City Council Considers $3.5M Loan for Housing Authority Development Project

The Finance Committee of the Santa Barbara City Council convened on August 12, 2025, to discuss a significant funding request from the Housing Authority for a new development project. The meeting focused on the proposal for a $3.5 million loan to help close a financing gap after the Housing Authority lost its investor.

The Housing Authority is seeking city funding in addition to a land donation from the city, which is part of the project agreement. The total cost of the project is estimated at just under $45 million, with the proposed loan structured as a 30-year term at a 3% simple interest rate. The loan would be sourced from the local housing trust fund, specifically from allocations under Measure I and general fund reserves.

During the discussion, it was noted that the project aims to provide long-term affordability through a 90-year restrictive covenant, which will ensure that seven low-income and 55 moderate-income households will benefit from the development. The cost per unit for the new build is approximately $712,086, with the city's contribution representing about 25% of that cost due to the land donation.

Committee members were informed that the allocation of the $3.5 million would fully expend the fiscal year 2026 Measure I and general fund reserves, leaving a remaining balance of approximately $500,000 in the local housing trust fund for operational costs. This expenditure means that no additional funding for new projects will be available until fiscal year 2027.

Additionally, the committee discussed the implications of the Measure I sales tax revenue, which is budgeted at $15.1 million for the fiscal year. The early appropriation of $1.5 million for the housing trust fund could impact funding for other essential services, such as public safety, if the expected revenue does not materialize.

The staff recommended that the committee forward the proposal to the city council for consideration, which includes introducing and adopting an ordinance for the loan amount, securing it with a deed of trust, and recording the affordability control covenant. The committee also discussed authorizing the city administrator to execute necessary amendments to the project agreement with the Housing Authority.

The meeting concluded with a transition to further discussions about the project, led by Mr. Fredericks, who was invited to provide additional insights. Overall, the meeting highlighted the city's commitment to addressing housing needs while navigating financial constraints.