, divide the amount of the remainder (0.3) by total number of Inclusionary Units required (4.3), multiplied by the recommended in-lieu fee rate of $50. Multiply result by net residential square feet.

Source: BAE, 2025
Development Program Assumptions Cost and Income Assumptions Development Cost Analysis Site Size (acres) 0.69 Development Costs Hard Costs
Site Size (sf) 30,000 Residential Hard Costs, per sf $443 (b) Residential $18,186,500 Commercial Hard Costs, per sf $443 (c) Commercial $828,373 Total Dwelling Units 43 Podium Parking, per space $40,000 Podium Parking $1,800,000 Commercial Space (sf, gross) 1,869 Underground Parking, per space $70,000 Gross Residential Area (sf) 41,027 Total Hard Costs $20,814,873 GBA (excluding parking, sf) 42,896 Hard Costs per Unit $484,067 Residential Circulation eff (%) 85% Soft Costs (as a % of hard costs) 15% (d) Net Residential (sf) 34,873 School Fees (per sf residential) $3.79 (e) Soft Costs $3,122,231 Average Unit Size (net, sf) 811 School Fees (per sf commercial) $0.78 (e) Impact fees $156,950 In-Lieu Fee $50.00 Fractional Fee $121,650 (h)
Total Parking Spaces 45 Total Soft Costs $3,400,831
Surface Spaces 0 Market-Rate Rental Prices
Podium Spaces 45 Market Rate Studio, per Month $3,303 (f) Developer Profit $2,421,570 Underground Spaces 0 Market Rate 1 BR, per Month $3,686 Parking Ratio (spaces/du) 1.05 Market Rate 2 BR, per Month $4,455 Total Development Costs (Excl. Land) $26,637,274 Garage Size (sf) 19,096 Market Rate 3 BR, per Month $4,883 Cost per non parking sf $621 Cost per residential unit $619,471
Unit Mix % # Moderate-Income Rental Prices (net utilities) (g) Studio 0% 0.0 Moderate Income Studio, per Month $1,604 Valuation Analysis One-Bedroom 25% 11.0 Moderate Income 1 BR, per Month $1,990 Projected Revenue Two-Bedrooms 75% 32.0 Moderate Income 2 BR, per Month $2,372 Gross Annual Income $2,174,890 Three-Bedrooms 0% 0.0 Moderate Income 3 BR, per Month $2,641 Less: Vacancy ($108,744) Total 0% 43.0 Commercial Revenue ($/sf) $3.26 Less: Operating Expenses ($652,467) Net Operating Income (NOI) $1,413,678
Affordable Units 10% 4.30 (a) Vacancy Assumption 5%
Capitalized Project Value $29,028,303
Affordable Breakdown Aff Market Operating Expenses (% gross revenues) 30% Less Total Development Costs ($26,637,274) Studio 0.0 0.0 Residual Land Value (RLV) $2,391,029
One-Bedroom 1.0 10.0 Developer Profit (as % of total project costs) 10% Two-Bedrooms 3.0 29.0 RLV per Site sf $80
Three-Bedrooms 0.0 0.0 Capitalization Rate 4.87% Feasibility Threshold per Site sf $150 Total 4.0 39.0 Financially Feasible? No
RLV per Site sf - Existing Fee $82
Inclusionary Housing and In-Lieu Fee Study | Appendix C: Residential Pro-Formas 95 Figure 16: Financial Feasibility, Rental Prototype V: Recommendation F (Count Rental Inclusionary as Bonus) Notes:
(a) Per Santa Barbara Municipal Code Section 30.150.110, Inclusionary Requirements for Rental Housing Projects. (b) Residential Hard Costs include Site Prep work (e.g., grading, minor demolition), and assuming Tier 4 Stormwater Requirements. (b) Commercial Hard Costs include Commercial Shell and Tenant Improvements (C) Soft costs shown in this line include engineering, architecture, as well as City cost-recovery fees for planning, permitting, and entitlements, and financing. (d) Per Santa Barbara Unified Developer Fee Schedule, effective October 2024. (e) Based on rents for market-rate units in recently-constructed multifamily rental developments, according to CoStar. Rental rate shown weighted based on unit mix of prototype. (f) Per Maximum Rent levels for Target AMI of 100% (City of Santa Barbara), net Utilities. (g) Per Santa Barbara Municipal Code Section 30.150.120, for Fractional Fee, divide the amount of the remainder (0.3) by the total # Inclusionary Units required (4.3), multiplied by the current in-lieu fee rate of $25. Multiply result by net residential square feet.

Source: BAE, 2025.

Development Program Assumptions Cost and Income Assumptions Development Cost Analysis Site Size (acres) 0.69 Development Costs Hard Costs
Site Size (sf) 30,000 Residential Hard Costs, per sf $443 (b) Residential $18,174,987 Commercial Hard Costs, per sf $443 (b) Commercial $827,848 BASE Dwelling Units 43 Podium Parking, per space $40,000 Podium Parking $1,800,000 Commercial Space (sf, gross) 1,869 Underground Parking, per space $70,000 Gross Residential Area (sf) 41,027
GBA (excluding parking, sf) 42,896 Total Hard Costs $20,802,835 Residential Circulation eff (%) 85% Soft Costs (as a % of hard costs) 15% (c) Hard Costs per Unit $442,614 Net Residential (sf) 34,873 School Fees (per sf residential) $3.79 (d) Average Unit Size (net, sf) 742 School Fees (per sf commercial) $0.78 (d) Soft Costs $3,120,425 School Fee $156,950
Total Parking Spaces 45 Fractional Fee $60,825 (g)
Surface Spaces 0 Market-Rate Rental Prices Total Soft Costs $3,338,200 Podium Spaces 45 Market Rate Studio, per Month $3,303 (e) Underground Spaces 0 Market Rate 1 BR, per Month $3,912 Developer Profit $2,414,104 Parking Ratio (spaces per dwelling unit) 1.05 Market Rate 2 BR, per Month $4,120 Garage Size (sf) 19,096 Market Rate 3 BR, per Month $4,883 Total Development Costs (Excl. Land) $26,555,139 Cost per non parking sf $619
Affordable Units 10% 4.30 (a) Moderate Income Studio, per Month $1,604 (f) Cost per residential unit $617,561 Bonus Density (# units) 4 Moderate Income 1 BR, per Month $1,990 Total Dwelling Units 47 Moderate Income 2 BR, per Month $2,372 Valuation Analysis Moderate Income 3 BR, per Month $2,641 Projected Revenue Unit Mix % # Commercial Revenue ($/sf) $3.26 Gross Annual Income $2,244,138 Studio 9% 4.0 Less: Vacancy ($112,207)
One-Bedroom 23% 11.0 Vacancy Assumption 5% Less: Operating Expenses ($673,241) Two-Bedrooms 68% 32.0 Net Operating Income (NOI) $1,458,689 Three-Bedrooms 0% 0.0 Operating Expenses (% gross revenues) 30% Total 100% 47.0 Capitalized Project Value $29,952,555
Developer Profit (as % of total project costs) 10% Less Total Development Costs ($26,555,139) Affordable Breakdown Aff Market Residual Land Value (RLV) $3,397,416 Studio 0.0 4.0 Capitalization Rate 4.87%
One-Bedroom 1.0 10.0 RLV/acre $4,933,048
Two-Bedrooms 3.0 29.0 RLV per Site sf $113
Three-Bedrooms 0.0 0.0
Total 4.0 43.0 RLV per site sf Existing $82
Inclusionary Housing and In-Lieu Fee Study | Appendix C: Residential Pro-Formas 96 Figure 17: Financial Feasibility, Rental Prototype V: 10% Moderate-Income w/ Recommended Target 110% AMI Notes:
(a) Per Santa Barbara Municipal Code Section 30.150.110, Inclusionary Requirements for Rental Housing Projects. (b) Residential Hard Costs include Site Prep work (e.g., grading, minor demolition), and assume Tier 3 Stormwater Requirements. (c) Commercial Hard Costs include Commercial Shell and Tenant Improvements (d) Soft costs shown in this line include engineering, architecture, as well as City cost-recovery fees for planning, permitting, and entitlements, and financing. (e) Per Santa Barbara Unified Developer Fee Schedule, effective October 2024. (f) Based on rents for market-rate units in recently-constructed multifamily rental developments, according to CoStar. Rental rate shown is weighted based on unit mix of prototype. (g) Per Maximum Rent levels for Target AMI of 110%, net Utilities. (h) Per Santa Barbara Municipal Code Section 30.150.120, to calculate Fractional In-Lieu Fee, divide the remainder (0.45) by total number of Inclusionary Units required (6.45), multiplied by the current in-lieu fee rate of $25. Multiply by net residential square feet.

Source: BAE, 2025
Development Program Assumptions Cost and Income Assumptions Development Cost Analysis Site Size (acres) 0.69 Development Costs Hard Costs
Site Size (sf) 30,000 Residential Hard Costs, per sf $443 (b) Residential $18,186,500 Commercial Hard Costs, per sf $443 (c) Commercial $828,373 Total Dwelling Units 43 Podium Parking, per space $40,000 Podium Parking $1,800,000 Commercial Space (sf, gross) 1,869 Underground Parking, per space $70,000 Gross Residential Area (sf) 41,027 Total Hard Costs $20,814,873 GBA (excluding parking, sf) 42,896 Hard Costs per Unit $484,067 Residential Circulation eff (%) 85% Soft Costs (as a % of hard costs) 15% (d) Net Residential (sf) 34,873 School Fees (per sf residential) $3.79 (e) Soft Costs $3,122,231 Average Unit Size (net, sf) 811 School Fees (per sf commercial) $0.78 (e) Impact fees $156,950 Fractional Fee $60,825 (h)
Total Parking Spaces 45 Total Soft Costs $3,340,006
Surface Spaces 0 Market-Rate Rental Prices
Podium Spaces 45 Market Rate Studio, per Month $3,303 (f) Developer Profit $2,415,488 Underground Spaces 0 Market Rate 1 BR, per Month $3,686 Parking Ratio (spaces/du) 1.05 Market Rate 2 BR, per Month $4,455 Total Development Costs (Excl. Land) $26,570,367 Garage Size (sf) 19,096 Market Rate 3 BR, per Month $4,883 Cost per non parking sf $619 Cost per residential unit $617,916
Unit Mix % # Moderate-Income Rental Prices (net utilities) (g) Studio 0% 0.0 Moderate Income Studio, per Month $2,085 Valuation Analysis One-Bedroom 25% 11.0 Moderate Income 1 BR, per Month $2,359 Projected Revenue Two-Bedrooms 75% 32.0 Moderate Income 2 BR, per Month $2,627 Gross Annual Income $2,188,499 Three-Bedrooms 0% 0.0 Moderate Income 3 BR, per Month $2,874 Less: Vacancy ($109,425) Total 0% 43.0 Commercial Revenue ($/sf) $3.26 Less: Operating Expenses ($656,550) Net Operating Income (NOI) $1,422,525
Affordable Units 10% 4.30 (a) Vacancy Assumption 5%
Capitalized Project Value $29,209,950
Affordable Breakdown Aff Market Operating Expenses (% gross revenues) 30% Less Total Development Costs ($26,570,367) Studio 0.0 0.0 Residual Land Value (RLV) $2,639,583
One-Bedroom 1.0 10.0 Developer Profit (as % of total project costs) 10% Two-Bedrooms 3.0 29.0 RLV per Site sf $88
Three-Bedrooms 0.0 0.0 Capitalization Rate 4.87% Feasibility Threshold per Site sf $150 Total 4.0 39.0 Financially Feasible? No
RLV per Site sf - AMI 100% $82
Inclusionary Housing and In-Lieu Fee Study | Appendix C: Residential Pro-Formas 97 Figure 18: Financial Feasibility, Rental Prototype V: Hypothetical 15% Moderate-Income Requirement Notes:
(a) Per Santa Barbara Municipal Code Section 30.150.110, Inclusionary Requirements for Rental Housing Projects. (b) Hard Costs include Site Prep work (e.g., grading, minor demolition), and assume Tier 4 Stormwater Requirements (additional $17/sf GBA for a $700,000 investment). (c) Includes Commercial Shell and Tenant Improvements
(d) Soft costs shown in this line include engineering, architecture, as well as City cost-recovery fees for planning, permitting, and entitlements, and financing. (e) Per Santa Barbara Unified Developer Fee Schedule, effective October 2024. (f) Based on rents for market-rate units in recently-constructed multifamily rental developments, according to CoStar. Rental rate shown is weighted based on unit mix of prototype. (g) Per Maximum Rent levels for Target AMI of 100% (City of Santa Barbara), net Utilities. (h) Per Santa Barbara Municipal Code Section 30.150.120, to calculate Fractional In-Lieu Fee, divide the remainder (0.45) by total number of Inclusionary Units required (6.45), multiplied by the current in-lieu fee rate of $25. Multiply by net residential square feet.

Source: BAE, 2025.

Development Program Assumptions Cost and Income Assumptions Development Cost Analysis Site Size (acres) 0.69 Development Costs Hard Costs
Site Size (sf) 30,000 Residential Hard Costs, per sf $443 (b) Residential $18,186,500 Commercial Hard Costs, per sf $443 (c) Commercial $828,373 Total Dwelling Units 43 Podium Parking, per space $40,000 Podium Parking $1,800,000 Commercial Space (sf, gross) 1,869 Underground Parking, per space $70,000 Gross Residential Area (sf) 41,027 Total Hard Costs $20,814,873 GBA (excluding parking, sf) 42,896 Hard Costs per Unit $484,067 Residential Circulation eff (%) 85% Soft Costs (as a % of hard costs) 15% (d) Net Residential (sf) 34,873 School Fees (per sf residential) $3.79 (e) Soft Costs $3,122,231 Average Unit Size (net, sf) 811 School Fees (per sf commercial) $0.78 (e) Impact fees $156,950 Fractional Fee $60,825 (h)
Total Parking Spaces 45 Total Soft Costs $3,340,006
Surface Spaces 0 Operating Revenues & Expenses
Podium Spaces 45 Market Rate Studio, per Month $3,303 (f) Developer Profit $2,415,488 Underground Spaces 0 Market Rate 1 BR, per Month $3,686 Parking Ratio (spaces/du) 1.05 Market Rate 2 BR, per Month $4,455 Total Development Costs (Excl. Land) $26,570,367 Garage Size (sf) 19,096 Market Rate 3 BR, per Month $4,883 Cost per non parking sf $619 Cost per residential unit $617,916
Unit Mix % # Moderate-Income Rental Prices (net utilities) (g) Studio 0% 0.0 Moderate Income Studio, per Month $1,604 Valuation Analysis One-Bedroom 25% 11.0 Moderate Income 1 BR, per Month $1,990 Projected Revenue Two-Bedrooms 75% 32.0 Moderate Income 2 BR, per Month $2,372 Gross Annual Income $2,129,551 Three-Bedrooms 0% 0.0 Moderate Income 3 BR, per Month $2,641 Less: Vacancy ($106,478) Total 0% 43.0 Commercial Revenue ($/sf) $3.26 Less: Operating Expenses ($638,865) Net Operating Income (NOI) $1,384,208
Affordable Units 15% 6.45 (a) Vacancy Assumption 5%
Capitalized Project Value $28,423,163
Affordable Breakdown Aff Market Operating Expenses (% gross revenues) 30% Less Total Development Costs ($26,570,367) Studio 0.0 0.0 Residual Land Value (RLV) $1,852,796
One-Bedroom 2.0 9.0 Developer Profit (as % of total project costs) 10% Two-Bedrooms 4.0 28.0 RLV per Site sf $62
Three-Bedrooms 0.0 0.0 Capitalization Rate 4.87% Feasibility Threshold per Site sf $150 Total 6.0 37.0 Financially Feasible? No
RLV per Site sf - 10% $82
Inclusionary Housing and In-Lieu Fee Study | Appendix C: Residential Pro-Formas 98 Figure 19: Financial Feasibility, Prototype SDBL-I: Rental Mixed-Use Density Bonus Prototype Notes:
(a) Applies 32.5% Density Bonus to AUD Priority Housing Overlay Density. Calculated on the Base Number of Units allowed (44), rounded up to the nearest whole number. (b) Providing 10% of base units for lower income households to satisfy SDBL also satisfies the inclusionary requirement for rental. (c) Hard Costs include Site Prep work (e.g., grading, minor demolition), and assume Tier 4 Stormwater Requirements (additional $17/sf GBA for a $750,000 investment). (d) Includes Commercial Shell and Tenant Improvements
(e) Soft costs shown in this line include engineering, architecture, as well as City cost-recovery fees for planning, permitting, and entitlements, and financing. (f) Per Santa Barbara Unified Developer Fee Schedule, effective October 2024. (g) Based on rents for market-rate units in recently-constructed multifamily rental developments, per CoStar. Rental rate shown is weighted based on unit mix of prototype. (h) Utilize Maximum Rents for Very-Low Income (Target 50% AMI) households published in April 2025 by the City of Santa Barbara, minus utilities.

Source: BAE, 2025
Development Program Assumptions Cost and Income Assumptions Development Cost Analysis Site Size (acres) 0.69 Development Costs Hard Costs
Site Size (sf) 30,000 Residential Hard Costs, per sf $442 (c) Residential $18,153,827 Commercial Hard Costs, per sf $442 (d) Commercial $826,885 AUD Allowable Dwelling Units 44 Podium Parking, per space $40,000 Podium Parking $1,800,000 Total Dwelling Units (SDB) 59 (a) Underground Parking, per space $70,000 Underground Parking $0 Commercial Space (sf, gross) 1,869 Parking Stackers $0
Gross Residential Area (sf) 41,027 Total Hard Costs $20,780,711 GBA (excluding parking, sf) 42,896 Soft Costs (as a % of hard costs) 15% (e) Hard Costs per Unit $352,215 Residential Circulation eff (%) 88.4% School Fee (per sf residential) $3.79 (f) Net Residential (sf) 36,250 School Fee (per sf commercial) $0.78 (f) Soft Costs $3,117,107 Average Unit Size (net, sf) 614 School Fee $156,950
Fractional In-Lieu Fee n/a
Total Parking Spaces 45 Operating Revenues & Expenses (g) Total Soft Costs $3,274,057 Surface Spaces 0 Market Rate Studio, per Month $3,303
Podium Spaces 45 Market Rate 1 BR, per Month $3,402 Developer Profit $2,405,477 Underground Spaces 0 Market Rate 2 BR, per Month $3,966 Parking Ratio (spaces/du) 0.76 Market Rate 3 BR, per Month $4,883 Total Development Costs (Excl. Land) $26,460,245 Cost per non parking sf $617
Affordable Unit Rental Prices (net utilities) (h) Cost per residential unit $448,479 Unit Mix % # Moderate Income Studio, per Month $1,604
Studio 25% 15.0 Moderate Income 1 BR, per Month $1,990 Valuation Analysis One-Bedroom 50% 30.0 Moderate Income 2 BR, per Month $2,372 Projected Revenue Two-Bedrooms 25% 14.0 Moderate Income 3 BR, per Month $2,641 Gross Annual Income $2,335,583 Three-Bedrooms 0% 0.0 Commercial Revenue ($/sf) $3.26 Less: Vacancy ($116,779) Total 0% 59.0 Less: Operating Expenses ($700,675)
VLI Studio, per Month $895 Net Operating Income (NOI) $1,518,129 VLI Units 10% 5.0 VLI 1 BR, per Month $999
Mod Units 0% 0.0 (b) VLI 2 BR, per Month $1,098 Capitalized Project Value $31,173,076 VLI 3 BR, per Month $1,174 Less Total Development Costs ($26,460,245) Residual Land Value (RLV) $4,712,832
Affordable Breakdown VLI Mod Market Vacancy Assumption 5% Studio 1.0 0.0 14.0 Operating Expenses (% gross revenues) 30% RLV/acre $6,843,031 One-Bedroom 3.0 0.0 27.0 Developer Profit (as % of total project costs) 10% RLV per Site sf $157 Two-Bedrooms 1.0 0.0 13.0
Three-Bedrooms 0.0 0.0 0.0 Capitalization Rate 4.87%
Total 5.0 0.0 54.0
Inclusionary Housing and In-Lieu Fee Study | Appendix C: Residential Pro-Formas 99 Figure 20: Financial Feasibility, Prototype SDBL-II: Rental Density Bonus Prototype (a) Applies 50% Density Bonus to AUD Priority Housing Overlay Density. Calculated on the Base Number of Units allowed (44), rounded up to the nearest whole number. (b) Providing 15% of base units for VLI households to satisfy SDBL also satisfies the inclusionary requirement for rental. (c) Hard Costs include Site Prep work (e.g., grading, minor demolition), and assume Tier 4 Stormwater Requirements (additional $17/sf GBA for a $750,000 investment). (d) Includes Commercial Shell and Tenant Improvements
(e) Soft costs shown in this line include engineering, architecture, as well as City cost-recovery fees for planning, permitting, and entitlements, and financing. (f) Per Santa Barbara Unified Developer Fee Schedule, effective October 2024. (g) Based on rents for market-rate units in recently-constructed multifamily rental developments ,according to CoStar. Rental rate shown is weighted based on the unit mix in the prototype.
(h) Utilize Maximum Rents for Very-Low Income (Target 50% AMI) households published in April 2025 by the City of Santa Barbara, minus utilities.

Source: BAE, 2025
Development Program Assumptions Cost and Income Assumptions Development Cost Analysis Site Size (acres) 0.69 Development Costs Hard Costs
Site Size (sf) 30,000 Residential Hard Costs, per sf $437 (c) Residential $27,513,000 Commercial Hard Costs, per sf $437 (d) Commercial $0
AUD Allowable Dwelling Units 44 Podium Parking, per space $40,000 Podium Parking $0 Total Dwelling Units (SDB) 66 (a) Underground Parking, per space $70,000 Underground Parking $0 Commercial Space (sf, gross) 0 Parking Stackers $0
Gross Residential Area (sf) 62,972 Total Hard Costs $27,513,000 GBA (excluding parking, sf) 62,972 Soft Costs (as a % of hard costs) 15% (e) Hard Costs per Unit $416,864 Residential Circulation eff (%) 85.0% School Fee (per sf residential) $3.79 (f) Net Residential (sf) 53,526 School Fee (per sf commercial) $0.78 (f) Soft Costs $4,126,950 Average Unit Size (net, sf) 811 School Fee $238,663
Fractional In-Lieu Fee n/a
Total Parking Spaces 0 Operating Revenues & Expenses (g) Total Soft Costs $4,365,613 Surface Spaces 0 Market Rate Studio, per Month $3,694
Podium Spaces 0 Market Rate 1 BR, per Month $3,903 Developer Profit $3,187,861 Underground Spaces 0 Market Rate 2 BR, per Month $5,315 Parking Ratio (spaces/du) 0.00 Market Rate 3 BR, per Month $5,695 Total Development Costs (Excl. Land) $35,066,474 Cost per non parking sf $557
Affordable Unit Rental Prices (net utilities) (h) Cost per residential unit $531,310 Unit Mix % # Moderate Income Studio, per Month $1,604
Studio 25% 17.0 Moderate Income 1 BR, per Month $1,990 Valuation Analysis One-Bedroom 50% 33.0 Moderate Income 2 BR, per Month $2,372 Projected Revenue Two-Bedrooms 25% 16.0 Moderate Income 3 BR, per Month $2,641 Gross Annual Income $3,046,536 Three-Bedrooms 0% 0.0 Commercial Revenue ($/sf) $3.26 Less: Vacancy ($152,327) Total 0% 66.0 Less: Operating Expenses ($913,961)
VLI Studio, per Month $895 Net Operating Income (NOI) $1,980,248 VLI Units 15% 7.0 VLI 1 BR, per Month $999
Mod Units 0% 0.0 (b) VLI 2 BR, per Month $1,098 Capitalized Project Value $40,662,185 VLI 3 BR, per Month $1,174 Less Total Development Costs ($35,066,474) Residual Land Value (RLV) $5,595,711
Affordable Breakdown VLI Mod Market Vacancy Assumption 5% Studio 2.0 0.0 15.0 Operating Expenses (% gross revenues) 30% RLV/acre $8,124,972 One-Bedroom 3.0 0.0 30.0 Developer Profit (as % of total project costs) 10% RLV per Site sf $187 Two-Bedrooms 2.0 0.0 14.0
Three-Bedrooms 0.0 0.0 0.0 Capitalization Rate 4.87%
Inclusionary Housing and In-Lieu Fee Study | Appendix D: Residential Nexus Analysis 100 APPENDIX D: RESIDENTIAL NEXUS ANALYSIS
The residential nexus analysis identifies the relationship between construction of new marketrate residential units, the need for affordable housing, and the need for City funds to construct affordable housing. The nexus analysis establishes the rates the City would need to charge in inclusionary housing in-lieu fees to fully address the estimated affordable housing need associated with the construction of a prototypical new market-rate residential development.

The residential nexus calculation assumes that new households in Santa Barbara will spend some of their money within the local economy, thereby supporting employment for new workers, a portion of which will be in need of affordable housing. The residential nexus-based fee for market-rate residential units represents the fee that the City of Santa Barbara would need to collect to support the construction of the affordable housing needed to house these lower-income worker households.

The process for estimating the relationship between new residential development and the fee revenue necessary to address the resulting affordable housing need consists of the following steps:

Step 1: Identify Housing Types and Prices
The residential nexus analysis evaluates two residential development types that encompass anticipated development in Santa Barbara over the next several years: a multi-unit rental development and an ownership condominium residential project.

First, Step 1 identified the estimated average rent or sale price for each unit type. For rental units, BAE reviewed data from CoStar on rental rates among new (built since 2017) multifamily rental properties in Santa Barbara. For ownership units, BAE reviewed data from Redfin on sale prices among recently-constructed (built since 2007) condominiums in Santa Barbara. Input from interviews with members of the local development community and responses to the developer survey also informed the rent and sale price assumptions that were used in the analysis. The resulting average rent and sale price estimates are shown in Table 21 and Table 22, respectively.

Step 2: Estimate the Incomes of Households in New Market-Rate Housing Step 2 applies the rent and sale prices for new units in Santa Barbara from Step 1 to estimate the household income needed to occupy new rental and ownership units in Santa Barbara.

Table 21 presents the annual household income required to rent new market-rate multifamily rental units in Santa Barbara, assuming households spend 30 percent of their gross income on rent and utilities, in accordance with HUD guidelines. Housing analysts and local, State, and federal housing programs typically consider a household’s housing costs to be affordable if the cost of housing is equal to no more than 30 percent of household income.

Inclusionary Housing and In-Lieu Fee Study | Appendix D: Residential Nexus Analysis 101 Based on an estimated average monthly rent of $4,278 for new rental units, the estimated annual household income required to afford these market rents is approximately $177,736.

Table 21: Income Required to Rent New Multifamily Units (built in 2017 or later) in Santa Barbara
Notes:
(a) Estimated average monthly rents for new units (built since 2017) based on data from CoStar, applied to sizes used in the pro-formas. (b) Includes published utility allowances effective January 2025 from HASB for “Basic” Electric, Gas, Water, Sewer, and Trash.
(c) Assumes 30 percent of gross income spent on housing costs.

Sources: Costar, 2025; Housing Authority of Santa Barbara City, 2025; BAE, 2025.

Table 22 shows the annual household income required to afford a new ownership unit in Santa Barbara. Based on the sale prices for new ownership units, the estimated annual household income needed to afford new ownership units in Santa Barbara is approximately $278,610 for condominiums.

Apartment
Average Monthly Rent (a) $4,278
Plus Utilities (b) $166
Total Monthly Housing Costs $4,443
Annual Housing Costs $53,321
Household Income Required (c) $177,736
Inclusionary Housing and In-Lieu Fee Study | Appendix D: Residential Nexus Analysis 102 Table 22: Income Required to Purchase New Market-Rate Units in Santa Barbara Notes:
(a) Based on Redfin previous 12-month condo sales in City of Santa Barbara (2007+), applied to sizes used in pro-formas. (b) Monthly housing costs based on estimated sale price for each unit type and the resulting monthly housing cost. The monthly housing cost is equal to the monthly mortgage payment, based on the mortgage terms shown in the table, as well as the estimated property tax payment, home insurance cost, and HOA fee. (c) Equal to the average of the weekly rate for a 30-year fixed rate mortgage between Jan 2023-Feb 2025 per Freddie Mac. (d) Includes Basic 1.00% Prop 13/AB8 plus applicable SB Unified Bond, SBCC Bond, SC Flood Zone, and Measure S. (e) Based on insurance rate information provided via California Dept. of Insurance for condos in Santa Barbara County. (f) Based on HOA fees for recently-constructed (2007+) condominiums in the City that were sold in the past year per Redfin.

Sources: Redfin, 2024-25; Freddie Mac, 2023-2025; California Department of Insurance, 2025; BAE, 2025.

Step 3: Analyze the Spending Patterns for Households in New Market-Rate Units and Estimate the Number of Jobs Associated with this Spending
New household spending within an economy supports jobs. As households spend money on retail goods, food, and services (health, personal, professional, and educational), they support job growth in these and other sectors.

To estimate the effect of new household spending on employment generation, this analysis uses IMPLAN (“Impact Analysis for Planning”), a widely-accepted and utilized software model.

See Appendix E for more information about IMPLAN. At the heart of the model is an inputoutput dollar flow table. For a specified region (in this case, Santa Barbara County), the inputoutput table accounts for all dollar flows between different sectors of the economy. Using this information, IMPLAN models the way income injected into one sector is spent and re-spent in other sectors of the regional economy, generating waves of economic activity, or so-called “economic multiplier” effects.

For the purpose of this analysis, the economic “event” is the household spending by occupants of new residential units in Santa Barbara. By IMPLAN definition these household expenditures are direct impacts, and the resulting spending generates induced impacts. For instance, the household expenditures generate jobs for cashiers and baggers at grocery stores patronized by the new households. The process initiated by household expenditures continues as these workers and the businesses they work for spend money in subsequent transactions, Condominium
Estimated Sale Price for New Residential Unit (a) $1,265,032 Monthly Housing Costs for a New Residential Unit (b) $8,126 Annual Housing Costs $97,514
Household Income Required $278,610
Assumptions
Annual Interest Rate (c) 6.58%
Term of Mortgage (years) 30
Percent of sales price as down payment 20%
Property tax as a % of Sale Price (annual) (d) 1.08%
Annual homeowner's insurance cost (townhouse/condo) (e) $599 Monthly homeowners' association fee (Condos) (f) $494
Percent of household income available for housing costs 35% Inclusionary Housing and In-Lieu Fee Study | Appendix D: Residential Nexus Analysis 103 supporting employment at places other than the initial point of sale, such as wholesalers supplying retail stores, or truck drivers delivering goods to those stores. In turn, these businesses and workers spend money to generate additional activity in the local economy.

These are all part of the induced impacts linked to the household expenditures.

For the two residential unit types evaluated, the IMPLAN analysis provides an estimate of the total number of jobs generated by the household expenditures made by residents in new market-rate housing. Because household spending tends to increase as household incomes increase, the IMPLAN analysis indicates that condominium ownership units will generate a higher number of jobs per unit than multifamily rental units. The IMPLAN analysis estimates the total number of jobs as well as the number of jobs in each industry sector that each unit type will generate. These estimates are shown in Step 4 (Table 24 through Table 26).

Step 4: Estimate New Worker Households by Household Income Level For the residential nexus, Public Use Microdata Samples (PUMS) data was used to estimate worker household incomes for workers in each industry sector that is associated with job growth attributable to new market-rate residential units, as identified in the IMPLAN analysis in Step 3. Worker households14 often have more than one employed person. The incomes of individual workers do not provide sufficient information to estimate the distribution of household incomes among new workers because worker households vary with respect to the number of other workers in the household and the individual incomes among any other workers in the household.

Table 23 shows the distribution of workers in each major industry sector by household income level, based on PUMS data for workers employed in each industry sector that work in Santa Barbara County.
14 A worker household is a household with one or more employed persons. They may be wage and salary workers, or self-employed/sole proprietors.

Inclusionary Housing and In-Lieu Fee Study | Appendix D: Residential Nexus Analysis 104 Table 23: Worker Household Income Level by Industry of Employment, Santa Barbara County Note:
(a) Based on a cross tabulation of Public Use Microdata Samples (PUMS) from the 2019-2023 American Community Survey. These incomes were compared to 2023 Santa Barbara County household income limits published by HCD to determine the percentage of households in each income category. The analysis controlled for household size, to address the varying income limits for each household size.

Sources: American Community Survey, 2019-2023 Public Use Microdata Sample; CA Dept. of Housing and Community Development (HCD), 2023; BAE, 2025.

Estimated Household Income as a Percent of AMI (a)
Acutely Extremely Very Above
NAICS Low Low Low Low Moderate Moderate
Industry Code (15% AM I) (30% AM I) (50% AM I) (80% AM I) (120% AM I) >120% AM I) Total Private Sector
Agriculture and Natural Resources 11, 21 0.4% 18.6% 26.1% 26.3% 6.9% 21.6% 100.0% Construction 23 1.1% 7.0% 14.7% 23.0% 5.2% 49.0% 100.0% Manufacturing 31-33 1.1% 2.9% 9.1% 18.8% 4.1% 64.0% 100.0% Wholesale Trade 42 0.0% 4.0% 17.5% 25.9% 3.5% 49.1% 100.0% Retail Trade 44-45 3.2% 8.9% 16.5% 25.0% 3.4% 43.0% 100.0% Transportation, Warehousing, and Utilities 48-49, 22 2.0% 8.1% 14.4% 22.3% 3.6% 49.7% 100.0% Information 51 1.2% 1.8% 6.0% 13.4% 6.0% 71.8% 100.0%
Finance, Insurance, and Real Estate 52-53 1.0% 4.2% 8.9% 19.0% 3.1% 63.7% 100.0% Professional, Scientific, & Technical Svcs, & Mgmt of Companies 54-55 0.4% 2.0% 3.3% 9.9% 3.2% 81.3% 100.0% Administrative and Support and Waste Mgmt. Svcs 56 1.3% 10.3% 19.2% 27.7% 6.4% 35.1% 100.0% Educational Services 61 2.1% 5.4% 11.7% 19.8% 5.7% 55.3% 100.0% Health Care and Social Assistance 62 1.2% 5.0% 14.3% 22.3% 2.9% 54.2% 100.0% Leisure and Hospitality 71-72 2.6% 10.9% 20.1% 25.4% 2.0% 39.0% 100.0% Other Services Except Public Administration 81 2.6% 7.4% 17.3% 27.7% 4.9% 40.1% 100.0% All Government Employment 1.8% 4.6% 7.1% 21.6% 3.1% 61.7% 100.0% Total 1.6% 7.1% 13.6% 22.0% 3.9% 51.8% 100.0%
Inclusionary Housing and In-Lieu Fee Study | Appendix D: Residential Nexus Analysis 105 Table 24 applies the household income distribution by industry, as shown in Table 23, to the number of jobs generated in each industry as a result of spending by households, as estimated in Step 3. Since the income of an individual household generates only a small amount of employment within each specific industry and household income level category, the tables show the number of jobs generated for every 100 units. The results are then divided by 100 in Step 6 below to show the estimated impact of a single household.

Housing need is based on the number of households rather than the number of jobs. As such, the analysis translates the number of jobs into households by dividing the number of jobs by the average number of workers per worker household for each income category, using PUMS data to identify the average number of workers per worker household by household income level.

The number of jobs that each residential product type generates corresponds to the household income required to afford each unit type. As shown in Table 24, 100 units of high-density multifamily rental housing in Santa Barbara generates a need for approximately 40 housing units for local workers in total, including approximately 21 units affordable to Acutely Low-, Extremely Low-, Very Low-, and Low-Income households. As shown in Table 25, 100 units of condominium ownership housing in Santa Barbara generates a need for approximately 45 housing units for local workers in total, including approximately 23 units affordable to Acutely Low-, Extremely Low-, Very Low-, and Low-Income households. These findings are summarized in Table 26.

The findings shown in Table 24 and Table 25 and summarized in Table 26 can be used to identify the inclusionary housing proportions or fee that would be needed in each residential development type to fully mitigate the need for affordable housing that is attributable to new market-rate development.
.

Inclusionary Housing and In-Lieu Fee Study | Appendix D: Residential Nexus Analysis 106 Table 24: Jobs and Worker Household Generation by Income Level from New Multifamily Rental Housing Notes:
(a) Total Jobs is output of IMPLAN model, and shows employment generated by household spending. Columns to right may not sum to Total Jobs due to independent rounding. (b) Estimated Jobs per 100 Units at each worker household income level is equal to Total Jobs per 100 Units in each industry, as shown in this table, multiplied by the share of workers in each industry at each income level, as shown in Table 23. (c) Average number of workers per worker household by income category calculated based on American Community Survey PUMS data, 2019-2023.

Sources: American Community Survey, 2019-2023 Public Use Microdata Sample; CA Department of Housing and Community Development, 2023; IMPLAN; BAE, 2025.

Estimated Jobs per 100 Units
Total Jobs by Worker Household Income Level (b)
NAICS per 100 Up to 15% to 30% to 50% to 80% to Over
Industry Code Units (a) 15% AMI 30% AMI 50% AMI 80% AMI 120% AMI 120% AMI Private Sector
Agriculture and Natural Resources 11, 21 0.36 0.00 0.07 0.10 0.10 0.03 0.08 Construction 23 0.59 0.01 0.04 0.09 0.14 0.03 0.29
Manufacturing 31-33 0.10 0.00 0.00 0.01 0.02 0.00 0.07
Wholesale Trade 42 1.49 0.00 0.06 0.26 0.39 0.05 0.73
Retail Trade 44-45 10.48 0.33 0.93 1.73 2.62 0.36 4.51
Transportation, Warehousing, and Utilities 48-49, 22 2.05 0.04 0.17 0.29 0.46 0.07 1.02 Information 51 2.13 0.02 0.04 0.13 0.29 0.13 1.53
Finance, Insurance, and Real Estate 52-53 6.22 0.06 0.26 0.55 1.18 0.19 3.96 Professional, Scientific, & Technical Svcs, & Mgmt of Companies 54-55 3.35 0.01 0.07 0.11 0.33 0.11 2.72 Administrative and Support and Waste Management Services 56 3.46 0.05 0.36 0.66 0.96 0.22 1.21 Educational Services 61 2.02 0.04 0.11 0.24 0.40 0.11 1.12 Health Care and Social Assistance 62 15.56 0.19 0.78 2.23 3.46 0.46 8.43 Leisure and Hospitality 71-72 15.43 0.40 1.68 3.10 3.91 0.31 6.02 Other Services Except Public Administration 81 7.88 0.21 0.59 1.36 2.19 0.38 3.16 All Government Employment 1.27 0.02 0.06 0.09 0.28 0.04 0.79 Total Jobs 72.40 1.40 5.20 10.95 16.71 2.50 35.64
Workers per Households (c) 1.80 1.24 1.36 1.65 1.85 1.96 1.94 Number of Households 40.25 1.13 3.81 6.65 9.02 1.27 18.37 Inclusionary Housing and In-Lieu Fee Study | Appendix D: Residential Nexus Analysis 107 Table 25: Jobs and Worker Household Generation by Income Level from New Ownership Housing Notes:
(a) Total Jobs is output of IMPLAN model, and shows employment generated by household spending. Columns to right may not sum to Total Jobs due to independent rounding. (b) Estimated Jobs per 100 Units at each worker household income level is equal to Total Jobs per 100 Units in each industry, as shown in this table, multiplied by the share of workers in each industry at each income level, as shown in Table 23. (c) Average number of workers per worker household by income category calculated based on American Community Survey PUMS data, 2019-2023.

Sources: American Community Survey, 2019-2023 Public Use Microdata Sample; CA Department of Housing and Community Development, 2023; IMPLAN; BAE, 2025.

Estimated Jobs per 100 Units
Total Jobs by Worker Household Income Level (b)
NAICS per 100 Up to 15% to 30% to 50% to 80% to Over
Industry Code Units (a) 15% AMI 30% AMI 50% AMI 80% AMI 120% AMI 120% AMI Private Sector
Agriculture and Natural Resources 11, 21 0.35 0.00 0.07 0.09 0.09 0.02 0.08 Construction 23 0.59 0.01 0.04 0.09 0.14 0.03 0.29
Manufacturing 31-33 0.10 0.00 0.00 0.01 0.02 0.00 0.06
Wholesale Trade 42 1.43 0.00 0.06 0.25 0.37 0.05 0.70
Retail Trade 44-45 9.95 0.32 0.88 1.64 2.49 0.34 4.28
Transportation, Warehousing, and Utilities 48-49, 22 2.21 0.04 0.18 0.32 0.49 0.08 1.10 Information 51 1.93 0.02 0.03 0.12 0.26 0.12 1.39
Finance, Insurance, and Real Estate 52-53 9.64 0.10 0.41 0.85 1.84 0.30 6.14 Professional, Scientific, & Technical Svcs, & Mgmt of Companies 54-55 3.78 0.01 0.07 0.12 0.37 0.12 3.07 Administrative and Support and Waste Management Services 56 3.49 0.05 0.36 0.67 0.97 0.22 1.22 Educational Services 61 3.77 0.08 0.20 0.44 0.75 0.21 2.09 Health Care and Social Assistance 62 17.42 0.22 0.87 2.50 3.88 0.51 9.44 Leisure and Hospitality 71-72 16.41 0.43 1.78 3.30 4.16 0.33 6.40 Other Services Except Public Administration 81 9.34 0.25 0.69 1.61 2.59 0.45 3.74 All Government Employment 0.99 0.02 0.05 0.07 0.21 0.03 0.61 Total Jobs 81.40 1.54 5.70 12.09 18.62 2.83 40.62
Workers per Households (c) 1.80 1.24 1.36 1.65 1.85 1.96 1.94 Number of Households 45.18 1.24 4.18 7.33 10.05 1.44 20.94 Inclusionary Housing and In-Lieu Fee Study | Appendix D: Residential Nexus Analysis 108 Table 26: Summary of Induced Housing Need per 100 Units by Residential Development Type by Income Category
Notes:
(a) Total Jobs is output of IMPLAN model, and shows employment generated by household spending. Columns to right may not sum to Total Jobs due to independent rounding. (b) Estimated Jobs per 100 Units at each worker household income level is equal to Total Jobs per 100 Units in each industry, as shown in this table, multiplied by the share of workers in each industry at each income level. (c) Average number of workers per worker household by income category calculated based on American Community Survey PUMS data, 2019-2023.

Sources: American Community Survey, 2019-2023 Public Use Microdata Sample; CA Department of Housing and Community Development, 2023; IMPLAN; BAE, 2025.

Estimated Jobs per 100 Units
Total Jobs by Worker Household Income Level (b)
per 100 Up to 15% to 30% to 50% to 80% to Over
Jobs Units (a) 15% AMI 30% AMI 50% AMI 80% AMI 120% AMI 120% AMI Rental Apartments 72.40 1.40 5.20 10.95 16.71 2.50 35.64 For-Sale Condos 81.40 1.54 5.70 12.09 18.62 2.83 40.62
Estimated Worker Households per 100 Units
Total HH by Worker Household Income Level (c)
per 100 Up to 15% to 30% to 50% to 80% to Over
Households Units (c) 15% AMI 30% AMI 50% AMI 80% AMI 120% AMI 120% AMI Rental Apartments 40.25 1.13 3.81 6.65 9.02 1.27 18.37
For-Sale Condos 45.18 1.24 4.18 7.33 10.05 1.44 20.94
Inclusionary Housing and In-Lieu Fee Study | Appendix D: Residential Nexus Analysis 109 Step 5: Calculate the Affordable Housing Financing Gap
This step calculates the cost to house the Extremely Low-, Very-Low-, and Low-Income households from Step 4 by determining the per unit “financing gap” for an affordable unit. The financing gap for an affordable unit is the difference between the development cost for an affordable unit and the amount of permanent financing available to subsidize the development of the unit.

Affordable Unit Development Cost. The estimated average construction cost for an affordable unit in Santa Barbara County is based on cost estimates provided in ten applications for tax credit funding that were submitted in 2023 and 2024 for proposed affordable housing developments in Santa Barbara County. Cost information from applications was inflated to 2025 estimates based on the RS Means Historical Cost Index. Based on the information from these applications, the estimated average cost to construct an affordable housing unit in Santa Barbara County is approximately $757,000, as shown in Table 27 below. This may underestimate the cost of constructing new affordable units in Santa Barbara; for example, the Housing Authority recently estimated that the cost to construct affordable housing in Santa Barbara averages approximately $1 million per unit. To the extent that the estimate of $757,000 understates the true average cost of constructing an affordable unit in Santa Barbara, this analysis may underestimate the fee that could be supported based on the nexus analysis.

Permanent Financing. The financing gap for an affordable unit assumes an affordable housing developer is able to secure four percent Low-Income Housing Tax Credit (LIHTC) equity financing and a permanent loan based on the net operating income (NOI) from each unit.

The analysis assumes four percent LIHTC equity financing because this funding source is more readily available than nine percent LIHTC financing, for which there is considerable competition. However, four percent LIHTC financing is nonetheless limited and is unlikely to be available at the levels that would be necessary to construct all the affordable units needed to address housing needs generated by new market-rate residential development. In addition, inclusion of four percent tax credits as a funding source shifts some of the cost of providing affordable housing onto the public sector because the tax credits reduce the tax credit investors’ tax liability. Including four percent LIHTC financing as a source of funding in the nexus model reduces the net affordability gap shown in Table 27, and therefore serves as a conservative assumption in estimating the cost associated with mitigating the housing needs generated by new residential development. As shown in Table 27, four percent LIHTC equity would provide an estimated $276,577 per affordable unit, based on an average development cost of approximately $757,000 per affordable unit. Table 27 does not include any LIHTC equity for Moderate-Income units because Moderate-Income units are not eligible for LIHTC funding.

Inclusionary Housing and In-Lieu Fee Study | Appendix D: Residential Nexus Analysis 110 The financing gap calculation does not include financing from other public funding sources because other sources are limited and typically require a heavily competitive application process. These sources are not sufficient to fully address affordable housing needs that arise from the impact of new market-rate residential development projects in Santa Barbara.

Table 27 also shows the estimated permanent loan amount per unit, based on the Net Operating Income (NOI) from each unit (i.e., gross income net of vacancy and expenses) and typical financing terms. The rental rates used in this analysis are the 2025 rent limits for a two-bedroom unit for households at each income level, as set by the Tax Credit Allocation Committee (TCAC) for LIHTC projects, excluding an estimated utility allowance effective January 2025 from Housing Authority of the City of Santa Barbara (HASB) for “Basic” Electric, Gas, Water, Sewer, and Trash.

Table 27: Affordable Housing Financing Gaps, Santa Barbara, 2025 Notes:
(a) Based on a 3-person household, CA Department of Housing & Community Development, 2025. (b) Maximum affordable rents for 2-bedroom units per TCAC rent limits, excluding 2-bedroom utility costs. (c) Data from recent (2023 and 2024) applications for affordable housing projects in Santa Barbara, Ventura, and San Luis Obispo Counties.
(d) Net Operating Income divided by Debt Coverage Ratio. (e) Average of development costs shown in LIHTC applications submitted in 2023-24 for projects in Santa Barbara County. (f) The financing gap calculations that are shown in this table incorporate credit financing to offset a portion of the cost of constructing an affordable unit, which reduces the estimated financing gaps. However, it should be noted that projects must compete for tax credit financing, with a limited amount of funding available from tax credit financing in each round. It is unlikely that enough tax credits would be available to fully address affordable housing needs in Santa Barbara or in the broader region, and therefore full mitigation of housing needs would likely require affordable housing developments to be constructed without tax credit financing. Therefore, the financing gaps shown in this table likely represent an underestimate of the funding that would be needed to address the full need. (g) Based on financing terms assumptions. Moderate units are not eligible for LIHTCs. (h) Total Development Costs less Loan Amount and tax credit financing. (i) Based on Secured Overnight Financing Rate (SOFR) plus 200 basis points to reflect Q1 2025 financial conditions. (i) All of the City of Santa Barbara is included within either a Difficult to Develop Area (DDA) or Qualified Census Tract (QCT). Projects in DDAs or QCT receive a tax credit “boost”.

ELI VLI LI Moderate
Household Income Limit (a) $47,700 $79,450 $127,100 $128,600 Maximum Affordable Monthly Contract Rent per Unit (b) $1,016 $1,811 $3,003 $3,040 Annual Gross Rent per Unit $12,192 $21,732 $36,036 $36,480 Less 5% Vacancy ($610) ($1,087) ($1,802) ($1,824)
Miscellaneous Income per Unit (Annual) (c) $131 $131 $131 $131 Less 5% Vacancy ($7) ($7) ($7) ($7)
Total Annual Revenue per Unit $11,706 $20,769 $34,358 $34,780 Less Annual Operating Expenses per Unit (c) $11,580 $11,580 $11,580 $11,580 Annual Net Operating Income per Unit $126 $9,189 $22,778 $23,200 Annual Supportable Debt Service per Unit (d) $110 $7,990 $19,807 $20,174 Total Development Costs per Affordable Unit (e) $757,021 $757,021 $757,021 $757,021 Less: Permanent Loan Amount (f) ($1,466) ($106,884) ($264,946) ($269,852) Less: Tax Credit Financing (4% LIHTC) (g) ($276,577) ($276,577) ($276,577) $0 Financing Gap per Affordable Unit (h) $478,978 $373,560 $215,498 $487,169 Income Group
Inclusionary Housing and In-Lieu Fee Study | Appendix D: Residential Nexus Analysis 111 The vacancy, miscellaneous income, and operating expense assumptions shown in Table 27 are also based on information provided in 2023 and 2024 applications for LIHTC funding for projects in Santa Barbara County. Based on the NOI for units at each affordability level and standard financing assumptions, the supportable loan amount ranges from $1,466 per unit for units serving Extremely Low-Income households to $269,852 per unit for units serving Moderate-Income households.

Net Financing Gap. The financing gap per affordable unit is equal to the total development cost less the tax credit equity and supportable loan amount. As shown, the financing gap per affordable unit ranges from $215,498 for Low-Income units to $487,169 for ModerateIncome units.

Step 6: Calculate the Maximum Nexus-Based Fee
The final step in calculating the nexus-based fee is to apply the financing gap per unit for each income level (from Step 5) to the total housing need by income level from new market-rate units (from Step 4). As shown in Table 28, the nexus-based fees for residential product types are as follows:

Multifamily Rental:
$91.41 per net square foot
Ownership Condominium:
$72.53 per net square foot
While the nexus analysis shows that condominium units are associated with a higher number of induced jobs than multifamily rental units, the overall nexus-based fee per square foot is lower for condominium units because condominiums generally have larger unit sizes.

Inclusionary Housing and In-Lieu Fee Study | Appendix D: Residential Nexus Analysis 112 Table 28: Nexus-Based Fee Rates for Market-Rate Residential Units Note:
(a) See Table 26
(b) See Table 27
(c) Equal to affordable housing need per 100 units at each income level multiplied by financing gap at corresponding level. (d) Equal to the nexus-based fee per 100 units divided by 100. (e) Reflects the fee rate per net leasable/saleable square foot. Based on the following unit sizes:

Multifamily Rental Apartment Units (SF): 811
Condominium Units (SF): 1,131
Source: BAE, 2025.

Affordable Housing Financing Nexus-Based Fee Nexus-Based Nexus-Based Fee Affordability Level Need Per 100 Units (a) Gap (b) Per 100 Units (c) Fee Per Unit (d) Per Net SF (e) Multifamily Rental Apartment Units
Extremely Low Income (up to 30% AMI) 4.940 $478,978 $2,366,246 $23,662 $29.18 Very Low Income (31-50% AMI) 6.645 $373,560 $2,482,356 $24,824 $30.61 Low Income (51-80% AMI) 9.021 $215,498 $1,944,105 $19,441 $23.97 Moderate Income (80-120% AMI) 1.274 $487,169 $620,665 $6,207 $7.65 Total 21.881 $7,413,373 $74,134 $91.41
Condominium Units
Extremely Low Income (up to 30% AMI) 5.420 $478,978 $2,596,189 $25,962 $22.95 Very Low Income (31-50% AMI) 7.331 $373,560 $2,738,634 $27,386 $24.21 Low Income (51-80% AMI) 10.051 $215,498 $2,166,074 $21,661 $19.15 Moderate Income (80-120% AMI) 1.442 $487,169 $702,632 $7,026 $6.21 Total 24.245 $8,203,529 $82,035 $72.53
Inclusionary Housing and In-Lieu Fee Study | Appendix E: Overview of IMPLAN 113 APPENDIX E: OVERVIEW OF IMPLAN
This appendix provides additional clarification on the IMPLAN input-output model. It provides an overview of the data that IMPLAN uses internally, a step-by-step account of how IMPLAN estimates economic impacts, and the process of how the model estimates the impacts of new commercial and housing projects.

What is IMPLAN?
IMPLAN is an input-output model that estimates the total economic implications of new economic activity within a specified geography. The model uses national industry data and county-level economic data to generate a series of multipliers, which in turn estimate the total economic implications of economic activity.

At the heart of the model is a national input-output dollar flow table called the Social Accounting Matrix (SAM). Unlike other static input-output models, which just measure the purchasing relationships between industry and household sectors, SAM also measures the economic relationships between government, industry, and household sectors, allowing IMPLAN to model transfer payments such as unemployment insurance. Thus, for the specified region, the input-output table accounts for all the dollar flows between the different sectors within the economy.

National Industry Data. The model uses national production functions for 546 sectors to determine how an industry spends its operating receipts to produce its commodities. The model also uses a national matrix to determine the byproducts15 that each industry generates. To analyze the impacts of household spending, the model treats households as an “industry” to determine their expenditure patterns. IMPLAN couples the national production functions with a variety of county-level economic data to determine the impacts for our example.

County-Level Economic Data. To estimate the county-level impacts, IMPLAN combines national industry production functions with county-level economic data. IMPLAN collects data from a variety of economic data sources to generate average output, employment, and productivity for each of the industries in a given county. It also collects data on average prices for all of the goods sold in the local economy. In this analysis, IMPLAN uses economic data for Santa Barbara County. IMPLAN gathers data on the types and amount of output that each industry generates within the County. In addition, the IMPLAN model uses county-level data on the prices of goods and household expenditures to determine the consumption functions of regional households and local government, taking into account the availability of each commodity within the specified geography. 15 The byproducts refer to any secondary commodities that the industry creates.

Inclusionary Housing and In-Lieu Fee Study | Appendix E: Overview of IMPLAN 114 Multipliers. IMPLAN combines these data to generate a series of SAM-type multipliers for the local economy. The multiplier measures the amount of total economic activity that results from an industry (or household) spending an additional dollar in the local economy. Based on these multipliers, IMPLAN generates a series of tables to show the economic event’s direct, indirect, and induced impacts to gross receipts, or output, within each of the model’s 546 sectors. These outputs are described below:
 Direct Impacts. Direct impacts refer to the dollar value of economic activity available to circulate through the economy and the jobs associated with that economic activity. In the case of new residential development, the direct impacts are equal to the new households’ discretionary spending. The direct impacts do not include household savings and payments to federal, state, and local taxes, as these payments do not circulate through the economy.

It should be noted that impacts from retail expenditures differ significantly between the total economic value of retail and the amount available to circulate through the local economy.

The nature of retail expenditures accounts for this difference. The model assumes that only the retail markup impacts the local economy, particularly for industries heavily populated with national firms such as gas stations and grocery stores. Since local stores generally buy a significant portion of goods from wholesalers and manufacturers outside of the area, and corporate profits also leave the local economy, only the retail markup will be available for distribution within the local economy. To the extent that retailers’ headquarters are located within the county or region, the model allocates their portions of the impacts to the local economy.
 Indirect Impacts. The indirect impacts refer to the impact of local industries buying goods and services from other local industries, and to the jobs supported by those purchases. The cycle of spending works its way through the supply chain until all money leaks from the local economy, either through imports purchased outside of the local economy or by payments to income and taxes. For capital projects, indirect impacts include payments for wood, steel, office supplies, and any other non-labor payments that a construction firm would purchase in the building process.
 Induced Impacts. The induced impacts refer to the dollar and employment impacts of household spending by the employees generated by the direct and indirect impacts. In other words, induced impacts result from the household spending of employees that the new households patronize (direct) and their suppliers (indirect). The model accounts for local commute patterns in the geography. For example, if 20 percent of construction workers who work in the region live outside of the region, the model will allocate 80 percent of labor’s disposable income into the model to generate induced impact estimates. The model excludes payments to federal and state taxes and savings based on the geography’s average local tax and savings rates. Thus, only the disposable incomes from local workers are included in the model.

Inclusionary Housing and In-Lieu Fee Study | Appendix E: Overview of IMPLAN 115 Specifying the “Event” and Running the Model
Once the model is built for the specified geography, the next step is specifying the “event” that the model will analyze and running the model.

Specifying the “Event.” The “event” refers to the total economic value of industry output that the analyst is considering. For example, in the case of the construction of new market-rate residential units, the “event” would be the household spending by new households living in the residential units, including the resulting new jobs and the worker compensation.

Running the Model. Once the event is specified, IMPLAN model generates the results. By default, IMPLAN applies local data on average output per worker and compensation per worker to determine the direct impacts. The model then applies the value of the event to the national production functions and runs a number of iterations of this value through the production functions for the local economy to determine the indirect and induced impacts. For each iteration, the model removes expenditures to government, savings, and for goods bought outside of the local economy so that the results only include those dollars that impact the local economy.

Summarizing the Impacts
Once the model is run, IMPLAN generates output tables to show the direct, indirect, and induced impacts within each of the model’s 546 sectors. IMPLAN generates these tables for three types of impacts: employment, output, and value added. The IMPLAN analysis of this study is focused on the employment impacts.
• Employment shows the number of employees needed to support the economic activity in the local economy. It should be noted that for ongoing operations, the employment figure represents the amount of employment needed to support that activity for a year.

Furthermore, IMPLAN reports the number of jobs based on average output per employee for a given industry within the geography. This is not necessarily the same as the number of fulltime positions. • Output refers to the total economic value of the project in the local economy. • Value Added shows the total income that the event generates in the local economy. This income includes:
o Employee Compensation – total payroll costs, including benefits o Proprietary Income – payments received by self-employed individuals as income o Other Property Type Income – payments for rents, royalties, and dividends o Indirect Business Taxes – excise taxes, property taxes, fees, and sales taxes paid by businesses. These taxes occur during the normal operation of businesses, but do not include taxes on profits or in
ATTACHMENT 2
City Council: Inclusionary Housing and In-Lieu Fee Study (CITY2026-00003) May 5, 2026
1 HOUSING ELEMENT PROGRAM AND

APPLICABLE GENERAL PLAN GOALS, POLICIES, AND ACTIONS
2023–2031 Housing Element
Program HE-13: Evaluate Inclusionary Housing Ordinances The City’s Inclusionary Housing Ordinances have been used to increase the number of affordable units in ownership projects since 2004 and rental housing projects since 2019.

In some cases, the developer can pay in-lieu fees rather than the required on-site inclusionary unit(s). In-lieu fees are allocated to a reserve fund intended to increase and improve the supply of deed-restricted affordable housing and ensure compliance with the City’s Affordable Housing Policies and Procedures. There are relatively few projects that pay the in-lieu fees.

Since 2019, 11 deed-restricted moderate-income inclusionary units have been approved and 25 are pending.

Economic studies conducted in 2017 and 2019 evaluated a range of potential inclusionary requirements and in-lieu fees to determine the appropriate balance for the 2019 amendment. Since then, development costs and rents have increased to the extent that a new study should be conducted.
• Evaluation. The City will conduct a feasibility study to determine if the inclusionary requirement or in-lieu fee should be adjusted to produce a greater percentage of deed-restricted affordable housing units or in-lieu funds for affordable housing. The evaluation will also review consistency with “No Net Loss” law to ensure any existing deed-restricted affordable units or other “Protected Units” proposed to be demolished as part of a new housing project are replaced in addition to the required inclusionary units or in-lieu fee.
• Zoning Ordinance Amendments. The City shall draft Inclusionary Housing Ordinance amendments for adoption if warranted by the results of the evaluation.

Funding Source: General Fund (staff)
Responsibility: Planning and Housing and Human Services Divisions Time Frame: Feasibility Study Start Date Q2 2024. End Date Q3 2025. Amendments Start Date Q4 2025. End Date Q5 2026.

Corresponding Goal/Policy: Goals 1, 2; Policies 2.1, 2.2, and 2.3 ATTACHMENT 2
City Council: Inclusionary Housing and In-Lieu Fee Study (CITY2026-00003) May 5, 2026
2 Land Use Element (2011)
• LG1. Resource Allocation Priority
Prioritize the use of available resources capacities for additional affordable housing for extremely low, very low, low, moderate, and middle income households over all other new development.
o LG1.1 Affordable Housing
Support affordable housing consistent with Housing Element goals and requirements and develop incentives in the form of flexibility in densities or standards for affordable housing projects if supported by available resource capacities.
• LG5. Community Benefit Housing
While acknowledging the need to balance the provision of affordable housing with market-rate housing, new residential development in multi-family and commercial zones, including mixed-use projects, should include affordable housing and open space benefits.
o LG5.1 Affordable Housing
Develop standards and project level findings to encourage the development of Community Benefit Housing defined as: Rental housing; Housing affordable to low, moderate, or middle income households; Employer sponsored workforce housing; Limited Equity Co-operative Housing; Affordable Housing Downtown for Downtown Workers; and/or Transitional housing, single residential occupancy, and other housing for special needs populations including seniors, physically or mentally disabled, homeless, and children aging out of foster care.

Housing Element 2023–2031
Goal 1 Create New Housing: Create new healthy, safe, and energy-efficient housing that meets community needs, within our resources.

Goal 2 Prioritize Affordable Housing: Prioritize housing that is affordable to the workforce and vulnerable communities, by the use of deed restrictions and other measures, over other types of development, with special emphasis on housing that meets the needs of extremely low, very low, low, moderate, and middle income, and special needs households.
• Policy 2.1 Prioritize Affordable Housing and Community Priority Projects ATTACHMENT 2
City Council: Inclusionary Housing and In-Lieu Fee Study (CITY2026-00003) May 5, 2026
3 Prioritize production of deed-restricted affordable housing and nonresidential community priority projects with broad community benefits over all other land uses and housing types.
• Policy 2.2 Increase Production of Affordable Housing
Encourage and provide development opportunities and incentives to increase production of affordable housing.
• Policy 2.3 Ownership Housing
Encourage the development of smaller ownership units that provide paths to homeownership for first-time homebuyers, including opportunities for employerprovided housing.

ATTACHMENT 3
City Council: Inclusionary Housing Study (CITY2026-00003) May 5, 2025
1 HOUSING PRODUCTION (2023-2031 RHNA PROGRESS)
Table 1
RHNA Progress, 2023–2031 Housing Element
RHNA
Units
Permitted
Units*
Progress
(%)*
Very Low (0-50%) 2,147 38 1.8%
Low (50 – 80%) 1,381 93 6.7%
Moderate (80-120%) 1,441 69 4.8%
Above Moderate (over 120%) 3,032 663 21.9%
Total 8,001 863 10.8%
* Units with an issued building permit before December 31, 2025 Twenty-one multi-unit residential projects contributed just under half of the 863 units permitted and counted towards RHNA Progress (47%). Since inclusionary housing requirements only apply to multi-unit residential projects (two or more ownership units, and five or more rental units), the following analysis does not consider single-unit projects or ADUs.

Figure 1: Permitted Units in RHNA Progress, 2023-2031 Housing Element Annually, the City has permitted an average of five multi-unit residential projects that provide an annual total average of 102 units. The median project size has been seven units. A majority (57%) of the permitted projects are smaller projects with fewer than 10 units. Inclusionary housing requirements for both ownership and rental units do not require on-site units for projects with fewer than 10 units—there are only 9 permitted ATTACHMENT 3
City Council: Inclusionary Housing Study (CITY2026-00003) May 5, 2025
2 projects that have more than 10 units. Interestingly, the largest projects permitted in each of the last three years (2023-2025) are 100 percent affordable projects.1 Figure 2: Units in Permitted Multi-Unit Projects, 2023-2031 Housing Element Eleven projects have contributed 200 affordable units to RHNA Progress. Seven of these eleven projects used State Density Bonus Law (SDBL), providing 188 of the affordable units (94%). Four of the seven SDBL projects and one project not using SDBL are 100 percent affordable, providing 184 of the affordable units (92%).

Table 2
2023–2031 RHNA Progress of
Permitted Affordable Units
Year
Permitted
Extremely
Low
Very
Low Low Moderate
825 De La Vina St 2022 2
27 E Gutierrez St 2022 8
215 E Victoria St 2022 1
821 State St* 2022 3 1
210 S Voluntario St* 2023 1
115 W Anapamu St*† 2023 34
425 Garden St* 2024 4 2
220 N La Cumbre Rd*† 2024 48
1 2023: 115 W Anapamu St with 34 units. 2024: 220 N La Cumbre Rd with 48 units. 2025: 400 W Carrillo St with 63 units. The second largest project permitted in 2025 was also 100% affordable (3055 De La Vina St with 33 units).

ATTACHMENT 3
City Council: Inclusionary Housing Study (CITY2026-00003) May 5, 2025
3 712 E Cota St† 2025 1
3055 De La Vina St*† 2025 33
400 W Carrillo St*† 2025 7 55
Total 0 38 93 69
Units issued a building permit in the 6th cycle Housing Element.

Source: Annual Progress Report data, 2022-2025
* Project utilizing State Density Bonus Law
† 100 percent affordable project
Looking to construction, all but one of the multi-unit projects issued a building permit in the current Housing Element cycle have begun construction, as indicated by a successfully passed building and safety inspection in the permit tracking system. 2 The
median duration between a multi-unit project getting an issued building permit and the first passed inspection is two and a half months.

Figure 3: Duration Between Building Permit Issued and Construction Start, 2023- 2031 Housing Element
Looking at the entitlements pipeline, there are 18 multi-unit projects with an approved planning application that do not yet have an issued building permit. These projects encompass 291 units. Overall, there are six projects (proposing a total of 177 units) that 2 The one multi-unit project with an issued building permit that has not started construction is 228 Cottage Grove for 2 units.

ATTACHMENT 3
City Council: Inclusionary Housing Study (CITY2026-00003) May 5, 2025
4 have approved entitlements but have not yet submitted for a building permit—three projects received their approved entitlements over a year ago (prior to March 2025) and three were entitled within the last 12 months.

Over time, units in projects using SDBL are rising as a percentage of units permitted in multi-unit residential projects. In 2022, just 14 units in one project used SDBL. SDBL usage peaked in 2024, with 2 projects using it to permit 84 units. Projects using SDBL are able to fulfill the local inclusionary housing requirement by counting units proposed to unlock SDBL, typically very-low- or low-income units instead of moderate-income units.

Figure 4: Multi-Unit Residential Units Using State Density Bonus Law, 2023-2031 Housing Element
City of Santa Barbara | Draft Minutes Page 1
City of Santa Barbara
Planning Commission
Draft Minutes
Meeting Date: Thursday, April 16, 2026
Meeting Time: 1:00 P.M.

Meeting location: City Hall, Council Chambers
735 Anacapa Street, Santa Barbara CA, 93101
Review Body Members: Lucille Boss, Chair; Donald DeLuccio, Vice Chair; Brian Barnwell; John M. Baucke; Benjamin Peterson; Devon Wardlow; Lesley Wiscomb Advisory Liaisons: Mike Jordan, City Council Liaison
Staff Liaisons: Megan Arciniega, Senior Planner; Tava Ostrenger, Chief Assistant City Attorney; Jasper Carman, Commission Secretary
Regular meeting Call to Order
Chair Boss called the meeting to order at 1:00 p.m.

I. Roll Call
Commissioners Present
Chair Lucille Boss
Vice Chair Donald DeLuccio
Commissioners Brian Barnwell
John M. Baucke
Benjamin Peterson
Devon Wardlow
Lesley Wiscomb
ATTACHMENT 4
City of Santa Barbara | Draft Minutes Page 2
Staff Present
Allison DeBusk, Community Development Director
Tava Ostrenger, Chief Assistant City Attorney
Ellen Kokinda, City Planner
Rosie Dyste, Principal Planner
Megan Arciniega, Senior Planner
Caroline Paine, Housing and Human Services Manager
Dana Falk, Project Planner
Brad Klinzing, Supervising Engineer
Jessica Metzger, Airport Planner
Christopher Bell, City TV Production Supervisor
Janet Ahern, City TV Production Specialist
Jasper Carman, Commission Secretary
II. Preliminary Matters
A. Requests for continuances, withdrawals, postponements, or addition of exagenda items:

No requests.

B. Announcements and appeals:

Ms. Arciniega announced the following:

1. The Short-Term Rental Ordinance was heard by the Ordinance Committee on Tuesday, April 14, 2026 and was continued for further discussion and public comment to next Tuesday, April 21, 2026.

2. The Single Family Streamlining Project was introduced at City Council on Tuesday, April 14, 2026 and is set for adoption next Tuesday, April 21, 2026.

C. Comments from members of the public pertaining to items not on this agenda:

Public comment opened at 1:02 p.m. and closed with no speakers.

City of Santa Barbara | Draft Minutes Page 3
III. New Item – 404 Moffett Place
Actual Time 1:02 PM
Assessor’s Parcel Number: 073-450-003
Zoning: A-A-O / C-Z (Aircraft Approach and Operation / Coastal Overlay) Application Number: PLN2026-00086 Filing Date: 3/6/2026 Applicant: Brad Klinzing
Owner: City of Santa Barbara
Request for a Local Coastal Program Amendment and Zoning Amendment to change the Zoning Map in the Title 29 - Airport Zoning for a portion of the Santa Barbara Airport property (APN 073-450-003) from A-A-O/C-Z (Aircraft Approach and Operation/Coastal Overlay) to the A-F/C­Z (Airport Facilities/Coastal Overlay).

The actions under the jurisdiction of the Planning Commission at this hearing are:

A. Recommendation to City Council to approve a Zoning Amendment to the Title 29 Zoning Map to change the zoning of the subject site from A-A-O / CZ to A-F / C-Z (SBMC §30.235; B. Recommendation to City Council to approve a Local Coastal Plan Amendment to change the Title 29 Zoning Map that is a part of the City’s Local Coastal Program; and
C. Recommendation to City Council to make a CEQA Determination that the project is exempt from further environmental review under Section 15265 [Adoption of Coastal Plans and Programs] of the California Environmental Quality Act Guidelines.

Jessica Metzger, Airport Planner, gave the Staff presentation. Brad Klinzing, Supervising Engineer was available to answer questions.

Public comment opened at 1:09 p.m. and closed with no speakers.

Motion: DeLuccio / Wardlow
Recommend the project to City Council, making the findings for the Zoning Amendment, Local Coastal Program Amendment, and CEQA Exemption as outlined in the Staff Report dated April 9, 2026.

Motion carried by the following vote: Ayes: 7, Noes: 0, Abstentions: 0, Absent: 0.

City of Santa Barbara | Draft Minutes Page 4
IV. Discussion Item: Inclusionary Housing & In-Lieu Fee Study Actual Time 1:17 PM
Application Number: CITY2026-00003
Applicant: City of Santa Barbara, Planning Division
That Planning Commission receive a presentation on the Inclusionary Housing and In-Lieu Fee Study and provide guidance on Study recommendations to amend the City’s existing inclusionary housing ordinances.

Dana Falk, Project Planner and Aaron Barker, BAE Urban Economics gave the Staff presentation. Allison DeBusk, Community Development Director; Ellen Kokinda, City Planner; Rosie Dyste, Principal Planner; and Caroline Paine, Housing and Homeless Services Manager were available to answer questions.

Public comment opened at 2:00 p.m. and the following individuals spoke:

1. Frank Thompson

2. Rob Fredericks

3. Richard Appelbaum
Written correspondence from Rob Fredericks on behalf of the Housing Authority of the City of Santa Barbara, Jessica de L’Arbre on behalf of Habitat for Humanity of Southern Santa Barbara County, Maricela Morales, Dick Flacks on behalf of Santa Barbara County Action Network, CLUE – Santa Barbara Housing Justice Workgroup, Lisa Carlos, Jennifer Berger on behalf of Santa Barbara Association of Realtors, and multiple submissions from Craig Minus on behalf of the Coastal Housing Commission, and Patricia Saley were acknowledged.

Public comment closed at 2:09 p.m.

The Commission Recessed From 3:34 To 3:46 P.M.

Commission Comments
Recommendation A: Apply Inclusionary Housing Requirements to All Rental Projects with 5+ units.

Initial Straw poll: Should staff include Recommendation A in future ordinance amendments?
City of Santa Barbara | Draft Minutes Page 5
Yes: 1, Yes with Revisions: 5, No: 0
The Commission supports a revised recommendation to apply rental inclusionary requirements to all projects of 2+ units.

Recommendation B: Maintain Current Inclusionary Housing Requirements.

Initial Straw poll: Should staff include Recommendation B in future ordinance amendments?
Yes: 6, Yes with Revisions: 0, No: 1
The Commission came to a majority agreement on the recommendation as proposed. Commissioner Baucke did not support the recommendation.

Recommendation C: Update In-Lieu Fee Rate for Rental Projects with 10+ units.

Initial Straw poll: Should staff include Recommendation C in future ordinance amendments?
Yes: 0, Yes with Revisions: 7, No: 0
The Commission supports a revised recommendation to update the in-lieu fee rate for rental projects of 10+ units at $91.41 per square foot.

Recommendation D: Set In-Lieu Fee Rate for Ownership Projects with 10+ units.

Initial Straw poll: Should staff include Recommendation D in future ordinance amendments?
Yes: 0, Yes with Revisions: 7, No: 0
The Commission supports a revised recommendation to set an in-lieu fee rate for ownership projects of 10+ units at $72.53 per square foot.

Recommendation E: Set a Lower In-Lieu Fee Rate for “Small” Rental and Ownership Projects.

Initial Straw poll: Should staff include Recommendation E in future ordinance amendments?
Yes: 0, Yes with Revisions: 7, No: 0
City of Santa Barbara | Draft Minutes Page 6
The Commission supports a revised recommendation to set an in-lieu fee rate for small rental and ownership projects at $50.00 per square foot.

Recommendation F: Count Rental Inclusionary Units as Bonus Density.

Initial Straw poll: Should staff include Recommendation F in future ordinance amendments?
Yes: 7, Yes with Revisions: 0, No: 0
The Commission supports the recommendation as proposed.

Recommendation G: Option G.1, Consider In-Lieu Fee Payment for All Fractional Inclusionary Requirements. Option G.2, Consider In-Lieu Fee Payment for All Inclusionary Requirements.

Initial Straw poll: Should staff include Option G.1 or Option G.2 in future ordinance amendments?
Option G.1: 0, Option G.2: 2, Both G.1 and G.2: 5
The Commission supports a revised Option G.2 with in-lieu fee rates of $72.53 per square foot (revised recommendation D) or $91.41 per square foot (revised recommendation C) for ownership and rental projects, respectively. Direction to staff to include a comment in the presentation to City Council that option G.2 offers maximum flexibility for developers to satisfy inclusionary housing requirements by allowing a mixture of on-site units and payment of an in-lieu fee.

Recommendation H: Simplify In-Lieu Fee Calculations for Ownership Projects.

Initial Straw poll: Should staff include Recommendation H in future ordinance amendments?
Yes: 7, Yes with Revisions: 0, No: 0
The Commission supports the recommendation as proposed.

Recommendation I: Implement Automatic Annual In-Lieu Fee Rate Adjustments.

Initial Straw poll: Should staff include Recommendation I in future ordinance amendments?
Yes: 1, Yes with Revisions: 6, No: 0
City of Santa Barbara | Draft Minutes Page 7
The Commission supports a revised recommendation to evaluate using the California Department of General Services California Construction Cost Index and the Engineering News-Record in the presentation to City Council.

Recommendation J: Adjust Target AMI for Moderate-Income Rents from 100% to 110%.

Initial Straw poll: Should staff include Recommendation I in future ordinance amendments?
Yes: 7, Yes with Revisions: 0, No: 0
The Commission supports the recommendation as proposed.

Additional Comments:

1. The Commission thanks staff for their great presentation, hard work, and important report.

2. Collected in-lieu fee payments are to be dedicated specifically to the development of affordable housing, not for administrative or consultant costs.

3. Commissioner Barnwell suggests informing builders that their units could be leased long term to small business owners who could provide it to their employees, as one option to provide housing to middle-income households.

4. Commissioner Wardlow emphasizes that inclusionary housing is one step forward but there is a lot of work remaining as the Average Unit-Size Density Incentive Program has only produced 13 moderate-income restricted units so far. Suggests ensuring the process to housing is streamlined and reviewing density in targeted areas where development is desired.

5. Vice Chair DeLuccio recommends reviewing public comment submissions again before presenting the report to City Council.

6. Chair Boss recommends listing public comment submissions received and noting whether it came from an entity or an individual so it is on record.

7. Chair Boss agrees with the request for monitoring and periodic program review, which was recommended in the Santa Barbara Association of Realtors public comment submission.

City of Santa Barbara | Draft Minutes Page 8

8. The Commission recommends that City Council consider a discussion regarding ongoing funding sources into the Local Housing Trust Fund. A value capture mechanism or transfer tax were proposed as options.

V. Administrative Agenda
Actual Time: 4:17 p.m.

A. Committee and Liaison Reports:

1. Staff Hearing Officer Liaison Report
Vice Chair DeLuccio reported on the Staff Hearing Officer meeting of April 15, 2026.

2. Other Committee and Liaison Reports
No reports.

B. Discussion on Subcommittees and Workshops
No discussion held.

VI. Adjournment
Chair Boss adjourned the meeting at 4:19 p.m.

City of Santa Barbara
Council Agenda Report
Agenda Date: May 5, 2026
To: Mayor and Councilmembers
From: City Administrator’s Office
Subject: Interviews for City Advisory Groups
Recommendation:

That Council hold interviews of applicants to various City Advisory Groups.

Discussion:

There are currently 30 vacancies in the City’s Advisory Groups. In accordance with Resolution No. 25-096, the Guidelines for all City Advisory Groups, all applicants have been notified that to be considered for appointment they must be interviewed by City Council; and Santa Barbara Youth Council applicants must also be interviewed by the current Santa Barbara Youth Council. Applicants have been asked to prepare a verbal presentation in response to a set of questions that are specific to the group for which they are applying to. Applicants applying to more than one advisory group may have up to five minutes for their presentation. A list of eligible applicants and pertinent information about the current vacancies is attached to this report. Appointments are scheduled to take place on June 9, 2026.

List of Applicants
Norma Welche, Deputy City Clerk
Attachment:

Prepared and
Submitted By:

Approved By: Kelly McAdoo, City Administrator
Agenda Item No. 9
SPRING 2026 ADVISORY GROUP RECRUITMENT

ATTACHMENT