The Santa Monica City Council voted 5-1 Tuesday to expand a new housing program that allows developers to build affordable units off-site or pay fees instead, despite criticism that it lets builders ‘buy their way out’ of inclusion requirements.
The Off-site Affordable Housing Pilot Program, launched in August with a 1,000-unit cap, filled up within five days as six applications totaling 1,018 units flooded in. The council's decision removes that cap and applies the program to all currently entitled projects — potentially affecting about 3,000 additional housing units.
The program aims to unlock stalled housing developments by giving developers three options instead of building affordable units on-site: construct affordable housing elsewhere within four years, rehabilitate existing units, or pay in-lieu fees to the city's Housing Trust Fund.
"We only have certain levers in our control over these major macro forces that are making it really, really hard to build the housing that we need," said Councilmember Jesse Zwick, defending the program's necessity given current economic headwinds, including high interest rates and construction costs.
Mayor Lana Negrete cast the lone dissenting vote, arguing the expansion promotes segregation by separating affordable housing from market-rate developments.
"We're literally right now handing out a way for someone to buy their way out of inclusion," Mayor Negrete said during the meeting. "Somebody's got to say it, and I'm here to say it."
The pilot's early results show five projects chose to build affordable housing off-site, while one elected to pay approximately $2.2 million in fees rather than construct nine affordable units. In total, the initial applications would produce 93 affordable units off-site and generate substantial fees for the city's Housing Trust Fund.
Compromise Adds Safeguards
Mayor Pro Tem Caroline Torosis proposed a compromise motion that significantly strengthened accountability measures while maintaining the program's feasibility for developers. The changes apply only to new applications beyond the original 1,000 units.
Key modifications include increasing the gap financing requirement from $150,000 to $160,000 per unit, tied to annual construction cost reviews. The council also added binding delivery milestones requiring developers to submit complete entitlement applications before pulling building permits and complete permit applications before receiving certificates of occupancy.
Perhaps most significantly, all participating projects must now commit to paying the city's Measure GS transfer tax — or its equivalent if the law changes — upon sale, ensuring the community receives revenue from every project.
"We're not trying to give a blank check. We're not trying to give a giveaway," Torosis said. "We're trying to get units for Santa Monicans to live in that are affordable and habitable."
Sharp Public Divide
The proposal drew a slew of public comments reflecting deep divisions over housing policy. Supporters argued the program represents the only viable path forward given economic realities that have essentially frozen housing construction.
"This program has been an early success with more than 1,000 units applying to use it," wrote Connor Webb of Santa Monica Forward, urging the council to "build on that momentum."
Critics flooded the council with opposition emails, arguing the program incentivizes luxury housing construction while providing inadequate affordable housing. Many cited concerns that the in-lieu fees are far below actual construction costs, leaving taxpayers to cover the difference.
Santa Monicans for Renters' Rights submitted an extensive analysis arguing for stronger delivery milestones and higher fees, while warning that the program exposes the city to substantial financial risks.
Housing Crisis Context
The program emerged from Santa Monica's struggle to meet state-mandated housing production goals. The city issued just 37 building permits for new homes in 2024, far below targets set in its housing element.
Councilmembers acknowledged the policy represents an imperfect solution to competing pressures: the need to spur housing construction amid difficult economic conditions while ensuring developers fulfill affordable housing commitments.
"In any collaborative process, there are trade-offs," said Councilmember Ellis Raskin, who supported the compromise despite reservations about some provisions.
The council directed staff to return with implementation details and monitoring mechanisms to track the program's success. Council member Barry Snell recused himself due to a potential conflict of interest.