A pilot program designed to jumpstart stalled housing construction in Santa Monica reached its 1,000-unit capacity within two days of launch, prompting city planners to seek an extension of the innovative initiative that offers developers unprecedented flexibility in meeting affordable housing requirements.
Six applications totaling 988 units were submitted immediately after the Off-Site Affordable Housing Pilot Program took effect on Aug. 10, according to Rachel Kwok, environmental planner, who presented program results to the Planning Commission on Sept. 17.
“We received six applications in about two days. One or two days after the program was adopted and so that pretty much capped us out,” Kwok told commissioners. The applications included 916 market-rate units and 102 affordable units, with five developers choosing off-site options and one opting to pay in-lieu fees.
Building permits for multifamily units have plummeted despite strong project approval rates in the city. While Santa Monica has approved more than 3,400 market-rate projects and 900 affordable units through streamlined processes, most remain unbuilt due to financial challenges including volatile construction costs, high interest rates and difficult financing conditions.
The pilot offers developers three options for meeting affordable housing obligations: constructing affordable units off-site with $150,000 per unit in gap financing, rehabilitating existing uninhabitable units, or paying in-lieu fees of $43 per square foot for apartments and $51 for condominiums.
The program’s most significant incentive is a “double density bonus” structure that allows market-rate projects to retain their original density bonuses while transferred affordable units contribute to additional bonuses for off-site 100% affordable projects. This represents what Commissioner Jim D. Ries called “a big give” that helps explain developer interest.
Off-site affordable units cannot include studios and must carry 75-year deed restrictions, compared to the standard 55-year requirement. Developers have 48 months to begin off-site construction, with a possible 12-month extension.
Planning commissioners expressed unanimous support for the program while emphasizing the need for careful monitoring. Commissioner Leslie Lambert praised the initiative, saying she supported it “100%” and called it evidence of “amazing leadership and creativity on the part of the city council and staff.”
However, commissioners stressed the importance of treating it as a pilot rather than a permanent solution. Commissioner Shawn Landres noted the program works as a targeted tool, suggesting it should be extended through the current housing element period with regular progress reviews.
The program intentionally limits participation to projects approved before Aug. 12 that haven’t yet received building permits, representing roughly 40 projects totaling about 4,000 units. New projects are excluded to maintain political viability.
Lambert raised concerns about protecting in-lieu fees from being diverted to pay city debt, as has happened with housing trust funds elsewhere. However, staff confirmed such protection isn’t possible under current structures.
Staff will return to the City Council on Sept. 30 with feedback from affordable housing providers and recommendations on potential program amendments or extensions. The Planning Commission voted to send a letter supporting continuation, with Chair Hamilton and Commissioner Lambert appointed to draft recommendations incorporating moderate-rate housing expansion possibilities and emphasis on equitable geographic distribution.
The program includes geographic restrictions, with off-site affordable units prohibited in the Pico neighborhood due to existing policies preventing concentration of affordable housing in that area.
One developer was able to pool multiple projects, with five of the six applications coming from the same entity who consolidated affordable units into two off-site properties.
The program expires Sept. 30 unless extended by the council.
maaz@smdp.com