City Council Moves Forward on Timeline to Build Housing on City-Owned Property

The city council continues to move forward with commitments to Santa Monica’s 6^th Cycle Housing Element. 

On Tuesday evening, the council passed a resolution setting a timeline in motion that should result in the development of 1,880 affordable housing units on several plots of land owned by the city. By declaring certain properties “surplus land,” the city will release a series of “Notices of Availability” (Notices) soliciting developers’ interest in building mixed-use housing projects that will, given the “surplus” status, be free of environmental review. 

The commitment to utilizing publicly-owned land is a vital portion of the Housing Element passed in October, 2022, as part of several strategies to meet the state’s demand that Santa Monica at least plan for the development of 8,895 housing units between 2021-2029. The number derived in the Regional Housing Needs Assessment (RHNA) was a dramatic spike from the previous 5^th State Cycle, which called for the city to plan for just over 1,600 units between 2013-2021. 

The locations included in the resolution include Parking Structures #1 and #3 (PS1/PS3) on 4^th Street, Public Parking lots 7, 8, and 12 on Wilshire Public Parking lots 9, 10, and 11 on Main Street, the bank parking lots at 4^th/5^th and Arizona, and the Bergamot Station Arts Complex.

PS3 is already closed to the public and in the redevelopment process.

City staff also categorizes sites as “surplus” and “exempt surplus.” Surplus properties set aside 25% of units as affordable housing as defined in the Health and Safety Code. A surplus property requires a city to follow a 90-day negotiation process with each developer that responds to a Notice. Exempt surplus sites set aside 100% of units for low or moderate-income households, with 75% set aside specifically for the low-income households. 

In the staff report on this council item, the 4^th/5^th and Arizona and Bergamot Station Arts Center are examples where an exempt surplus would allow the city to restrict commercial development to ground floor retail, but where doing so would increase “reliance on public subsidies to fund construction and limiting the opportunity for joint public-private development.” They argue given the two sites are the largest of the publicly-owned, and therefore with the greatest development potential, designating them as surplus “may increase possibilities for private funding sources, the extent of which is difficult to know without testing the market.” Only by releasing the Notices will the city know how much interest there is from for-profit developers.

Whereas a more modest-sized site like PS1 is potentially a good spot for exempt surplus designation. In the case of PS1, the city has four options:

1. Seismically retrofit the old parking garage at a cost of $14 million by October 2027
2. Demolish the structure to develop affordable housing, which itself would cost four or five million and require a permit from the California Coastal Commission, which can take up to four years.
3. Sell the property with the agreement that the new owner would develop affordable housing. This puts the costs of demolition and permit seeking on the new owner.
4. Keep the garage open until October 2027 and determine the site’s future then.

Given its potential for 100% affordable, the staff is recommending option two. 

Overall, the city is concerned that trying to develop housing at more than one site at a time may be difficult, as staff bandwidth will be stretched and there will be steep competition for funding and public subsidies, which are tightening given the state’s budget woes. Therefore, they recommend a Notice first be put out by June 30 of this year for the Bergamot Station Arts Center site, with the next released by June 30, 2027 for 4^th/5^th and Arizona.

One argument to put Bergamot first is the existing revenue potential for 4th/5th and Arizona, which far exceeds the revenue brought in by the arts center. Bank of America and Chase both possess existing leases with the city through spring 2026 and generate $2.5 million annually for the city’s General Fund. Both banks have requested new 5-year leases, and if they are both extended, they will generate an additional $12,500,000 for the General Fund. 

The other reason staff recommended beginning with the Bergamot property is that it is also a site of an Expo Line station, making it more attractive to public subsidies. 

Several members of the public spoke to the item before the council, largely in support of protecting the integrity of Bergamot Station’s arts infrastructure. Recreation & Parks Commissioner John C. Smith pleaded with the city council to create a park space at 4^th/5^th and Arizona, displaying visual evidence of how park-poor the downtown area is. 

Mayor Pro Tem Caroline Torosis pressed staff on the two-year delay in releasing a Notice/NOTICE for 4^th/5^th and Arizona, suggesting downtown needed to be activated sooner with more mixed use commercial, despite the revenue advantages the bank sites could provide over the next several years.

“That sounds a little bit like we’re prioritizing our short-term needs and not looking at our long-term strategy,” Torosis said in response to city staff. 

She also suggested the city should consider releasing both Notices closer together in time to see what level of interest Bergamot Station and 4^th/5^th and Arizona generate to help decide which site is developed first. 

Speaking in favor of putting the 4^th/5^th and Arizona first, Councilmember Ellis Raskin said, “I do think we have to be cognizant of tradeoffs between immediate financial return in these lease holds and the bang for the buck that we get from revitalizing the downtown.” 

Recognizing the revenue advantages Bank of America and Chase provide, Councilmembers Natalya Zernitskaya and Jesse Zwick seemed more inclined to move the Bergamot Station site first, though Zwick was more comfortable releasing multiple Notices at once. “To me, it’s all about flexibility,” he said. He also warned against putting too many conditions like replacement parking on builders who respond to the Notices, fearing it would lead to less creative designs.

Mayor Lana Negrete’s major concerns were ensuring an honest two-way public engagement process that considers business and public input, and that artists’ lofts be a part of any Bergamot solution given the removal of several in recent years on Main St.

After several minutes of back-and-forth among the council members and staff, the motion that ultimately passed declared Bergamot Station, 4^th/5^th and Arizona, and PS1 surplus land – none of it exempt – prioritizing the two downtown sites just ahead of Bergamot, staggering the Notices by several months, prioritizing affordable housing and revenue generating properties, and at Bergamot, stating a preference for an artist right-of-return and artistic-serving commercial spaces that also consider temporary artist relocation. It also offered that 4^th/5^th and Arizona could be bundled with PS1, but is not required.

After an initial “no” vote from Zernitskaya, it ultimately passed 7-0.