Santa Monica developers face 'experiment' in providing affordable housing

Beset by the highest rents in Los Angeles County, Santa Monica officials are adopting a new affordable housing standard they say will create more residential units for lower-income households, although critics say it will only serve to depress housing production. 

Under the city's new policy adopted last week, developers who want to build in downtown Santa Monica must price as much as 30 percent of the units below market-rate. The taller and denser the building, the more affordable housing units there have to be.

City Manager Rick Cole said the goal is to house people who work in the city as well as the children of residents who can't afford to live where they grew up. Santa Monica's average monthly rent tops $3,000, buoyed by proximity to the beach and Silicon Beach's tech jobs.

"The reality is there’s very difficult barriers for working people to be able to afford new apartments," Cole said.  

But developers say the new affordable housing standard in Santa Monica is far higher than other cities and will keep their projects from penciling out.

Dave Rand, a land use attorney representing several developers in Santa Monica, commended city officials for trying to address housing affordability but said their good intentions would have poor outcomes.

"Producing affordable housing in otherwise market rate buildings is very expensive," Rand said. "Santa Monica’s gambling with the future of housing production by making the requirements that strict."

In the past, Santa Monica would strike deals with individual developers that varied in the amount of affordable housing that was required, although it typically averaged 15 to 20 percent and has hit as high as 24 percent, according to Cole. 

Rand said that the 20 percent requirement was "economically feasible" but 30 percent would force developers to abandon projects. 

The city said it is reducing developers' costs in other ways, such as eliminating minimum parking requirements. 

Studies of so-called inclusionary zoning in California show they have produced tens of thousands of affordable units in recent decades. A report last year for the National Housing Conference found that the policies do not lead to "significant declines" in housing production or increase market-rate prices.

Cole called Santa Monica’s new policy "an experiment," but one they have to try. The council will be checking on its impact every six months.  

He said Santa Monica has led the way in housing policy, from being one of the only cities in Southern California to use rent control to adopting of one of the country's toughest regulations on Airbnb and other short-term rental platforms.