Play It As It Lays by Joan Didion (1970) — set largely on the freeways and beach communities of Los Angeles, this is the novel that captured the particular anxiety of California living. The Santa Monica of the novel is recognisable: the beach as backdrop, the sense of unreality, the car as refuge.
The Long Goodbye by Raymond Chandler (1953) — Chandler's Los Angeles bleeds into Santa Monica through his fictional stand-in "Bay City," a corrupt beach town that maps onto the real place in unsettling ways. Still the best fiction about the city's darker currents.
Kem Nunn's Tapping the Source (1984) — a surf noir set in and around Huntington Beach that captures the Southern California beach culture of the era in ways that feel specific to the region rather than generic. Not strictly Santa Monica, but essential background reading for the beach communities along this coast.