Off-Site Affordable Housing
Pilot Incentive Program
City Council
September 30, 2025
Item 11-A
September 30, 2025
Item 11-A
September 30, 2025
Purpose
• Provide update on program status
• Summarize results of additional outreach to affordable housing providers and review of public comments
• Receive direction on 7 policy questions on next phase of the pilot program Purpose
Item 11-A
September 30, 2025
Item 11-A
September 30, 2025
• Pilot program adopted on August 12, responsive to June 10 Council direction • Program objectives included:
• Target projects that have received their approvals prior to August 12, 2025 in order to unlock “frozen” units
• Consistent with Housing Element Program 2.C, provide 3 new options to comply with AHPP
• Increase flexibility in off-site affordable housing option by removing requirement that CofO for affordable housing project be issued before CofO for market rate project • Create new local density bonus program
• Limited to 1,000 units or until September 30, 2025 whichever comes first [return to Council on Sept 30]
Review Pilot Program Objectives
Item 11-A
September 30, 2025
Item 11-A
September 30, 2025
Be multiple-unit project of 6 units or more
Have obtained final approval of all required discretionary and ministerial City permits, on or before August 12, 2025
AB130 time limits do not apply to previously approved projects Cannot be under construction or have been completed
A previously approved project can be redesigned and approved prior to December 31, 2026 Could use new standards for housing projects and new pilot program potentially resulting in more units
Pilot Program Eligibility
Item 11-A
September 30, 2025
Item 11-A
September 30, 2025
Pilot Program Options
• Option 1: Alternative Site
• Construct same number of off-site affordable units (all lower income) after the market rate project begins construction
• Pay gap financing at $150,000 per unit (assumes 4% tax credits) • Option 2: Rehabilitation Option
• Complete substantial rehabilitation of existing units in a number equivalent to required off-site affordable units
• Option 3: In-Lieu Fee Option
• Pay in-lieu fee of $43.91/sf for apartments and $51.30/sf for condominiums per off-site affordable housing unit (adjusted annually) into Housing Trust fund Pilot Program Options
Item 11-A
September 30, 2025
Item 11-A
September 30, 2025
Program Status Updates • 6 applications received for 1,018 units • 5 for off-site option
• 1 for in-lieu fee option
Option 3 Estimated
In-LIeu Fee
Option 3
Project SF
Option 1 # of Off-Site Affordable
Units
Option 1 Off-Site Property
Pilot
Program
Option
Chosen
# of Previously
Approved On-Site Affordable
Units
# of Previously
Approved
Market Rate
Units
Project Address Total Units
1333 7 14 N/A -
th 1902 Wilshire 140 126 14 1 St*
1143-1145 25 21 N/A -
th 1527 Lincoln 210 189 21 1 St
1333 7 17 N/A -
th 2501 Wilshire 170 153 17 1 St*
1333 7 15 N/A -
th 150 135 15 1 St* 2025-2037
Wilshire
1143-1145 25 26 N/A -
th 1931 Wilshire 260 234 26 1 St
88 79 9 3 N/A - 51,189 sf $2,247,708.99 2906 Santa
Monica
Total 1,018 916 102 93
Item 11-A
September 30, 2025
Item 11-A
September 30, 2025
Program Status Updates
• Website launched
• https://www.santamonica.gov/status
-of-development-projects
• Click on “Status of Off-Site Affordable
Housing Pilot Program
• 1,000 unit cap reached – program is
no longer available unless
Ordinance is extended and
amended
Item 11-A
September 30, 2025
Item 11-A
September 30, 2025
Roundtable - Affordable Housing Providers
• September 17, 2025 - City hosted workshop to solicit input from representatives of the following affordable housing providers:
• Community Corporation of Santa Monica
• Hollywood Community Housing
• EAH Housing
• Thomas Safran & Associates
• Venice Community Housing
• Abode Communities
Item 11-A
September 30, 2025
Item 11-A
September 30, 2025
Roundtable – Affordable Housing Providers • Eligibility of At-Risk Units • Expand Option 2 to include affordability for at-risk units (i.e., affordable-deed restricted units with covenants imminently at risk of expiring and converting to market rate) • Moderate Income Housing • Expand Option 1 to include moderate units or allow fees from Option 3 to be used for moderate units • Option 1 Gap Financing
• Concern that gap financing amount of $150,000 is too low even with 4% tax credits and additional funding may be needed • Competition for Financing
• Concern that the program could add more competition into an already competitive financing landscape • Concern about how competitive these developments would be without the public subsidy leveraging points from TCAC
Item 11-A
September 30, 2025
Item 11-A
September 30, 2025
Other Comments Received
• Santa Monicans for Renters’ Rights (SMRR) • Require completion of development milestones for off-site affordable housing • Increase Option 1 gap financing amount to account for construction cost escalation, on-site parking, and prevailing wage
• Increase Option 3 in-lieu fee to reflect actual cost of construction • Require program participants to commit to paying Measure GS tax upon sale of the project • Planning Commission discussed at 9/17/25 meeting and voted for Council to consider following minor amendments to the program: • Extend pilot program to end of 6th Cycle Housing Element • Allow pilot program to include moderate-income units • Actively monitor progress and success of the program
Item 11-A
September 30, 2025
Item 11-A
September 30, 2025
Program Results • The stated purpose of program was to allow flexibility for market rate projects in how they provide affordable housing units, in an effort to spur housing production • Based on policy objective, objectives were met – market rate development has been spurred, which has also led to the advancement of affordable housing unit development • Of note, the program has inherent tradeoffs between prioritization of affordable housing vs. reducing economic uncertainty to produce housing for market rate projects • These two goals may be in conflict because increasing the requirements for off-site affordable housing may impact the financial feasibility of producing market rate housing
Item 11-A
September 30, 2025
Item 11-A
September 30, 2025
Policy Question 1
Extension of Program
• Background
• Total 1,000 unit cap has been reached with initial 6 applications • Approximately 3,000 units in 30 housing projects could be eligible for the program • Should the program be extended beyond the 1,000 unit cap that was established on August 12?
• YES MEANS…continue the program and allow additional market-rate projects approved as of August 12, 2025 to utilize this program
• NO MEANS…do not continue the program. • ALTERNATIVELY…continue the program and establish a new cap or other limit for the program.
Item 11-A
September 30, 2025
Item 11-A
September 30, 2025
Policy Question 2
Expansion of Option 1 to Allow Moderate Income Units
• Background
• Public comments and feedback from additional outreach requested flexibility to allow moderate income units in off-site affordable housing if developer is not using tax credit funding • Should Option 1 be modified to allow moderate units?
• YES MEANS…the ordinance would be amended to require that off-site affordable units be deed-restricted for lower income OR moderate income households. • NO MEANS…the ordinance would continue to require that off-site affordable units only be for lower-income households.
Item 11-A
September 30, 2025
Item 11-A
September 30, 2025
Policy Question 3
Option 1 Milestones
• Background
• Public comments and additional outreach have expressed concern that the pilot program does not provide assurance that off-site affordable will be constructed Item 11-A
September 30, 2025
Item 11-A
September 30, 2025
Policy Question 3
• Should permitting milestones for the off-site affordable housing project be required for Option 1?
• YES MEANS...the ordinance would be amended to establish milestones that may include: • Submit application for off-site affordable housing project prior to issuance of building permit of market rate • Complete plan check process for the off-site affordable housing project prior to CofO for market rate • Allow the City to exercise its option on the off-site property, draw down on the gap financing, and receive an assignment of architectural and construction plans for the off-site housing development early if the developer does not complete the plan check process within a certain timeline of pulling a building permit on the market rate project • NO MEANS…timeline requirements remain unchanged Item 11-A
September 30, 2025
Item 11-A
September 30, 2025
Policy Question 4
Option 1 Gap Financing Amount
• Background
• Public comments and additional outreach have expressed concern that the $150,000/unit gap financing is too low
• Particular concern if land is given to the City due to prevailing wage requirements and likelihood that affordable housing provider will include on-site parking • Increasing gap financing amount is a policy decision that may affect feasibility of market rate project • Staff assessment of our past 6 affordable housing projects funded with Housing Trust Fund dollars identified a comparable gap financing amount of $158,781 / unit, assuming a 5% per year escalation factor since the acquisition of the project
Item 11-A
September 30, 2025
Item 11-A
September 30, 2025
Policy Question 4
Should the gap financing amount be modified?
• YES MEANS…increase and establish a new amount • If there is interest in feasibility considerations, staff can also return to Council with additional analysis on recommended gap financing accounting for on-site parking, unit types, and providing information regarding the effect of prevailing wages. • NO MEANS…$150,000 gap financing per unit would remain unchanged. • ALTERNATIVELY…keep the gap financing amount at $150,000 per unit • Remove 5% annual cap on escalation • Replace with requirement that the amount would be reviewed and updated annually by Council resolution based upon construction cost index
Item 11-A
September 30, 2025
Item 11-A
September 30, 2025
Policy Question 5
Expansion of Option 2 (Rehabilitation) to Include At-Risk Units • Background
• Public comment received that Option 2 should be expanded to include at-risk units • Should Option 2 be expanded to include At-Risk units? • YES MEANS…the ordinance would be amended to include At-Risk units in Option 2 • NO MEANS…At-Risk units would not be eligible for Option 2 Item 11-A
September 30, 2025
Item 11-A
September 30, 2025
Policy Question 6
Option 3 In-Lieu Fees
• Background
• Public comment received that Option 3 in-lieu fees are too low • Updated nexus study would likely be required to establish new fee • Should the in-lieu fee payment be modified?
• YES MEANS…the in-lieu fee should be modified. If modified, a new nexus study would be required. The nexus study would require cost and time, estimated at several months. • NO MEANS…the in-lieu fee would remain unchanged and would increase only annually in accordance with construction cost index
Item 11-A
September 30, 2025
Item 11-A
September 30, 2025
Response to Comments on Measure GS
Measure GS Tax Commitment
• Background
• Public comment has been received stating that participants in the program should commit to payment of Measure GS tax
• There have been attempts to modify property transfer tax requirements in California. • Should the City attempt to establish a provision requiring developers electing to participate in the pilot commit to payment of our Measure GS tax, or an equivalent amount should the law change?
• YES MEANS…the City would identify potential options to require payment of Measure GS tax amounts upon the sale of a project participating in the program. • NO MEANS…if changes to the law negate Measure GS, projects participating in the program may be exempted from paying the tax.
Item 11-A
September 30, 2025
Item 11-A
September 30, 2025
Questions?
Item 11-A
September 30, 2025
Item 11-A
September 30, 2025