The simple answer is lifestyle. That really is all it is. Santa Barbara is a little enclave here on the coastline that offers incredible weather, restaurants, architecture, culture, outdoor activity and a safe healthy place to raise children.
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 www.KevinSchmidtchen.com