By Danielle M. Leidner-Peretz, Founder of DLP Government Relations LLC

A seemingly simple percentage: 60% of the change in the Consumer Price Index (CPI) with a cap of 3%. It is the foundation upon which an entire costly regulatory system is being built, yet it is the element that has garnered limited City Council debate and discussion. The city is Santa Barbara; the deliberation, rent stabilization. The City’s destination has been established. The journey is where the story takes shape.

The 2024 election was the tipping point. The new City Council configuration created a shift, a 4-3 majority on the issue, setting the path forward for a local policy. An early inflection point came in September 2025, when Councilmembers Sneddon and Santamaria put forth a joint memo calling for consideration of a proposed rent stabilization ordinance (RSO), drafted with the assistance of pro bono attorneys, requesting it be submitted to the City Attorney for legal review and possible rewriting before returning to the Council for amendment and adoption. The memo also sought a work plan to administer, fund and enforce the program.

During the October 14, 2025 Council meeting, the memo was discussed though not the specifics of the proposed RSO. The stated rationale was to save city staff time and money by drafting the ordinance to provide a starting point for deliberation and broader input. Councilmember Santamaria echoed that sentiment, highlighting the City’s tight budget, lack of funds for a consultant, and that hiring another consultant was not fiscally responsible. The immediate objective was to formally agendize rent stabilization, initiate the process and have the conversation. Councilmember Harmon, a proponent of rent stabilization, expressed strong criticism of the procedural path chosen, speaking unequivocally about the importance of an open, transparent process.

The proposed ordinance was not advanced. Nonetheless, local rent stabilization was moving forward. Councilmember Harmon’s words reverberated, “rent stabilization is coming, and it’s coming sooner than later.”

And so it was.

By the end of 2025, a rent stabilization work plan had been advanced, and the City moved toward a temporary rent increase freeze, taking effect in February 2026, pending adoption of the anticipated RSO. Approximately five months later, the City entered into a $65,105 consultant contract to assist in its development.

At the core of a rent stabilization ordinance is the rent cap formula. The stricter the cap, the greater the potential reliance on and necessity of fair return and capital improvement petitions, mechanisms meant to protect an owner’s right to a reasonable return. So how did the City Council determine that 60% of the change in CPI with a 3% cap was the appropriate formula?

The April 7 Council meeting was the transition point, where the general framework began to form. Staff and the consultant provided data from a sampling of local jurisdictions with established RSOs, yet only a small number use 60% of CPI in their rent cap formula. The consultant also noted that a very low rent cap could result in more petitions for fair returns. The percentage was advocated for by tenants and was the formula used in Councilmembers Santamaria and Sneddon’s initial September 2025 draft ordinance, later characterized by Councilmember Sneddon as a “placeholder” that she had anticipated would be negotiated.

Councilmember Santamaria advanced a motion for the rent cap: 60% of the change in CPI. She expressed that the engagement and research “keeps pointing us back to the 60% of the CPI. It’s what the majority is asking for,” describing the number as legally defensible, and “proven to be most effective in other cities.” She further explained that “the reason for 60% of CPI is that CPI in itself, 40% of that is already housing and so we don’t want to count housing twice and that is what we would be doing if we put it at 100% of CPI.” Interestingly, the rationale offered for the 60% formula was not challenged or questioned. While there appeared to be some willingness to consider a higher percentage, none was put forth.

Councilmember Harmon raised the question of imposing a cap, Councilmember Santamaria suggested 3%, the motion was amended to include that cap. Councilmember Harmon seemed hesitant, expressed concern about deciding the formula in a vacuum and asked staff to return with a ten-year snapshot of CPI and the corresponding amounts under 60%, 75%, and 100%. The amended motion was approved: an annual adjustment formula of 60% of the change in CPI or 3%, whichever is lower.

The following month presented an opportunity to revisit the annual rent increase formula considering additional research. Staff’s report for the May 19 meeting offered insight into the relationship between rent cap levels and broader programmatic outcomes, noting it “is not uniform and can be difficult to isolate.” Equally significant, the report included a case study from Concord, which adopted the same formula being contemplated by Santa Barbara, and recently replaced it with a flat 5% cap. Concord’s real-world experience provided an opportunity for pause and reconsideration. There was no apparent public reconsideration.

Instead, the Council’s focus was on policy considerations as posed in the consultant presentation: (A) consider adjustments to the CPI percentage and/or fixed cap structure, including, but not limited to, the City’s Mobile Home RSO formula of 75% of the CPI, (B) maintain the current Council direction. The Mobile Home RSO formula was swiftly dismissed as not comparable, since mobile homes are not subject to vacancy decontrol. Once A was ruled out, B became the obvious answer, regardless of whether it truly was. With no other alternatives discussed, the 60% formula remained.

In the time since, the draft RSO was formally presented to Council for consideration and further modification. No further revisions were made to the rent cap formula.

A 30-day public comment period followed, generating 655 comments, and a 127-item staff matrix of proposed amendments. The July 28 meeting staff report indicated that the proposed annual rent increase formula was “the most frequently contested provision in the record”, with owners citing property insurance premiums that had increased by 60-100% over three years against a formula recent CPI figures would constrain to 1.8%. The matrix nevertheless reflected a rejection of increasing the percentage, affirming the Council’s April directive.

During the July 28 Council meeting, staff discussed matrix items and outstanding policy provisions for the purpose of returning with a revised ordinance for formal introduction. Much of the Council deliberation centered on the regulatory structure surrounding the rent cap: exemptions, petition processes, a rental registry and rent board. These provisions are not ancillary; they determine the practical implications of a low cap. While the final programmatic refinements are underway, limited exemptions, narrowly defined capital improvements, and the general complexities associated with fair return petition processes compound rather than provide the release valve that a strict cap necessitates. Staff estimate the program will cost approximately $2 million annually, pending a fee study, against a backdrop of a projected $14.8 million City general fund deficit in FY2027, with staff having cautioned that the program design should minimize ongoing administrative costs where feasible while maintaining efficacy. It does not appear that caution was heeded.

The rent increase formula has moved from a policy proposal to a settled policy choice, sitting at the center of the regulatory framework. The level at which rent can be increased creates a ripple effect, impacting everything built around it. As this chapter of the City’s RSO journey draws to a close, the program’s implementation will reveal the true complexity of a seemingly simple percentage.

Danielle M. Leidner-Peretz is the Founder of DLP Government Relations LLC, specializing in expert advocacy and ethical insight. She offers strategic counsel across a range of policy issues, delivering tailored, results-driven solutions for navigating complex government and regulatory challenges. She previously served as the Director of Government Relations for the Apartment Association of Greater Los Angeles. For more information, go to www.dlpgovernmentrelations.com.