Santa Monica council approves off-site affordable housing pilot

Santa Monica, California, August 28, 2025

News Summary

Santa Monica’s City Council voted 6-1 to adopt an emergency pilot allowing developers to meet local affordable-housing requirements by building units off-site, rehabilitating uninhabitable units, or paying in-lieu fees. The time-limited program is capped at 1,000 units and requires off-site construction to begin within 48 months of permit issuance, with limited 12-month extensions. Gap financing of $150,000 per unit is available for off-site builds; in-lieu fees are set per square foot for apartments and condominiums. The pilot excludes the Pico neighborhood and staff will return with data before any renewal is considered.

Santa Monica council approves emergency pilot to allow off-site affordable housing

The city council voted 6-1 to approve an emergency pilot that lets developers meet local affordable housing rules by building units off-site instead of including them inside new market-rate developments. The pilot is limited to 1,000 units and is set to expire on September 30, 2025, with staff ordered to return with more data before any renewal is considered.

Key facts up front

• The council vote was six in favor and one opposed; the mayor cast the lone dissent and raised concerns about increased economic segregation and patterns that could push affordable units to cheaper land rather than integrating them into mixed-income neighborhoods.
• The pilot offers three ways for developers to meet affordable housing obligations: building off-site with gap financing, rehabilitating existing uninhabitable units, or paying in-lieu fees.
• Gap financing for off-site units is set at $150,000 per unit. In-lieu fees are $43.91 per square foot for apartments and $51.30 per square foot for condominiums.
• Developers using the off-site construction option have up to 48 months after building permit issuance to begin affordable housing construction, with possible 12-month extensions.
• The pilot excludes the Pico neighborhood from receiving off-site affordable units, because that area already has a high concentration of affordable housing.

Why the pilot was proposed

Supporters framed the action as an emergency measure to address a construction slowdown that has left many approved projects stalled. City staff pointed to elevated interest rates, volatile material costs, labor shortages, and the local Measure GS transfer tax as complicating factors that make financing new multifamily construction difficult. Council members who supported the pilot said rules needed to adapt to reality so more housing can move forward.

How the pilot works

The pilot gives developers three compliance options:

• Off-site construction: Developers can build required affordable units at a different site and may receive up to $150,000 of gap financing per unit. The off-site option carries the 48-month start window with a possible 12-month extension.
• Rehabilitation: Developers may rehabilitate existing units that are currently uninhabitable to meet affordable housing obligations.
• In-lieu fees: Developers may pay fees instead of building units. The fee schedule sets apartment fees at $43.91 per square foot and condominium fees at $51.30 per square foot.

Scale and potential impact

City records show up to 3,598 approved market-rate units and 642 approved affordable units across 37 projects that could potentially be eligible under the pilot. Officials said the pilot primarily targets roughly 40 approved projects that remain stalled right now. Supporters argued the approach could unlock thousands of housing units, with at least one supporter estimating the ordinance could produce more than a thousand new homes including more than 100 affordable units.

Permits and current activity

So far this year the city has issued only two multifamily building permits. One permit was for an affordable housing project, and the other was for a three-unit project. Supporters point to these low numbers as evidence the current system is not producing housing at scale.

Concerns and opposition

Critics worry the pilot could push affordable units to areas with the cheapest land, reinforcing economic segregation rather than promoting mixed-income neighborhoods. Housing advocates questioned whether the pilot will produce enough affordable units and raised concerns about limited public input on a program enacted on an expedited timeline. A local renters’ rights group criticized the rushed process and said advocates received only five days’ notice of the proposal’s details.

Next steps

Staff were directed to track outcomes and return with more data before any extension or change to the pilot. The city will monitor how many units move forward under the three options, whether the gap financing results in affordable development, and how the location rules affect neighborhood patterns.

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Frequently Asked Questions

Table: Key features of the pilot program

Feature	Detail
Council vote	6-1 approval
Pilot cap	1,000 units
Expiration	September 30, 2025
Options for compliance	Off-site build with gap financing; rehabilitation; in-lieu fees
Gap financing	$150,000 per unit
In-lieu fees	$43.91/sq ft apartments; $51.30/sq ft condos
Eligible approved units (city records)	3,598 market-rate and 642 affordable across 37 projects
Permits issued this year	Only two multifamily permits: one affordable project and one three-unit project
Start window for off-site construction	48 months after permit, with possible 12-month extension
Neighborhood exclusion	Pico neighborhood excluded from receiving off-site affordable units

Deeper Dive: News & Info About This Topic

Additional Resources

• City of Santa Monica — News & Press Releases
• Wikipedia: Inclusionary zoning
• Santa Monica Daily Press
• Google Search: Santa Monica off-site affordable housing pilot
• Los Angeles Times — Santa Monica affordable housing search
• Google Scholar: inclusionary housing California
• Curbed LA — Santa Monica coverage
• Encyclopedia Britannica: Housing policy
• Santa Monica Mirror — affordable housing coverage
• Google News: Santa Monica affordable housing pilot