Santa Barbara may be a world-class tourist destination, but the city is considering a moratorium on building new hotels.
Officials believe that no new hotels should be approved until a new housing element has been adopted as part of the city’s overall plan. The housing element, which will be updated next year, sets housing targets for the city through 2031.
“The development of new hotel rooms can frustrate approved housing element objectives in a number of ways,” the staff report states.
According to the report, converting land that could be used for housing into a commercial hotel could inadvertently create more vacation rentals; inflate the value of land zoned for residential housing, making housing construction impossible for developers; and create additional demand for affordable housing for service workers.
There are currently 21 hotel development projects — representing nearly 800 hotel rooms — that could potentially be subject to an interim emergency order, according to the city.
The proposed order would prohibit many pending applications for new or expanded hotel development from proceeding unless the project application has been deemed complete.
“I think it’s a signal from the city that they prefer housing,” said Herlihy, who brokered recent major hotel sales involving the Californian Hotel and the Indigo Hotel on Lower State Street.
“While I’m glad to see the city put housing first, I’m not sure I agree with a moratorium on hotels. The economy is changing and the economy alone will create its own moratorium on hotel development.
The hospitality industry is booming.
Last year billionaire Bill Foley paid $130 million for Californian Hotel at 36 State St. The 75-room Hotel Santa Barbara, at 533 State St., sold for $42 million. Hotel Indigo, at 121 State St., was on the market for $19.5 million and sold in a cash transaction.
In Goleta, meanwhile, based in New York AWH Partners paid $240 million for the former Hotel Kimpton Goodland, at 5650 Calle Real, along with four other properties in California. Hotel Goleta has recently been renamed The Leta.
Hotels are also attractive because owners and managers are able to increase room rates as needed, in the context of the state of the economy and the overall market. Interest rates had also been low until this year.
Santa Barbara is a hot market as the coastal community is a top destination for visitors to Los Angeles and San Francisco and offers a steady supply of tourists.
According to the proposed order, the temporary ban would be applicable in all areas that allow hotels except the coastal area.
The staff report indicates that it is unlikely that the California Coastal Commission would support zoning changes or programs that would significantly restrict hotel development in the coastal area where hotels are currently a permitted use.
Hotel development applications deemed complete by May 17 would be permitted, but seven projects – involving 126 hotel rooms – would be barred from moving forward while the 2023 housing element is under development.
City staff are considering three other options, including exemptions for projects with submitted applications, those with building permits, and those with land use or design review approval.
The staff proposal recommends an immediate temporary emergency order, followed by the council returning on June 28 to extend the order for 10 months. A temporary emergency order can be extended twice in one-year increments.
The proposal comes at a time when Santa Barbara is grappling with a severe housing shortage, with affordable and labor housing particularly scarce. City officials also face a state mandate to build 8,000 more homes by 2031 under California law. Regional Housing Needs Allocation.
“We must commit to preserving and prioritizing the creation of affordable housing where we can,” Councilor Kristen Sneddon said. “Santa Barbara has many successful and welcoming hotels. Given the current housing shortage, if there are areas where housing could be built instead, we need to think about it. »