Off-Site Affordable Housing
Pilot Incentive Program
City Council
January 13, 2026
Item 10-A
January 13, 2026
Item 10-A
January 13, 2026
Purpose
• On June 10, 2025, Council gave direction to staff to “establish a pilot program allowing market-rate housing projects more flexibility in how they provide affordable housing units off-site, while also allowing these housing projects to be eligible for density bonus, incentives/concessions, and modifications.”
• On August 12, 2025, Council approved an emergency ordinance to establish the Off-Site Affordable Housing Pilot Program to first 1,000 units or September 30, 2026
• On September 30, 2025, Council received an update of the Pilot Program and gave direction to amend and extend the program for additional multiple unit housing projects, subject to certain conditions Summary
Item 10-A
January 13, 2026
Item 10-A
January 13, 2026
AHPP Pilot Program Overview
• Approved on August 12, 2025 in Section 9.64.065 of the SMMC as Emergency Ordinance
• Recommended action for Council to introduce for first reading a regular ordinance to codify the AHPP pilot program (Section
9.64.065 of the Santa Monica Municipal Code) for the applications for 1000 units, filed and pending prior to September 30, 2025, with the same terms and conditions as the August 12 emergency ordinance . • This action is recommended out of an abundance of caution in light of the advice from the FPPC and the timing of Council Member Zwick’s employment with Housing Action Coalition.
Item 10-A
January 13, 2026
Item 10-A
January 13, 2026
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
Limited to first 1,000 units
AHPP Pilot Program Overview
Item 10-A
January 13, 2026
Item 10-A
January 13, 2026
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
AHPP Pilot Program Overview
Item 10-A
January 13, 2026
Item 10-A
January 13, 2026
AHPP Pilot Program Extension
• Council on September 30, 2025, provided direction to extend program for new projects but with the following additional conditions:
Program Option for At Risk Units
Community Benefit Payment
Increase Gap Financing Amount
Strong Enforceable Milestones
Long Term affordability protections
• New Ordinance for Extension would be added as Section 9.64.075 • Additional edits since publication of Council Staff Report are proposed and indicated in Green of this presentation
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January 13, 2026
Item 10-A
January 13, 2026
SMMC Section 9.64.075
Option 1 Gap Financing: Gap financing amount for new program applicants is increased to $160,000 per unit, to be reviewed and updated annually based on the ENR Building Cost index. Program Option for At-Risk Units: New option to purchase covenants for at-risk units (i.e., affordable-deed restricted units with covenants at risk of expiring) and record an extension of the covenant for a term of 75 years.
• Units must be deemed by City Manager that the structural condition of the property supports the purchase of at-risk covenants and the 75 year extension
Item 10-A
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January 13, 2026
SMMC Section 9.64.075
Community Benefit Payment: In the event that Measure GS is no longer in place, applicant must pay a Community Benefit Payment • Applies to the first transfer of a multiple-unit project (or its property) and is equal to 5.0% of the amount of consideration or value of that transfer or
• If the City’s Third Tier Tax Rate is reduced for any reason, applicant must pay the reduced amount plus the difference between 5.0% of first transfer payment above and the reduced amount ·
Item 10-A
January 13, 2026
Item 10-A
January 13, 2026
SMMC Section 9.64.075
Enforceable Milestones for Option 1 for Construction of Off-Site Units:
• Prior to issuance of a building permit for the first market rate project, applicant must submit a complete entitlement application for the off-site affordable housing project.
• Prior to receiving a CofO for the first market rate project, applicant must submit construction plans for the off-site affordable housing project.
• Off-site affordable housing construction must commence within 48 months of issuance of the first building permit for any market-rate project (or 18 months for Coastal Zone projects), unless City grants extension
• If construction does not commence on time, the City may exercise its option to acquire the off-site property and may retain the Gap Financing Amount.
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SMMC Section 9.64.075
Long Term Affordability Protections: Applicant must record a Right of First Refusal Agreement on that off-site property.
• The City has the first opportunity to purchase the off-site property before it can be sold to any third party.
• If the property owner receives a purchase offer, the City may choose to match that offer and acquire the property, or allow the sale to proceed.
Item 10-A
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Item 10-A
January 13, 2026
Recommended Actions • Adopt CEQA findings • Introduce for first reading a regular ordinance to:
1. Codify the AHPP pilot program (Section 9.64.065 of the Santa Monica Municipal Code) for the applications for 1000 units, filed and pending prior to September 30, 2025, with the same terms and conditions as the emergency ordinance presented to Council on August 12, 2025; and
2. Codify the expansion of the AHPP pilot program (Section 9.64.075 of the Santa Monica Municipal Code) beyond the 1000 units approved, but with different conditions and requirements
Item 10-A
January 13, 2026
Item 10-A
January 13, 2026
Questions?
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January 13, 2026
Item 10-A
January 13, 2026