After acknowledging that Santa Barbara's high-density housing program has failed in many areas, the city is turning from Milpas Street to downtown as a place to build rental apartments.

Santa Barbara's Planning Commission met for more than nine hours over two separate meetings to look at ways to overhaul the "average unit-sized density" (AUD) incentive program, which has sparked widespread controversy because of its impacts on neighborhoods.

The City Council approved the program in 2013 with the goal of encouraging developers to build rental apartments in certain parts of the city. One of those areas was Santa Barbara's Eastside and Milpas Street area.

Now, the city is looking to end the high-density program on the Eastside and move it to downtown Santa Barbara, where there there would be fewer impacts.

Planning Commissioner and former mayor Sheila Lodge said Milpas should no longer be a target of the program.

"It’s an area where property values have been lower," Lodge said at last Thursday's Planning Commission meeting. "It’s an older part of the community with its own character, and I don’t think it should be changed."

The commission plans to meet with the City Council in a special joint meeting on Nov. 14, when the two panels will continue the discussion about the proposed changes. The City Council will eventually vote on whether amend the program.

City staff has proposed several other changes, including allowing developers to pay an in-lieu fee of $10,000 instead of providing an off-street parking space in the central business district.

Other proposals include allowing the developer to separate a parking fee from the rent, so people without cars could pay less; placing limits on the sizes of the units, instead of the total number, which would allow developers to build more smaller units; allowing individual apartments to be as high as 10-feet in some zones; and increasing the maximum building height from 45 to 48 feet.

The City Council also will decide whether to extend the overall program, which as of now is scheduled to sunset when 250 units are built or by 2021. There have been 222 units built so far.

However, allowing the higher density downtown would mark a dramatic change in philosophy for the city, and signal a full embrace of a new philosophy of building housing downtown above commercial buildings.

Such a move would possibly attract young professionals who enjoy the living near shopping, drinking and restaurant opportunities, while also creating a built-in customer base for the struggling merchants in the area.

Moving the housing downtown could also mean possibly closing portions of State Street to vehicular traffic.

"The narrative of our community right now is really focused on State Street," said Rob Dayton, parking and transportation manager. "State street is not needed for traffic movement. There’s other reasons why cars are on the streets. It actually could be closed to pedestrians, and the transportation system would work just fine."

Building housing on top of commercial areas on Milpas street could present safety hazards and create congestion, Dayton said. Earlier this year, the city approved a 76-unit apartment project at 711 Milpas St.

"On Milpas, we could never close that street," Dayton said. "That street is an artery. It is an arterial for this city, and it doesn’t just serve Milpas, it serves multiple neighborhoods. It serves the Riviera. Yes, we want housing in the city of Santa Barbara, that is truly a goal, but another goal that we should always be thinking about is we don’t want traffic congestion."

Dayton said there is "friction" in many parts of the city over the AUD program, but "the least amount of friction is in the downtown."

Planning Commissioner John Campanella said the city should maintain the AUD program on the Eastside because of statewide pressures to build up to 3,000 more units. All of the new housing cannot be build in the central business district, he said.

"It’s going to be based on site-specific ability to build, parcel by parcel," Campanella said. "Once you say no on Milpas Street, no one will submit an application."

He's also worried developers would just build condos on the Eastside if there is no incentive to build rental apartments.

"If we are afraid of gentrifying, right now there’s an attraction to rentals" Campanella said. "If you take off the overlay, there could be more of an attraction to do condominiums."

Commissioner Addison Thompson was supportive of maintaining the AUD program on Milpas Street, but said they should not charge developers an in-lieu fee if they can't provide an off-street parking space.

"$10,000 is small compared to the cost to build parking, but it is still disincentive," Thompson said. "If the city is serious about trying to invigorate downtown and do some adaptive re-use of some of the existing buildings downtown, this works against that."

— Noozhawk staff writer Joshua Molina can be reached at .(JavaScript must be enabled to view this email address) . Follow Noozhawk on Twitter: @noozhawk, @NoozhawkNews and @NoozhawkBiz. Connect with Noozhawk on Facebook.