Santa Monica skyline with cranes and planning documents as council approves an off-site affordable housing pilot.
Santa Monica, California, August 28, 2025
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.
Pilot program approved — The Santa Monica City Council voted 6-1 to approve a time-limited pilot that lets developers meet local affordable-housing requirements by building units off-site instead of only on the development site. The measure was passed as an emergency ordinance intended to respond to a local construction crisis that has stalled hundreds of projects.
The program gives developers three choices to satisfy affordable-housing obligations: build units off-site with a gap financing offer of $150,000 per unit; rehabilitate existing uninhabitable units; or pay in-lieu fees. In-lieu fees are set at $43.91 per square foot for apartments and $51.30 per square foot for condominiums.
The pilot is capped at 1,000 units and is scheduled to expire on September 30, 2025. City staff were asked to return with more data before any renewal is considered. Under the off-site construction option, developers must start building affordable units within 48 months after building permit issuance, with potential 12-month extensions available in some cases. The program includes a safeguard that bars off-site affordable units in the Pico neighborhood, a neighborhood already described as having a concentration of affordable housing.
Supporters framed the measure as an emergency response to a construction market under pressure. City staff reported the residential construction industry is facing significant financial challenges tied to elevated interest rates, volatile construction material costs, labor shortages and other global and macroeconomic factors. Local financing hurdles, including the city’s Measure GS transfer tax, were also cited as complicating projects. Council members said thousands of approved units remain unbuilt and that rules needed to adapt to current conditions.
City records show up to 3,598 approved market-rate units and 642 approved affordable units could potentially become eligible under the pilot across 37 projects. Council members estimate the pilot targets roughly 40 stalled housing projects. This year only two building permits for multifamily units have been issued in the city; one of those permits was for an affordable housing project and the other was for a three-unit building.
The measure passed with broad council support; one councilor opposed the pilot, expressing concern that the policy could push affordable housing away from higher-cost neighborhoods and deepen spatial economic divides. Supporters argued the pilot could unlock thousands of housing units that are currently stalled and one supporter estimated the ordinance could produce more than a thousand new units, including about 100 affordable units. Critics, including local housing advocates, questioned whether the pilot will actually produce enough affordable housing, raised concerns about the speed of adoption and said there was too little public notice before the vote.
One tenant-advocacy representative criticized the rushed timeline and said stakeholders had only a few days’ notice of the proposal details. City staff highlighted the tension between urgent action to unfreeze construction and the need for public input and monitoring.
Staff will track how the pilot is used and return to the council with additional data to consider extension or modification before the program expires. Supporters want the pilot to quickly unlock stalled projects; opponents want stronger guarantees that affordable units are produced where needed and that public review is adequate.
The council approved a pilot allowing developers to satisfy affordable-housing requirements by building units off-site, rehabilitating uninhabitable units, or paying set in-lieu fees.
The pilot runs until September 30, 2025, and is limited to 1,000 units. Staff will return with data before any renewal is considered.
Developers choosing the off-site construction option may be offered gap financing of $150,000 per unit.
In-lieu fees are $43.91 per square foot for apartments and $51.30 per square foot for condominiums.
Yes. The pilot prohibits placing off-site affordable units in the Pico neighborhood to avoid increasing concentration there.
Construction must begin within 48 months of permit issuance, with possible 12-month extensions in certain cases.
City records show up to 37 projects with a combined total of 3,598 market-rate units and 642 affordable units that could be affected, and the pilot specifically targets around 40 stalled projects.
The city cited a construction crisis driven by high interest rates, rising and volatile material costs, labor shortages and local financing complications that have left many approved projects unbuilt.
| Feature | Detail |
|---|---|
| Pilot cap | 1,000 units |
| Expiration | September 30, 2025 |
| Compliance options | Off-site construction with gap financing; rehab of uninhabitable units; in-lieu fees |
| Gap financing | $150,000 per unit |
| In-lieu fees | $43.91/ft² for apartments; $51.30/ft² for condominiums |
| Project eligibility (records) | Up to 3,598 market-rate units and 642 affordable units across 37 projects |
| Start window for off-site builds | Begin within 48 months of permit; possible 12-month extension |
| Neighborhood exclusion | Pico neighborhood excluded from off-site placements |
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