Funding the Right Kind of Housing

The City of Santa Barbara is in the midst of a growing affordable housing crisis. The lack of affordable housing is forcing working-class families, vulnerable seniors, and young adults who grew up here to be displaced from their community, or worse, become homeless. In response, the City of Santa Barbara continues to loosen building codes on parking, density, open space, and height to encourage more rental housing. The good news is that plenty of new housing is now being built, but is it the right type of housing?

The right kind of housing is housing that is affordable to the majority of our local workforce, elderly, and vulnerable whose income falls below 120 percent of the Area Median Income (AMI). For a single person, that’s approximately $90,000 a year and for a family of four that’s below $129,000 a year. That type of housing falls into the moderate-, low-, and very-low-income categories. Only 120 very-low-income units, 112 low-income units, and 16 units of moderate-income housing have been built in the last eight years in the City of Santa Barbara. To put those 232 very-low- and low-income housing units in perspective, the U.S. Census Bureau (2015-19) finds that there are over 14,000 households that fall into those income categories in the City of Santa Barbara.

The state’s system for determining how much housing we need, called the Regional Housing Needs Allocation (RHNA), shows that we’re lagging behind in affordable housing production and we’ve primarily met our target for above-moderate or market-rate housing production. The City of Santa Barbara has permitted 1,581 units of market-rate- or above-moderate-income housing in the past eight years, according to California’s Department of Housing and Community Development.

Still Priced Out

Unfortunately, this new housing isn’t translating into lower housing prices. A recent report and survey from the online rental marketplace Dwellsy indicates that Santa Barbara has one of the top 10 highest rent levels in the nation. Santa Barbara is a unique housing market.

When living in a highly desirable place, such as Santa Barbara, demand is more inelastic and less sensitive to price. Anyone from any place in the world will pay whatever price it takes to move to paradise if they can afford it. As we witnessed with the number of remote workers who moved here during the pandemic, build it and they will come.

Relying on the building of expensive, new market-rate-housing projects with only 10-20 percent affordable units won’t help our lower income local workforce — nor is it a realistic long-term solution. It will take tens of thousands of units of market rate housing to meet our affordable housing need for the moderate to very low income RHNA targets and not without significant impacts to our city’s resources and infrastructure. Moreover, our developable land is finite — and what limited land we have should be maximized for the amount of affordable housing we need.

Increasing the supply of moderate-, low-, and very-low-income workforce housing is where our city’s resources, energy and time needs to be laser focused. Key to accomplishing this goal is to subsidize and build projects with 100 percent deed-restricted units. Deed-restricted units are made legally affordable by covenant. That covenant specifies the amount of years a housing unit will be price-controlled at a certain income level for a certain number of years, usually 90. Renters whose incomes qualify for deed-restricted affordable housing are not cost-burdened. The price of the rent is never increased to be above 30 percent of their annual income. Nor will they be evicted because their apartment can be bought and flipped by corporations whose primary motivation is a return on their investment.

100 Percent Affordable

Housing projects that have 100 percent affordable deed-restricted units are built by mission-driven nonprofits, such as the Housing Authority of the City of Santa Barbara (HACSB), Habitat for Humanity, and People’s Self-Help Housing. An advantage of having nonprofits build affordable housing is that they prioritize giving housing units to people who live and/or work in the South Coast, which is known as a local preference.

Building the right kind of housing requires substantial funding as well as the robust implementation of affordable housing policies, as outlined in the city’s new Housing Element Plan draft. Unfortunately, the primary source of funding, the Redevelopment Agency (RDA), was dismantled a decade ago. This is a large part of the reason why affordable housing production is so challenging. Since that time, the Housing Authority and other nonprofits have increasingly struggled to meet the housing needs of the community. While there is state and federal funding that allows us to leverage any local dollars provided by up to 10 to 1, such as Low Income Housing Tax Credits (LIHTCs), those government funding sources are only obtained through a competitive application process and most qualified applicants are unfunded for years. The lack of a consistent source of revenue since the dissolution of the RDA has led to a 50 percent decline in affordable housing production.

Less affordable housing has meant more human suffering, housing instability, and homelessness. In recent years we have seen more seniors living in their vehicles or on the streets due to their fixed low incomes and the lack of affordable housing. Our local family shelter, Transition House, has also experienced long waiting lists for providing basic shelter services to low-income families with young children. The Housing Authority has more than 4,000 households on its waiting lists for affordable housing opportunities for families, seniors, low- to moderate-income workers, veterans, and individuals with disabilities. Needless to say, the situation is dire and heartbreaking.

The lack of affordable housing also has impacts on our community at large. Santa Barbara’s quality of life, environmental sustainability, and ability to maintain a thriving local economy is tied to maintaining a strong affordable housing infrastructure. Without such an infrastructure, our essential workers are forced to commute from the North County or from Ventura County, adding to greenhouse gas emissions. When natural disasters strike, they are unable to access the city due to highway closures. Meanwhile, employers face significant challenges in hiring and retaining a qualified workforce — extending to all facets of our community, including school districts, government, private businesses, health care, tourism, and other related service industries.

A Funding Source

That is why the Housing Authority is exploring a permanent, ongoing local funding source to build 90-year deed-restricted affordable housing. We’re not currently wed to one approach or another and are weighing thoughtfully what is in the best interests of our entire community. At the top of the list is a Transient Occupancy Tax (TOT) that would be charged to visitors who stay in one of our city’s hotels. There is a clear relationship between the demand for affordable housing and those who work for hotels and other tourism-related businesses. Many tourism-industry workers make far less than $90,000 a year, which means they would more than likely qualify for deed-restricted affordable housing, rather than market-rate housing. Another option being discussed is a sales tax but that would mean the people who are most in need of affordable housing would be financially impacted.

At this point, we are continuing to check in with stakeholder groups and city leaders. We encourage you to do the same. Whatever we do, we must do together for the betterment of our community. The city Housing Authority wants to continue to build affordable housing that is not only livable but something we can all be proud of, improves neighborhood vitality, and creates a more resilient city. What we really can’t keep doing is just wringing our hands. We must tackle the biggest barrier to resolving our affordable housing problem — the lack of a steady, sizable funding source. It will take all of us to make this happen.