Santa Barbara Council Allows Downtown Housing Projects Without Affordable Units

The Santa Barbara City Council approved an ordinance on October 14, 2025, allowing certain downtown housing projects to proceed without affordable (inclusionary) unit requirements.

Downtown housing projects are supported by the Adaptive Reuse Ordinance in the Central Business District (CBD). They focus on converting existing non-residential buildings into residential units.

The Council voted in favor of staff recommendations to amend the Municipal Code and create incentives for turning non-residential buildings into housing.

Details of the Inclusionary Housing Exemption

The approved ordinance has an important exemption for inclusionary housing. This depends on location and the number of units.

• Exempt Projects: Adaptive reuse projects within the Central Business District (CBD) are exempt from rental inclusionary housing requirements if they include fewer than 40 new residential units.
• Purpose: City staff said the exemption is intended to encourage downtown reuse by removing financial barriers that could prevent smaller projects from moving forward.
• Unit Type and Location: This specific exemption applies only to rental projects within the CBD.
• In-Lieu Fees: For rental projects with 5 to 9 units in the CBD, the ordinance waives the in-lieu fee requirement. For projects between 10 and 39 units, it waives the requirement for an on-site moderate-income unit.
• Inclusionary Requirements: The team maintained the existing inclusionary requirements for all other projects.

Density, Unit Size and Barriers

• The ordinance removes maximum density limits. This means developers can fit as many units as possible within the existing building shell, adhering to the minimum average unit size and state building code.
• Councilmember Mike Jordan suggested that removing density caps and setting a minimum density should be a part of the larger downtown conversation to ensure sufficient density is built.
• The ordinance caps average unit size at 1,200 sq. ft. for rentals and 2,000 sq. ft. for ownership projects to promote smaller, more numerous housing units.

Staff said exceptions could be made by the community development director if a slightly larger average unit size makes sense due to the existing building floor plan.

They were directed to study and pursue options for increasing housing downtown by analyzing potential barriers, including the city’s stormwater management program and permit requirements.