By Jorge Casuso

August 6, 2026 – An effort to save the apartments of 40 households in a 77-year-old rent control building has turned into what is likely the most expensive housing renovation in Santa Monica's history, according to information provided in a staff report to the City Council.

The report the Council will take up Tuesday outlines how the City's investment in helping Community Corporation of Santa Monica (CCSM) embark on the project ballooned from a nearly $15.2 million acquisition and pre-development loan in 2020 into a $35.65 million loan to rehabilitate the property at 2033-2101 Virginia Avenue in the Pico Neighborhood.

The total per-unit cost – which includes relocating the tenants -- rivals the price-tag for Santa Monica's most expensive affordable housing development, which is expected to break ground Downtown later this year at a cost of more than $1 million per unit ("Downtown Affordable Project Secures Major Funding," May 19, 2026).

Community Corp, the City's largest affordable housing provider, estimates the Virginia Avenue Apartment Project will be over budget by some $2.4 million, "driven largely by higher-than-estimated construction and relocation costs," according to the report.

"Construction costs are higher than anticipated largely due to the extent of work required to address mold, termite damage, and deteriorated sewer lines," staff wrote. "Additional work is also required to correct existing conditions not known prior to construction."

In addition, the cost of relocating the tenants during construction increased by $1.6 million after CCSM abandoned its initial plan to phase the work so tenants could remain in part of the property.

Due to the "complexity and cost" of adding utility infrastructure, "safety risks posed during construction" and "a longer construction period needed," CCSM "ultimately determined that the construction would occur in one phase with all tenants relocated prior to starting on-site work."

The staff report was released after Councilmember Lana Negrete placed a discussion item on the May 26 Council agenda requesting information on the "project scope, timeline, current construction status, remaining phases, and anticipated completion dates" ("Housing Provider Over Budget on $37.5 million Rehab Project," May 26, 2026).

According to the report, the cost overruns began shortly after Community Corp purchased the property in January 2020 with money from the City's Housing Trust Fund (HTF), which is typically not expected to be paid.

Two months later, in March, the COVID pandemic resulted in "delays and cost escalations," staff wrote in the report. The following year, the City increased its funding by $5,376,330 "to cover a portion of the anticipated construction costs."

The funding -- which was "contingent on CCSM obtaining additional non-City funding to fully pay for the rehabilitation -- brought the total City commitment to $20.56 million.

A year later, in 2022, CCSM requested an additional $5.8 million, "citing challenges in the feasibility of obtaining and using tax credit financing for the rehabilitation as well as higher-than-anticipated rehabilitation needs."

In 2024, CCSM applied for tax credit equity financing and a tax-exempt construction loan to help finance the rehabilitation.

By then, the City had committed a total of $32,115,008 to the project from its Housing Trust Fund under the City’s Emergency Order on Homelessness and allocated up to 20 project-based vouchers from its Housing Authority "to support the project’s ability to leverage outside financing necessary to complete the rehabilitation."

Community Corp didn't get the tax credit, but was able to obtain $850,000 in federal grant funds through Representative Ted Lieu’s office and a $24,999 grant from the City’s Office of Sustainability and the Environment. It also determined the development would be eligible for $200,000 from the Low-Income Weatherization Program (LIWP) from the State, which would be reimbursed after the rehabilitation was completed.
On August 12, 2025, the Council authorized the City Manager to negotiate and execute all necessary documents to make a HTF loan to CCSM of up to $35,650,000 for the project, including a contingency of $850,000 the City would release in the event the federal grant funds were rescinded.

Construction began in November 2025 -- nearly six years after the City provided its first $15 million in funding. To date, $26,633,843, or 77 percent, of the original budget, has been spent.

The tenants, who were relocated last November are not expected to return to their units until construction is completed in June 2027.