By Jorge Casuso
January 16, 2025 -- The City Council on Tuesday expanded a pilot program eagerly embraced by market-rate housing developers that offers density bonuses and an opportunity to build mandated affordable units off-site.
Approved as an emergency ordinance by the Council in August, the program -- which is meant to kick-start construction in a tough financial market -- met its original applicant quota in its first week.
On Tuesday, the Council voted 4 to 1 to codify the 1,088 units accepted under the existing Affordable Housing Pilot Program (AHPP) and extended the program for eligible projects that total some 3,000 additional units.
The Council revisited the August vote "out of an abundance of caution" after the State's Fair Political Practices Commission (FPPC) advised the City that Councilmember Jesse Zwick had a conflict of interest when he voted on the measure, which was approved by a 6 to 1 vote.
Developers quickly rushed to the pilot program, which received applications for 916 market-rate and 102 affordable units. The program gives developers up to four years after receiving a building permit to obtain a permit for the affordable units.
The Council also amended the program to add safeguards for the affordable units and increased the amount of gap financing deposited into an escrow account from $150,000 per unit to $160,000.
In addition, the new program requires that in the event the sale of the project is not subject to the voter-approved Measure GS Transfer tax, the applicant must pay a "Community Benefit Payment" to the City, which in most cases would be 5 percent.
Both the benefit and the escrow payments would go into the City's Housing Trust Fund, which is used to help build affordable units but has in recent years been tapped to help Santa Monica balance its budget.
To ensure the affordable units are built, the applicant must submit the entitlement application for the off-site affordable project before a building permit for the first market rate project is issued.
The applicant also must submit construction plans for the affordable project before receiving a certificate of occupancy for the market-rate project.
If construction does not begin on time, the City can exercise its option to acquire the off-site property and retain the Gap Financing Amount.
The applicant must also record a "right of first refusal" agreement on the off-site property, giving the City the opportunity to purchase it before it can sell to any other third party. If the property owner receives a purchase offer, the City could choose to match it.
The provisions were added after Santa Monicans for Renters’ Rights (SMRR), which helped elect the Council's pro-housing super-majority, recommended developers provide "greater assurance" the affordable units would be built.
In order to meet a state mandate that carries major penalties if not met, the City must plan to build 8,895 housing units, 6,168 of them affordable, by the end of 2029.
"We need more housing," said Mayor Caroline Torosis. "We need more affordable housing. And this is going to unstick some of those units.
The Council, Torosis said, is "really proud to innovate on this when local jurisdictions around the county and the state are having such a hard time really getting those affordable units built."