The Santa Barbara City Council on December 2, 2025, declined to approve the Paseo Nuevo redevelopment plan and sent it back to staff with instructions to secure stronger guarantees, especially for affordable housing, and to resolve outstanding legal constraints before returning it for another vote.
The City Council also directed staff to prepare an analysis on a possible charter amendment to remove the city’s 50-year lease limit and return with recommendations.
Council members expressed concern about the plan’s lack of guarantees, especially regarding affordable housing, and criticized the failure to resolve the reciprocal easement agreement (REA) before the new plan was presented.
Santa Barbara City Council Meeting
At Tuesday’s meeting, Councilwoman Kristen Sneddon criticized the terms of the plan, asking the developers for reassurances that this was “the last best and final plan,” even after changes as late as last week.
Talking about more affordable housing units, Sneddon said, “There are lots of possibilities that could have been explored around phasing.”
Council members discussed requiring 80 guaranteed affordable units to be built concurrently with the market-rate development, with comparable amenities, including dedicated parking.
The Council also asked all three parties, the City of Santa Barbara, Alliance Bernstein (AB) Partners, and Shopoff (the owner of the Nordstrom parcel), to resolve the REA issues immediately.
Paseo Nuevo Redevelopment Plan
One of Santa Barbara’s most significant land-use decisions, the redevelopment plan was earlier panned by the Planning Commission and the Historic Landmarks Commission.
The proposal primarily seeks to revitalize downtown State Street and add new housing, which city officials say is a top priority.
The project envisions 233 rental units on the former Macy’s site, at least 24 affordable housing units (10% of the market rate), maintaining spaces for the Museum of Contemporary Art Santa Barbara and the Center Stage Theater, and reducing commercial retail staff (by almost half).
The plan includes a paseo connection to Ortega Street, as requested by the Historic Landmarks Commission and the Planning Commission. A proposed building on the Macy’s site is expected to reach 75 feet using the state bonus density law waiver.
Parking capacity in Lot 1 needs to be increased to 600 spaces, while reducing capacity in Lot 2 by 186 spaces. The proposal also calls for transferring ownership of the mall’s land to AB Developers.
The City’s interest in the land is entangled in years of financial and legal disputes.
The Paseo Nuevo mall was subsidized by the City’s redevelopment in the 1980s and opened in 1990, but failed to take off financially. The City has failed to receive annual lease revenue from the shopping center.
The land is also subject to an REA between the City, AB Partners, and Shopoff, which prohibits housing and restricts other uses.
Each of these three parties has a veto option regarding the future use of the site.
The land is also tied up by long-term ground leases that expire in 2065, 40 years from the meeting date. Currently, the City charter does not permit leases of more than 50 years and extensions of existing leases. This makes the current term insufficient for the developer to capitalize on the project’s investment.
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Good Luck, Got to get that affordable housing for everyone who wants to live downtown NOW!!! this is ridiculous – the shopping is dying and I got to pay high prices for my food and I can’t afford the rent that my greedy landlords are charging me. I should be able to live just like those folks in Montecito and Hope Ranch and have a nice car too!!!
Yet more strangeness.
Hopefully your comment was joke, particularly the last sentence.
No joke, but yours is.
Then move to Iowa. The low wage or very low income wage here is $88,000. This is an expensive town where small families of 3 rent when making $150,000. This is an expensive town. There is no constitutional right to live here! The law had been 10%, low income. Stop trying to move the bar. I am happy that you and others voted for this city council. They are destroying the financial backbone of the city. I hope people vote them out before it is too late. I notice that they don’t screw with Coast Village Road because that is guarenteed money from the wealthy. They just screw the middle class with their rules and laws on state street.
The concept of “Affordable housing” is an impossible myth in Santa Barbara and any other very desirable location in the entire world, for that matter. Folks can keep crying for it all they want. Politicians who want those people’s votes can keep trying to make that their platform to stay in the next election cycle.
Reality – any developer who wants to take on a project like this will automatically back right the heck out when their profits get squeezed out by a municipality. Developers, like insurance agencies and others, don’t lose money. That’s how they work. They aren’t non-profits who rely on donations amd government subsidies of course. Certain folks can whine about that all they want but it’s a reality. Back to the drawing board SB.
I predict this will eventually get redeveloped into a bunch of high-end condos for out of towners and almost zero “affordable” units.