The Study Points to Santa Monica’s Housing Affordability Crisis as a Major Factor to High Business Costs
Santa Monica has been named the most expensive city for businesses to operate in, according to the 2024 Kosmont-Rose Institute Cost of Doing Business Survey, released by Claremont McKenna College’s Rose Institute of State and Local Government. The annual survey, which analyzed a comprehensive set of cost-related factors across 216 cities nationwide, placed Santa Monica at the top, outpacing other high-cost cities in Southern California and across the country.
The study highlighted several key factors contributing to Santa Monica’s top ranking, including its elevated business license fees, utility taxes, and local sales taxes, which were found to be among the highest in the region. Commercial rents, which have consistently trended upwards in recent years, were another significant factor, with many business owners reporting that the high cost of leasing commercial space in Santa Monica has become unsustainable.
In addition to these local taxes and fees, Santa Monica’s high wage requirements, driven by both state mandates and local ordinances, further amplify the financial pressure on businesses.
The study also pointed to Santa Monica’s housing affordability crisis as a major contributing factor to its high business costs. The city, like much of Southern California, has been grappling with a shortage of affordable housing, which in turn affects both employers and employees. For businesses, the lack of affordable housing means higher wage expectations as workers struggle to meet the demands of living in the area. This dynamic can also lead to high employee turnover and difficulty in attracting and retaining talent, adding to operational costs for businesses.
The Kosmont-Rose Institute report noted that nearly half of the 88 cities in Los Angeles County fell into the top tiers of business costs, with Santa Monica leading the pack.
Neighboring cities such as Culver City, Malibu, and Pasadena were also ranked in the top five most expensive, illustrating the broader challenges faced by businesses operating in Southern California.
Outside of California, the study compared Southern California cities to business-friendly regions such as Boise, Idaho, which ranked as the least expensive city in the country for businesses.
