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.
Council Approves Emergency Pilot Letting Developers Build Off‑Site Affordable Units
Santa Monica city leaders voted 6 to 1 to launch a time-limited pilot program that lets developers satisfy affordable housing rules by building units off site, paying fees, or repairing uninhabitable homes. The measure was approved as an emergency response to a construction finance crisis that has stalled many approved projects, and it is designed to speed housing production while staff collect data for a possible extension.
What the vote did and why it passed
The council approved a pilot program with one member opposed. Backers framed the move as an emergency step to address an industry slowdown caused by high interest rates, volatile material costs, labor shortages, and local financing complications. Staff highlighted that those financial pressures have left thousands of approved units unbuilt.
Key features of the pilot
- The pilot allows three ways for developers to meet affordable housing requirements: construct affordable units off site, rehabilitate existing uninhabitable units, or pay in-lieu fees.
- The off-site construction option includes $150,000 per unit in gap financing to make building affordable units more feasible.
- In-lieu fees are set at $43.91 per square foot for apartments and $51.30 per square foot for condominiums.
- The program is capped at 1,000 units and is scheduled to expire on September 30, 2025, unless extended based on further data.
- Under the off-site option, developers have up to 48 months after building permit issuance to begin construction on affordable units, with possible 12-month extensions.
- The pilot includes a rule barring off-site affordable units in the Pico neighborhood, identified by city staff as an area that already has a high concentration of affordable housing.
Scope and scale
Staff pointed to roughly 40 housing projects that were approved but remain stalled. City records indicate up to 3,598 approved market-rate units and 642 approved affordable units across 37 projects that could become eligible under the pilot. This program aims to unblock a share of those projects and potentially bring new housing online.
Construction activity and local context
So far this year, only two building permits for multifamily housing were issued in the city, one of which was for affordable housing and the other for a three-unit project. Staff described the residential construction industry as facing significant financial pressure from global and macroeconomic forces, including elevated interest rates, material cost swings, and labor shortages. Local policy effects, including a city transfer tax known as Measure GS, were also cited as complicating construction financing.
Supporters and critics
Supporters argued the emergency pilot is a practical step to adapt rules to current economic realities and to unlock thousands of units, with some advocates estimating that the ordinance could result in more than a thousand housing units and roughly 100 affordable units. Some council members described the status quo as ineffective at getting projects built and urged flexibility.
Critics expressed concern that allowing off-site affordable units could reinforce economic segregation by directing lower-cost housing to cheaper land rather than integrating units across neighborhoods. Others worried the pilot might produce too few affordable homes, and several housing advocates said the proposal moved too quickly and did not allow enough public review. One organizing group noted they had only a handful of days notice to review the proposal before the vote.
Next steps
Council staff were directed to return with more data so the city can evaluate whether to renew or adjust the pilot. If conditions do not improve, the measure will expire on the set date. If the pilot achieves its aims and additional safeguards are deemed necessary, the council could consider a longer-term program with revised rules.
Frequently Asked Questions
What does the pilot program allow developers to do?
The pilot allows developers to meet affordable housing requirements by building affordable units off site, rehabilitating uninhabitable units, or paying in-lieu fees set by the city.
How long will the pilot run?
The pilot is limited to projects that fit within a 1,000-unit cap and is scheduled to expire on September 30, 2025, unless the council votes to extend or modify it based on new data.
What financial support is included for off-site units?
The off-site option includes gap financing of $150,000 per unit to help make affordable construction feasible where costs are otherwise prohibitive.
Are there limits on where off-site units can be placed?
Yes. The pilot bars off-site affordable units in the Pico neighborhood to avoid concentrating more affordable housing in areas where it is already dense.
How will progress be measured?
City staff were instructed to return with data on program results, production rates, and local market conditions before the council considers any renewal or changes to the pilot.
Key features at a glance
| Feature | Detail |
|---|---|
| Council vote | 6 in favor, 1 opposed |
| Program type | Emergency pilot to allow off-site affordable units, rehab, or in-lieu fees |
| Gap financing | $150,000 per affordable unit for off-site construction |
| In-lieu fees | $43.91 per sq ft for apartments; $51.30 per sq ft for condominiums |
| Unit cap | 1,000 units |
| Expiration | September 30, 2025 |
| Target projects | About 40 stalled projects; city records show up to 3,598 market-rate and 642 affordable approved units across 37 projects |
| Permit activity this year | Only two multifamily building permits issued: one affordable, one three-unit project |
| Safeguards | No off-site affordable units allowed in the Pico neighborhood |
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
Author: Construction CA News
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