By Jorge Casuso
August 11, 2025 -- Despite local efforts to speed up housing development, building permits for only 181 units have been issued since 2023, prompting the City Council to explore incentives to kick-start construction.
On Tuesday, the Council will take up an emergency ordinance to counter a "dramatic slowdown in housing construction" that has seen few of the more than 3,400 market rate and 900 affordable units approved in the streamlined process issued building permits.
The proposed options include allowing market rate developers to meet their affordable housing quotas by "pooling" affordable units from multiple projects and building them at an off-site location not in the Pico Neighborhood, City staff wrote in a report to the Council.
Two other options would allow developers to rehab existing multifamily units owned by third parties the City has declared uninhabitable and pay an affordable housing fee that would be used by the City to subsidize other affordable developments ("City Poised to Pay Nearly 35 Million to Save 40-unit Building," August 6, 2025).
The options would give 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.”
City officials hope the "pilot incentive program" can counter a construction slowdown "due in large part to elevated interest rates, construction material costs volatility, labor shortage and wage pressure, and stagnant rental rates."
In addition to nationwide factors, housing developers have indicated that Measure GS, a real estate transfer tax hike approved by Santa Monica voters in 2022 to help fund affordable housing, has "resulted in difficulty obtaining construction financing," staff wrote.
"As a result, additional flexibility is needed to facilitate the construction of housing, beyond the entitlement phase."
The proposed ordinance would apply to 37 approved projects totaling as many as 3,598 approved market rate units and 642 approved affordable units, staff said.
Under the proposed pilot program, developers who comply with the affordable housing options can build "the total number of previously approved units," including the affordable ones, at market rate.
Developers also would be required to build fewer deed-restricted units for lower-income households off-site and "would have up to 5 years" after obtaining a building permit to construct the affordable units, instead of building the two projects concurrently.
"This flexibility in timing would help developers in obtaining construction financing of the market-rate housing project," staff wrote.
Tuesday's vote comes more than two years after the Council approved a package of Zoning Ordinance amendments to encourage the production of housing ("Council Takes Major Step to Meet State-Mandated Housing Quota," March 27, 2023).
The amendments to the City’s land use plans and zoning ordinance focus on meeting the State's mandate to plan for some 9,000 new housing units, with two-thirds of them affordable, by October 2029.
Community Development Department officials acknowledge "there is no guarantee that the pilot program alone will lead to 'shovels in the ground,' given the economic uncertainty and multitude of other outside factors affecting the construction industry."
However, they believe the program "would be beneficial in addressing some of the financial challenges within the housing market and thereby serving as one important tool for supporting housing construction."
