Paseo Nuevo Redevelopment

The Paseo Nuevo redevelopment supports the City’s goals for a more vibrant and livable downtown. It introduces new housing, revitalizes retail space, and enhances public areas. 

The project is designed to:

• Revitalize the Paseo Nuevo Mall property
• Support rejuvenation of State Street
• Add much needed housing to downtown, including affordable units
• Improve walkability
• Support local businesses with refreshed storefronts and new amenities such as a specialty grocery store and fitness/lifestyle center
• Preserve cultural institutions like the Santa Barbara Museum of Contemporary Art and Center Stage Theater
• Strengthen the long-term economic vitality of the area
• Activate underused areas of the mall and Chapala Street with new merchants and public spaces

The project includes 80 income-restricted units as part of the redevelopment. These units will be developed under the California State Bonus Density Law, which allows for a waiver to allow building heights above the otherwise applicable 60-foot restriction. Final details regarding unit types and income levels will be determined through the DDA and entitlement process.

The proposal includes demolition of approximately 135,000 square feet of existing retail space (former Macy’s building), and the construction of 20,000 square feet of new retail on the Paseo Nuevo property. A new residential building will replace the existing Macy’s building in its entirety. On the Lot 2 property, the project proposes demolition of a portion of the parking garage to accommodate construction of approximately 80 new income-restricted affordable residential rental units. The design emphasizes walkability, compatibility with the character of downtown, and the preservation of cultural landmarks. The project reuses existing parking while introducing new design elements to support a more connected downtown environment.

(Proposed Rendering)

The City of Santa Barbara owns the land proposed for redevelopment, including the Paseo Nuevo, Macy’s, and Nordstrom’s parcels, along with Parking Lot 2. The Paseo Nuevo, Macy’s, and Nordstrom’s properties are under long-term ground leases. The applicant leading the current proposal holds the lease for Paseo Nuevo and Macy’s parcels. The Nordstrom parcel is leased to a separate party and is not currently included in the redevelopment project.

To support redevelopment, the City has designated City Parking Lot 2 as exempt surplus land, allowing for the transfer of fee title of the Paseo Nuevo, Macy’s, and Parking Lot 2 parcels through a future Disposition and Development Agreement. The City is evaluating potential financial contributions, such as land value and tax revenue sharing, to help ensure the project is financially viable. 

Paseo Nuevo Redevelopment Open House Flyer with map Oct 15 & Oct 16.

1.    Why does the project propose 233 units?
A proposal with a larger unit count was not financially feasible. The project provides the maximum amount of units while building above existing parking, reusing some existing structures at the site, and controlling costs.

2.    What’s happening to the existing mall?
The Macy’s building will be demolished and replaced with new housing. The in-line shops, Center Stage Theater, and Museum of Contemporary Art will remain and be revitalized.

3.    How will affordable housing be delivered?
Eighty affordable units will be built on City Lot 2, with most reserved for households earning up to 80% of Area Median Income (AMI). These units will be constructed concurrently with market-rate housing.

4.    Why are the affordable units proposed to be separate from the market-rate units? 
The Lot 2 residential building’s placement on a dedicated parcel allows financing through tax credits, bonds, and traditional lending, with the option to partner with an experienced affordable housing operator for long-term management.

5.    What is the unit mix and how much will the affordable units rent for? 
Unit details and affordability levels will be finalized through the Disposition and Development Agreement (DDA) and City review process.

6.    Why is the applicant using the California Density Bonus Law? 
The applicant requested a waiver through the California Density Bonus Law to allow increased height beyond the City’s Charter limitations in exchange for more affordable housing. The height waiver provides a financially feasibly project that redevelops the former Macy’s site, while preserving the existing in-line shops.

7.    What is the City’s role for this project?
The City owns the land under Paseo Nuevo, Macy’s, Nordstrom, and Parking Lot 2. The Paseo Nuevo and Macy’s parcels are leased by AB Commercial, while Nordstrom is under a separate lease. The City has designated Parking Lot 2 as exempt surplus land, enabling future property transfer through a Disposition and Development Agreement (DDA). The City is also evaluating potential contributions—such as land value and limited tax revenue sharing—to support feasibility and ensure long-term public benefit.

8.    How can the public provide input?
Submit Comment Online.
Public feedback is welcome and will be summarized for the City Council’s review of the Disposition and Development Agreement at the end of 2025.