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 launch a limited pilot that lets developers meet affordable housing rules by building units off-site or by using other alternate methods. Supporters called the move an emergency response to a construction slowdown that has left many approved housing projects stalled. One council member cast the only dissenting vote, raising concerns the policy could push lower-cost housing into the city’s least expensive neighborhoods and worsen economic segregation.

What the pilot does and how it works

The pilot gives developers three ways to satisfy inclusionary affordable housing requirements: build affordable units off-site with city gap financing, rehabilitate uninhabitable existing units, or pay an in-lieu fee. The program is capped at 1,000 units and is set to expire on September 30, 2025, unless the council extends it after staff returns with more data.

• Off-site construction: Developers may receive $150,000 per affordable unit in gap financing. They have up to 48 months after a building permit is issued to begin off-site construction, with possible 12-month extensions.
• Rehabilitation: Developers can restore uninhabitable units to count toward affordable requirements.
• In-lieu fees: Fees are set at $43.91 per square foot for apartments and $51.30 per square foot for condominiums.
• The pilot bans off-site affordable units in the Pico neighborhood, an area where affordable housing is already concentrated.

Why city leaders moved quickly

Council members who supported the pilot described it as an emergency ordinance aimed at a construction crisis. City staff reported that the residential construction industry is under strain from high interest rates, volatile material costs, and labor shortages. Local factors — including the city’s Measure GS transfer tax — were also noted as making construction financing harder.

Staff identified approximately 40 approved projects that remain stalled and showed record figures that up to 3,598 approved market-rate units and 642 approved affordable units across 37 projects could be affected by the new option. Only two multifamily building permits have been issued in the city this year, one for an affordable housing project and one for a three-unit project.

Support and opposition

Supporters argued the pilot could unlock thousands of housing units and said rules need to adapt to the current economy, which they see as unlikely to change quickly. One supporter estimated the ordinance could produce more than a thousand housing units overall and about one hundred affordable units.

Critics, including housing advocates and renter-rights representatives, raised several worries. They said the rushed timeline reduced public input, questioned whether the pilot will produce enough affordable housing, and warned it could create economic segregation by moving affordable units to cheaper parts of the city. The council member who voted against the pilot warned that the policy could mirror historic patterns of segregation by concentrating lower-cost housing where land is cheapest rather than integrating affordable units across neighborhoods.

Limits, timeline and next steps

The pilot is temporary and limited to 1,000 units. Council directed staff to gather more information and return before the pilot expires to allow the council to consider renewing or changing the program based on new data. The program’s off-site timeline gives developers up to 48 months to start building affordable units after a permit is issued, with possible 12-month extensions in certain cases.

City officials and council members said they will monitor results closely to see whether the program meaningfully speeds development and produces the intended mix of housing, or whether adjustments and stronger safeguards will be needed to prevent concentration and to protect neighborhood balance.

Frequently Asked Questions

Key features at a glance

Feature	Details
Council vote	6 in favor, 1 opposed
Pilot options	Off-site construction with gap financing; rehabilitation of existing units; in-lieu fees
Gap financing	$150,000 per affordable unit (off-site option)
In-lieu fees	$43.91/sq ft for apartments; $51.30/sq ft for condominiums
Unit cap	1,000 units total
Expiration	September 30, 2025
Targeted stalled projects	About 40 projects; up to 3,598 market-rate and 642 affordable approved units across 37 projects
Local construction context	High interest rates, material cost volatility, labor shortages, and Measure GS transfer tax complicating financing
Safeguards	Off-site units prohibited in Pico neighborhood
Off-site timeline	48 months to begin construction after permit; possible 12-month extensions

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