REAL ESTATE NEWS

San Diego is cutting back an incentive that encourages owners of single-family lots to build accessory dwelling units (ADUs), the backyard apartments known as Granny flats that California has embraced as a key solution to its housing crisis.

In a 6-3 vote, the City Council decided on Tuesday to limit the reach of the city’s bonus ADU incentive program, eliminating it in eight neighborhoods zoned for single-family homes where lot sizes tend to be larger than other types of those properties in different areas of the city.

San Diego has one of the most aggressive ADU incentives in California. The city’s program lets property owners in designated neighborhoods near transit routes build a potentially unlimited number of ADUs on a single-family lot.

For every ADU, a property owner is willing to build that is deed-restricted for low-income or moderate-income tenants, the owner can build one bonus unit and charge market-rate rent for it. Property owners can’t exceed the maximum square footage per acre, also known as the floor-area ratio, for a particular neighborhood.

The rollback of the program is aimed at preventing abuse by developers who are targeting so-called “outlier” properties, unusually shaped single-family lots where dozens of ADUs potentially can be built on one lot, The San Diego Union-Tribune reported.

In San Diego neighborhoods with larger lots, some property owners are piling up ADUs on a lot zoned for a single-family home. In one project, 17 accessory apartment units are being constructed on Almayo Avenue in Clairemont on a lot with a 1,018-square-foot single-family home.

The council is expected to enact a package of specific adjustments to the ADU bonus program, including new requirements that property owners who take advantage of the incentive provide parking spots and pay fees for needed infrastructure and community amenities.

There also will be stricter rules on how close ADUs can be to property lines and a prohibition on property owners building more ADUs by exaggerating the portion of their lots that can actually be developed with accessory units.

After the council limited the program at a contentious seven-hour public hearing, city officials announced on Tuesday they are preparing to put forward a proposal to allow property owners to sell ADUs separately from the primary home on a single-family lot.

In June of last year, San Jose became the first city in California to embrace a new state law, AB 1033, that made it legal for homeowners to sell ADUs as condos separate from the primary house on the property.

AB 1033 requires homeowners to establish a homeowners’ association that covers the primary unit and the ADU, with governing documents spelling out how common areas, like a shared yard, will be maintained or repaired.

According to figures released by the Construction Industry Research Board in Sacramento last summer, 22,000 ADUs were built in California in 2023. One out of every five new homes that got permits in the Golden State in 2023 for those types of units.

The state research board, which last year began breaking out the secondary suites as a separate tally in its annual building permit report for California’s 58 counties and 538 cities, is expected to release the 2024 totals in July.

The 1,348 permits issued to build ADUs in San Diego County in 2023 outpaced the total of 1,225 issued for single-family houses, reflecting the growing popularity of Granny flats in the county.

Source: GlobeSt/ALM