Santa Monica puts prime public land in play for affordable housing
- Nicole Apostolos
- Jul 23
- 4 min read
The Southern California city is offering long-term land leases to developers
Santa Monica plans to offer 99-year leases on a trio of underused parcels to developers in a bid to accommodate more housing. (CoStar)
CoStar News
July 17, 2025 | 12:52 P.M.
As cities across California scramble to meet housing mandates, Santa Monica is offering long-term leases on public sites in a bid to create hundreds of affordable homes in one of the state’s most expensive regions.
The city has designated three publicly owned properties as “surplus land” under the California Surplus Land Act, triggering a formal process to solicit proposals from affordable housing developers. The sites are the 5.6-acre Bergamot Station Arts Center at 2525 Michigan Ave.; nine downtown parcels at Fourth, Fifth and Arizona totaling 2.57 acres; and a 0.75-acre parking structure requiring seismic retrofitting.
The move is part of city leaders' attempt to meet state-mandated housing deadlines, which includes a commitment to deliver at least 1,880 affordable homes on public land. Officials have set site-specific goals: a minimum of 707 affordable units at Bergamot and 362 on the Fourth-Fifth-Arizona parcels, with flexibility depending on financial feasibility. Proposals must demonstrate strong efforts to maximize affordability, even if full targets can’t be met.
Under state law, priority will go to proposals that dedicate at least 25% of units to lower-income households, with top preference given to projects offering the highest number of affordable units at the lowest average income levels. Applicants must also commit to extensive community engagement and submit detailed development plans by Aug. 29.
If more than one qualified proposal comes in, the city will enter at least 90 days of exclusive negotiations with the top contender. A deal could ultimately lead to City Council approval of a long-term ground lease — up to 99 years — through a formal development agreement.
“Come at us with your best and brightest,” City Planning Manager Jing Yeo told developers, urging bold and creative proposals.
City Council member Jesse Zwick noted at a February meeting that “there aren’t state grants or local sources of funding” to support projects with 700 units on a single site, adding that any successful development plan will need to come together “very creatively” and will likely include “interesting commercial and revenue-generating uses.”
Complex sites
Developing the sites would not be simple. A ground lease can make affordable housing development more difficult because it adds a layer of cost and complexity that lenders and tax credit investors often view as riskier, especially when combined with already tight financing conditions, developers tell CoStar News.
Since the developer doesn’t own the land outright, it can be harder to secure long-term, low-cost debt or tax-exempt bond financing — critical to making most affordable projects financially feasible.
And it remains unclear if Santa Monica's so-called Measure GS transfer tax, which includes exemptions for affordable housing, would apply to the properties. In 2023, the city launched a 5.6% tax on properties sold for more than $8 million that observers say has dampened multifamily investment and sales in the market. Deals worth $5 million to $7.9 million are taxed at 0.6% and those worth less than $5 million at 0.3%.
Santa Monica isn't the only government entity seeking to transform underused space into housing. California has improved and expanded a statewide program aimed to pair obsolete government-owned land with affordable housing development firms.
Los Angeles, too, has opened up some city-owned lands to meet its affordable housing goals.
Under construction
Santa Monica’s multifamily vacancy has dipped to 6.8% from 7.0% a year ago, according to CoStar data, thanks in part to demand driven by displacement from January’s Pacific Palisades wildfires, as affected residents sought housing in nearby coastal areas.
The city faces a state mandate to plan nearly 8,900 residential units by 2029 — but it has issued permits for only a fraction of that number. A 2024 Rand Corp. report found Santa Monica has one of the Southern California's lowest rates of multifamily housing approvals.
Historically, Santa Monica has seen modest construction activity due to regulatory hurdles, but the pace has accelerated in recent years.
The Downtown Community Plan launched in 2017 mandates that 20% to 30% of new apartments be set aside for low-income renters, which has shaped both the volume and type of new housing under development.
The 470 apartments under construction in Santa Monica represent a 1.8% increase in total inventory. Major projects underway include Related California’s 280-unit property at 710 Broadway, scheduled to open this year on the site of a former supermarket.
Tishman Speyer has also been developing a sprawling housing complex with affordable units on 3 acres it bought in downtown Santa Monica in 2022. The company and its partners are building 620 units, 116 of which will be designated as affordable, and approximately 31,000 square feet of retail.
In 2023, the company broke ground on the 340-unit first portion of the so-called Santa Monica Collection at 711 Colorado Ave, 1650 Lincoln Blvd., 1430 Lincoln Blvd. and 501 Broadway.
The city recently nixed a proposal to explore housing development on the soon-to-shutter Santa Monica Airport, one of the city's largest undeveloped swaths of land.
Comments