By Joshua Molina, Noozhawk Staff Writer
Santa Barbara may be a world-class tourist destination but the city is considering a moratorium on the construction of new hotels.
Officials believe that no new hotels should be approved until a new housing element is adopted as part of the city’s general plan. The housing element, which will be updated next year, sets housing goals for the city through 2031.
The City Council will vote on the issue on Tuesday.
“The development of new hotel rooms can frustrate the approved housing element goals in several ways,” the staff report states.
According to the report, converting land that could be used for housing into commercial hotel use could inadvertently create more vacation rentals; inflate the value of land zoned for residential housing, making housing construction infeasible for developers; and create additional demand for affordable housing for service workers.
There currently are 21 hotel development projects — representing nearly 800 hotel rooms — that potentially could be subject to an interim urgency ordinance, according to the city.
The proposed ordinance would prohibit many pending applications for new or expanded hotel development from proceeding unless the project application has been deemed complete.
Austin Herlihy, executive vice president of Radius Commercial Real Estate, raised questions about the proposal and said he’s not sure a regulatory decree is the best way to preserve housing.
“I think this is a signal from the city that they prefer housing,” said Herlihy, who brokered recent big hotel sales involving the Hotel Californian and the Hotel Indigo on Lower State Street.
“While I’m happy to see the city prioritizing housing, I’m not sure I agree with a hotel moratorium. The economy is changing and the economy on its own will create its own moratorium on hotel development.”
The hotel industry is booming.
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Last year, billionaire Bill Foley paid $130 million for the Hotel Californian at 36 State St. The 75-room Hotel Santa Barbara, at 533 State St., sold for $42 million. The Hotel Indigo, at 121 State St., was on the market for $19.5 million and sold in an all-cash transaction.
In Goleta, meanwhile, New York City-based AWH Partners paid $240 million for the former Kimpton Goodland Hotel, at 5650 Calle Real, along with four other properties in California. The Goleta hotel was recently renamed The Leta.
Hotels are also attractive because owners and managers are able to raise room rates as needed, in the context of the status of the economy and the overall marketplace. Interest rates also had been low until this year.
Santa Barbara is a hot market because the coastal community is a driving destination for visitors from Los Angeles and San Francisco, and offers a steady supply of tourists.
According to the proposed ordinance, the temporary prohibition would be applicable in all zones that permit hotels, with the exception of the Coastal Zone.
The staff report said it is unlikely that the California Coastal Commission would support zoning changes or programs that would materially restrict hotel development in the Coastal Zone where hotels are currently an allowable use.
Hotel development applications that were deemed complete as of May 17 would be allowed to proceed, but seven projects — involving 126 hotel rooms — would be prohibited from moving forward while the 2023 housing element is being developed.
City staff is 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 interim urgency ordinance, followed by the council returning on June 28 to extend the ordinance for 10 months. An interim urgency ordinance can be extended twice in one-year increments.
The proposal comes at a time when Santa Barbara is struggling with an acute housing shortage, with affordable and workforce housing particularly scarce. City officials also are facing a state mandate to build 8,000 additional housing units by 2031 under California’s Regional Housing Needs Allocation.
“We need to be committed to preserving and prioritizing creating affordable housing where we can,” Councilwoman Kristen Sneddon said. “Santa Barbara has many successful and welcoming hotels. Given the current housing scarcity, if there are areas where housing could be built instead, we need to be looking at that.”
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