The Gold Coast of California

The most expensive housing region in the state is the scenic south coast of Santa Barbara County, where the median price of a home is $825,000 and is forecast to close in on $1 million in two years.

This isn’t some small enclave of the rich like Malibu or San Marino. It’s a region of 200,000 people, stretching 25 miles along the coast from Carpinteria to Goleta. Once a home to rich and poor, it remains a patchwork of mansions, tract homes and farms. But now its home prices rival those in even the smallest pockets of privilege -- and many see that as a crisis.

Longtime homeowners, of course, are delighted. But regional planners contend that the middle class is being driven out of an entire region. And that’s a danger not just for Santa Barbara, but also eventually for the entire California coast, they say.

For now, no other region comes even close to the skyrocketing prices of Santa Barbara. The San Francisco Bay Area, the state’s second-most-expensive housing market, had a median price of $554,560. The figure for the Los Angeles area, ranked 13th in 20 regions tracked by the California Assn. of Realtors, was $320,720, below the statewide median of $363,930.

Numbers don’t easily capture the social changes taking place in Santa Barbara, where prices have almost tripled in 10 years. What could be starter homes in many cities -- 1,800 square feet, three bedrooms, small yard -- can now cost up to $1 million.

And if your pocketbook is larger, there’s almost no limit. At the moment, you could pick up a two-acre oceanfront Montecito home for $25 million, dozens of smallish estates in the $10-million range and virtual palaces advertised locally with “price upon request” notations.

“This is a crisis that affects almost everyone’s life,” said Naomi Schwartz, chairwoman of the Santa Barbara County Board of Supervisors.

The situation is demonstrated in myriad ways: young families moving out. Half the city’s teachers, firemen and police forced to commute long distances. An ever-aging population. Businesses leaving and potential arrivals looking elsewhere. An uncertain future for minorities and the poor.

Ninety miles northwest of Los Angeles, the south coast of Santa Barbara County begins at the old farming and oil town of Carpinteria, where typical prices are now in the $700,000 range.

Summerland and Montecito mark the beginning of the really big-money coastal communities. Montecito, where Oprah Winfrey recently bought a $50-million estate, had a median housing price last year of $1.7 million. Goleta offers the areas lowest prices at $650,000 or so. In Hope Ranch, the number jumps to nearly $2 million.

And in the middle of it all is the city of Santa Barbara, where a median-priced house goes for about $750,000.

“There was no question in the early 1970s that the coast was going to be there for people of means,” said Peter Douglas, executive director of the California Coastal Commission. “That’s why a key decision was made then that protecting the coast would focus on coastal access.

“We could have slowed it with greater emphasis on affordable housing, but that didn’t happen. The reality now is that the rich will live in places like Santa Barbara, and the people who serve them will commute.”

Douglas recalled that the Coastal Commission initially had powers to impose affordable housing on coastal areas, but that was taken away by the Legislature in the early 1980s. The commission has tried since to have those powers restored, but repeatedly failed.

Mark Schneipp, director of the California Economic Forecast in Santa Barbara, said the result of all the past decisions is that the community is now experiencing a cultural drain, losing some of its brightest people. “You don’t have these people participating in the social structure,” he said. “They serve on the PTAs and in the Little Leagues where they live, not [in Santa Barbara] where they work.”

One measure of the outflow is declining school enrollment in Santa Barbara. In April, officials reported that elementary school attendance had dropped from 6,431 in 1998 to 6,066. The projection for 2008 is 5,996.

“This is a decline of 435 students,” equivalent to the enrollment of one elementary school, “in just 10 years,” said schools Supt. Deborah Flores in an April budget report.

Amal Bendimerad, an economist with the UC Santa Barbara Economic Forecast Project, said one reason for the decline is the housing issue. “One teacher friend of mine, who teaches deaf children, says the largest problem now is finding enough parent aides,” Bendimerad said. “I’ve also heard of some sports activities turning more to student coaches because it’s harder to find adults.”

Efforts are underway to fight this trend. But they are mostly small in scope, often focused more on affordable housing projects for the poor than the middle class. In Santa Barbara, there are 200 developments with 4,500 rental units for lower-income residents. The largest is 200 units. Two small projects that will include middle-class housing are only in the planning stages.

Robert G. Pearson, executive director of the Santa Barbara Housing Authority, said federal housing guidelines typically reserve affordable housing for families earning 80% or less of the area median income. In Santa Barbara, that works out to a ceiling of about $47,000 for a family of four. If your household makes $50,000 or more, Pearson said, you don’t qualify. “Nobody expected the middle class would ever need help,” he added.

Ed Moses is just one example. The single father of two sons was hired last year from suburban Cleveland to be Santa Barbara County’s new housing czar. He works in downtown Santa Barbara but can’t afford to live in the city. So he commutes 30 miles each way from Oxnard in neighboring Ventura County.

“I couldn’t believe the prices here,” Moses said. “You’ve heard of sticker shock. With me it was sticker fear. But people are just getting a grip on this. I think there are solutions, from incentives to increased government involvement in solving this.”

Taking a historical view, Supervisor Schwartz also expresses some optimism.

“The 1969 oil spill was the greatest crisis in Santa Barbara history, and we responded immediately to that,” she said. “This one sort of snuck up on a lot of people. It’s going to take longer to find the answers, but I think they will come.”

But one community leader whose family played a major role in shaping modern Santa Barbara said most locals are just fine, thank you, with the current state of affairs.

“I don’t see a problem so far,” said J.J. Hollister III. “The people who make things go here want to keep the Santa Barbara style of life, and that has to do with lovely homes and open space. That may be hurtful for the people who have to drive two hours to clean the homes in Montecito, but that doesn’t really trouble the people who live there.”

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It’s rush hour on U.S. 101, and traffic is backed up again.

In terms of its commuter work force, Santa Barbara is essentially a one-road town. When a flood or major traffic accident strikes, many workers have no way of getting to their jobs.

Schwartz and others say that’s one fear about having so many police officers, nurses, firefighters and other vital service workers among the commuters. They might not be able to even get to town in a major disaster.

About 30,000 workers now commute to the city of 92,000, some from the north county cities of Santa Maria and Lompoc, others from such Ventura County cities as Ventura and Oxnard, where housing prices are lower. Gridlock is a part of life.

Many of the commuters are community leaders. Richard Block is director of the Santa Barbara Zoo, and his wife, Tracy Pfautch, is a shopping center marketing director and incoming president of the Santa Barbara Junior League.

“We arrived here in 1998 and wound up buying a house in Ventura for $290,000. At the start, the commute was 30 to 35 minutes,” Block said. “But the traffic became unbelievable over the next two years, because everybody was doing the same thing. Sometimes it was well over two hours.”

Increasingly frustrated, the couple finally found a 1,600-square-foot house last June that they could afford in the $650,000 range. “We got part of our lives back when we moved here,” Block said.

For Milt and Cecia Hess, the process was far simpler. At 56, she is a retired schoolteacher. At 62, he is a retired computer systems executive from Virginia. They came to town with plenty of money, and last week they were moving into their new home in Santa Barbara.

The 2,500-square-foot house is 50 years old, with new hardwood floors, three bedrooms, two baths and a bricked backyard patio. The asking price was $1,095,000. They paid it with no haggling the first day the property went on the market to avoid getting into a bidding war.

“We started checking around three years ago, and we were shocked at the prices here at first,” Milt said. “We looked at other cities, too -- San Diego, Seattle, even overseas. But we liked Santa Barbara, because it is small and yet it has a lot to offer.”

High housing costs are not a phenomenon just in the Santa Barbara area, stressed Schneipp. Individual cities, in particular, record higher home prices. In April, Manhattan Beach and Malibu tied as the costliest cities for California homes, with median prices of $1.1 million.

“It doesn’t really matter which area is the most expensive,” he said. “The whole coast is going to the rich. And nobody’s doing anything to change that trend.”

But change is still possible, he said: “If we built 10,000 new homes in the Santa Barbara area, you would stabilize the market and maybe even lower prices.”

If average house prices were $400,000, Schneipp said, he believes developers could build that number on their own, just with some rezoning.

One strong supporter of that kind of thinking is Robert Rivinius, chief executive of the California Industry Building Assn

“Developers would rather build more middle-class housing because there are more middle-class people,” he said. “We would love to be building $400,000 homes around Santa Barbara. But the political will isn’t there.

“The state Legislature could do a lot to change the policies by clearing out the bureaucratic undergrowth that slows all development in this state,” he added. “We could rezone marginal agricultural lands and industrial areas. This is a crisis mainly because there’s no supply of middle-class housing.”

Others, however, say it is unlikely that Santa Barbara, with its taste for the elegant and a slow-growth history, would ever seriously consider a huge, middle-class housing tract.

Besides, says one resident active in housing issues, it wouldn’t work. “You’d just end up with 10,000 more rich people in the area,” said Mickey Flacks.

Higher density and mixed-used projects in urban areas are among partial solutions. But there isn’t a coastal city in the state that’s doing anything significant to address the housing affordability issue, added Sarah Christie, legislative director for the Coastal Commission.

“I’m very cynical about this. Everybody’s been punting as far as I’ve been able to tell.

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The people who run the city and county of Santa Barbara can’t afford much cynicism. Instead, they have been focusing on new approaches that might at least slow the exodus.

Mayor Marty Blum is proud that 12% of Santa Barbara’s housing stock is affordable. But like other city leaders, she realizes affordable housing is still aimed mainly at the poor and not the middle class.

“We recognize the need for diversity here,” she said. “Without it, a city loses its energy and its vitality. Almost everybody here is committed to keeping that from happening.”

One early approach was formation of the Coastal Housing Partnership, an organization of more than 70 local companies representing 32,000 employees.

The group, founded in 1987, provides help in getting discounts from real estate brokers, assistance from banks and aid with down payments in some cases.

The city of Santa Barbara has also begun to experiment with low-interest loan programs in hiring and keeping valuable employees. But the efforts are tiny in scale, starting with a $500,000 low-interest loan for Police Chief Camerino Sanchez and $1 million in bargain-rate loans to eight other employees.

“Lower-income workers need to be included too,” said Walt Hamilton, head of the government employees union throughout the county.

Already, the fastest-growing age group in Santa Barbara is 45 to 64, and young couples are leaving the region to buy affordable homes elsewhere when they start raising children.

There is a saying in Santa Barbara: “It’s a city where old people go to visit their parents.”

Bill Watkins, executive director of the Economic Forecast Project, said the reality is that Santa Barbara is turning into a “geriatric ghetto.”

The city is becoming a mix of old millionaires and young people who don’t mind living with half a dozen roommates or so after college. A two-bedroom apartment rents for about $1,400, so many people double up at the very least.

The fate of Santa Barbara’s Latinos, a third of the city’s population, is an issue that stirs some debate. “The city probably will become less diverse, and Latinos will be pushed into housing elsewhere,” said Schneipp.

But Coastal Commissioner Pedro Nava, former president of the Santa Barbara Hispanic Chamber of Commerce, said he thinks Latinos will hold on to their neighborhoods, partly because many bought early, invested wisely and believe in pooling family resources.

“We don’t believe in moving out and selling to somebody else other than family,” Nava said.

Those most likely to be pushed out are recent immigrants crowded into rental housing, others say. While those who already own homes stay, new arrivals may end up buying in cities like Santa Maria. Some already are, community leaders say.

One means of stemming a middle-class exodus may be a change of thinking by the middle class itself, the Housing Authority’s Pearson said.

“We’ve always been a city where renters outnumber homeowners,” he said. “Maybe we need to start thinking the way people in places like New York City think. It’s OK to be a renter. You don’t have to measure success or failure by whether you own or not.”