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Planning Commission backs higher in‑lieu fee ranges and flexibility in inclusionary housing study
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Summary
After a lengthy presentation and public comment, the commission gave staff direction to forward a package of recommended changes to City Council: expand applicability, count rental inclusionary units as bonus density, increase proposed in‑lieu fee ranges (staff/consultant cited defensible maxima of about $91.41/sq ft for rental and $72.53/sq ft for ownership), and allow broader fee payment options. Commissioners asked staff to refine fee index choices and feasibility scenarios before council review.
The Santa Barbara City Planning Commission on April 16 reviewed a lengthy inclusionary housing and in‑lieu fee study and provided guidance directing staff to transmit a revised package of recommendations to City Council.
Staff planner Dana Folk and consultant Aaron Barker of BAE Urban Economics presented an evaluation of the city’s inclusionary program and financial feasibility testing. Folk reviewed current rules: ownership projects generally have a 15% inclusionary requirement (targeting middle‑income units) while the city’s rental requirement applies predominantly to projects using the city’s AUD program and sets a 10% moderate‑income requirement. Folk told the commission the ownership rules have produced 45 deed‑restricted units and collected about $933,000 in in‑lieu fees; rental rules produced 13 deed‑restricted units and nearly $400,000 in fees since enactment.
Barker summarized the firm’s prototype pro forma work and said many baseline prototypes are not financially feasible under current market conditions without access to density bonuses. He recommended a balanced package of options to keep the local program viable while generating funding: maintain current percentage set‑asides but raise in‑lieu fee rates to reflect construction inflation and fee‑equivalent calculations, set a recommended large‑project fractional fee at $50 per square foot and a smaller‑project rate at $35 (the consultant presented ranges and mechanics), and consider policy options to make the program more attractive — notably counting rental inclusionary units as AUD bonus density and expanding when in‑lieu payments are permitted.
Public commenters were divided. Frank Thompson supported simplifying the ordinance and recommended a $50 fee with a lead time (e.g., an effective date of Jan. 1) so active projects can respond. Rob Fredericks (Housing Authority) urged broader feasibility scenarios and cautioned that results depend heavily on assumptions. Richard Applebaum, speaking for Clergy and Labor United for Economic Justice, argued the consultant’s recommended fees were too low and urged using the nexus analysis’ upper bounds (the consultant indicated a legally defensible nexus maximum on the rental side of roughly $91.41 per net square foot and roughly $72.53 for ownership) to maximize funds for the local housing trust fund.
Commissioners conducted a structured sequence of straw‑poll votes on recommendations A through J. The commission coalesced around several common directions to send to council: broaden rental inclusionary applicability down to smaller projects (the commission agreed to revise the proposed threshold to 2+ units); keep the current percentage set‑asides in place as a baseline; pursue higher defensible in‑lieu fee ranges (staff and the consultant will present the nexus‑based maximums and fee‑equivalent calculations to council); recommend a suggested small‑project in‑lieu fee around $50/sq ft while clarifying fee mechanics; allow flexibility so applicants can choose a mix of on‑site units and in‑lieu payments (the policy option labeled g2 in the consultant memo); count rental inclusionary units as bonus density (to improve feasibility); and adopt an automatic annual fee adjuster tied to a construction‑related index (staff will provide analysis comparing the California Department of General Services construction cost index and Engineering News‑Record indexes in addition to CPI).
Several commissioners stressed that the study is only one tool and does not replace a communitywide discussion about additional revenue mechanisms (transfer taxes, value capture, tax increment strategies) to meet the city’s broader affordable‑housing obligations. Commissioners also asked staff to include the public comment record and to ensure in‑lieu revenue is dedicated to the local housing trust fund for affordable housing development.
Staff will refine the draft ordinance language and supporting analysis (including alternate feasibility scenarios and index comparisons) and present the package to City Council for guidance and next steps toward ordinance drafting and eventual adoption.
