Costs compound. The cap doesn’t.
Santa Barbara owner operating-cost basket vs. California CPI vs. the draft ordinance’s rent-cap formula, indexed to 2016 = 100. The shaded band is the squeeze: cost growth the cap does not let rents follow — 26 points wide and compounding.
In 2026, the owner cost basket stands at 147.6 (2016 = 100), California CPI at 142, and the rent-cap formula at 121.6. The gap between costs and the cap is 26 index points.
Ten years of growth, line by line
Cumulative change, 2016–2026. Every owner cost except the Prop-13 tax baseline outgrew the rent-cap formula — most by multiples.
Vertical mark on every bar = the +22% the cap formula would have allowed over the same decade. Water/sewer is understated: the series is held flat before FY21 where City schedules are not yet collected. Sources per line on the methodology.
The same picture, eight times
Each cost series (rust) against the rent-cap line (black), 2016 = 100.
The formula, year by year
April-to-April California CPI (blue) and the increase Santa Barbara’s formula would have permitted that year (black) — 60% of CPI, rounded to 0.25%, never above 3%. In 2022, inflation ran 7.7%; the formula answers 3%.
Years shown by the January 1 the adjustment would take effect. 2027 is the first real adjustment under the draft ordinance’s formula — ≈2.1% to 2.25% from April 2026 CPI of +3.6%, depending on where the draft’s quarter-point rounding is applied (see the methodology); earlier years are the same formula applied to history. Source: CA DIR CPI series.
How the cap compares
Maximum allowable annual rent increase under each regime, evaluated at the actual measurement the draft ordinance would use — April 2026 California CPI of 3.602%.
Formulas as stated in each jurisdiction’s ordinance or statute (sources in the repository’s regimes dataset). Santa Barbara adds what the others don’t: a 3% hard ceiling, a 0% floor with no banking of unused increases, and a ban on utility pass-throughs.
The market response
The market is already repricing
Average cap rate on Santa Barbara apartment sales. A rising cap rate means buyers demand more income per dollar of price — i.e., values fall relative to income. South Coast apartments traded near 4% before 2022; sales since the ordinance debate began have averaged above 5%.
● Hayes Commercial Group South Coast apartment annual averages (2018–2022) · ● Radius quarterly averages from all CoStar-recorded 5+ unit Santa Barbara sales since 2023 (thin quarters — 1 to 7 sales — so read the trend, not any single point). Two different samples; shown together for history, not spliced.
Every sale on the record
All 54 recorded Santa Barbara 5+ unit apartment sales since January 2023, price per unit. Rust = pre-1995 buildings (covered by the draft ordinance); gray = newer, exempt, or year-built not recorded. The covered stock is the market’s workhorse — and the segment the ordinance reprices.
Dot size = unit count. Source: CoStar 5+ unit multifamily export (Santa Barbara), all transactions since 1/1/2023, compiled by Radius 2026-06-25. Coverage classification from recorded year built (pre-1995), an approximation of the draft ordinance’s certificate-of-occupancy test.
What this shows
This page compares two things: what it costs to operate a rent-stabilized apartment building in Santa Barbara, and what the city's ordinance allows rents to do.
The cost line is a weighted composite of the major operating expenses a typical owner of pre-1995 rental stock actually pays — insurance, property tax, water and sewer, maintenance labor and materials, management, electricity, and gas. The cap line is the draft ordinance's own formula: 60 percent of annual California CPI, never more than 3 percent, never banked.
The two lines diverge, and the divergence is not close. Over the past decade, California CPI rose 41.7 percent; the cap formula, applied to that same decade, would have permitted about 21.6 percent. Meanwhile nearly every cost line outran CPI itself — electricity rates rose 119 percent, gas 84 percent, insurance roughly 90 percent, construction materials 69 percent. Costs compound at full market rates. Revenue is capped below inflation. The gap between them is the squeeze.
Methodology
What is plotted. Every series on this page is indexed to 100 at 2016, so ten years of divergence reads left to right. Two policy dates are marked on the timeline: December 16, 2025 — the ordinance's base-rent date (base rent under Ordinance 2026-6206 is the rent in effect that day) — and the adoption of the temporary rent-increase moratorium (Ordinance 2026-6206) in January 2026, with the freeze effective February 26, 2026.
Cost basket sources. Each component comes from a public or documented series: California CPI from the CA Department of Industrial Relations (CPI-U, all items); insurance from National Apartment Association Premium Pulse per-unit premium data with California supplements (national multifamily premiums rose 55 percent from 2021 to 2024; Q2 2023 California metro renewals ran 27 to 79 percent above prior year); property tax per Proposition 13 (a 2 percent annual assessed-value adjustment for a continuing owner); water and sewer from City of Santa Barbara Public Works adopted rate schedules (tier-1 water is up 36 percent since FY21, with roughly 10 percent annual increases adopted through FY28); electricity from Southern California Edison Schedule D tariff filings (all-in baseline rate up 119 percent, 2016–2025); gas from SoCalGas residential and multi-family tariff filings (baseline rate up 84 percent, 2016–2026); maintenance labor from the BLS Employment Cost Index for construction (up 34 percent since 2016, running above 4 percent annually in late 2025); materials from the BLS Producer Price Index for construction materials (up 69 percent, 2016–2026).
The composite. Components are combined using fixed weights reflecting a typical pre-1995 Santa Barbara operating budget: property tax 30%, insurance 15%, water/sewer 12%, maintenance labor 12%, management 10%, maintenance materials 8%, electricity 4%, gas 3%, other 6%. Management is indexed to construction labor costs and "other" to CPI. The weights and the reasoning behind them are published in full in the project repository; because nearly every component individually outgrew the cap line, the composite's direction does not depend on any particular weighting.
Conservative conventions. Where a series is incomplete, the gap is filled in the direction that understates cost growth: water/sewer is held flat before FY21 (City schedules for FY17–FY20 are pending a records request), electricity is held flat for 2026 (SCE has not yet posted schedules), and insurance is held flat at the 2024 national per-unit value through 2026.
The cap line. Computed exactly as the June 10, 2026 public-review draft of SBMC Chapter 26.90 specifies: 60 percent of the April-to-April change in California CPI, rounded to the nearest 0.25 percent, capped at 3 percent, floored at 0 percent, with no banking of unused increases. Historical values are a backtest of that formula — "had this cap governed the last decade." In 2022, CPI rose 7.7 percent; the formula yields 3 percent. From April 2026 CPI (up 3.6 percent), the first real adjustment — scheduled for January 1, 2027 — computes to approximately 2.1 percent, or 2.25 percent under an alternate reading: the draft places its quarter-point rounding in the CPI definition (round the CPI change first, then take 60 percent → 2.1), but rounding after the multiplication yields 2.25. The draft text supports both readings — one of several drafting ambiguities catalogued on The Ordinance page. The historical backtest series shown here uses the round-after convention; the difference never exceeds a quarter point in any year and does not affect the decade-scale finding.
Update frequency. Monthly, as source series publish; tariff and rate schedules annually as adopted. Each chart carries its last-updated date.
Caveats. Property tax growth is tenure-dependent: 2 percent applies to continuing owners, while a purchase resets the base — so for recent buyers the composite understates cost growth. Insurance draws partly on national and metro series where local actuals are sparse. These limitations move magnitudes, not the finding: almost every line, weighted or not, outgrew the cap.
For press
Since 2016, California CPI has risen 41.7 percent, and Santa Barbara landlords' major operating costs — insurance, utilities, labor, materials — have mostly risen faster. Applied to that decade, the city's new rent formula would have allowed about 21.6 percent. That gap, compounding annually, is the squeeze.
— SBRSO, the Santa Barbara Rent Stabilization Observatory (sbrso.com), July 2026
Charts on this page may be downloaded and republished with the embedded citation footer. Underlying data series are maintained in the project repository and available on request.
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