Another reason why people are willing to pay so much for housing in Santa Barbara, at least when purchasing real estate, is the security of their investment. Santa Barbara has shown incredible average appreciation rates over the last several decades. And, when times are bad, the Santa Barbara market has shown a higher level of market resilience and less volatility than almost any other market in the U.S. For example, in 89-96 when real estate depreciated in California an average of 25%, Santa Barbara real estate only softened 13.5% over that entire period.
As far as the cost to live, I imagine you are speaking about the cost to buy a home. This is high for sure and simply is a matter of economics (supply v. demand). Many people want to live here and we are restricted by size....SB is pretty much built out with no room to sprawl (which is also another great factor in why people choose to live here). Since there is no room to sprawl, the prices are driven up with more demand than supply.
The most recent stats I have heard are that upwards of 70% of the population rents. This simply states that people choose to live here regardless of the cost to purchase a home. Outside of the home purchase, I think most people feel that everything else is similar in costs to other towns (maybe a little higher but not too much).
Please let me know if you have any other questions. I would be happy to be of help. You can contact me directly at 805-689-6877 or my website at http://www.KevinSchmidtchen.com