Second unit rent restrictions lifted for homeowners

CARLSBAD — A recent unanimous City Council vote made an important change for homeowners who have a second dwelling unit on their property. Rent restrictions have been lifted and homeowners can now charge the market value of their unit.

Before the vote, homeowners who had a second dwelling unit fell under the same category as developers who built multiple residential units and had to comply with the city’s Housing Element by renting to lower income groups.

But that’s all changed.

According to Corey Funk, associate planner for the city of Carlsbad, second dwelling units, or SDUs, are now split into two categories: inclusionary and noninclusionary.

Funk presented the proposal to City Council and it approved the revisions to the city’s Zoning Ordinance and Local Coastal Program Amendments for SDU rent regulations.

The inclusionary SDU was not amended. It will still go into effect when a developer builds multiple residential dwelling units and must provide 15 percent of the units as affordable housing.

“Developers doing a larger scale project must comply with the inclusionary housing ordinance, so we created the ‘inclusionary’ term to build that type of ordinance,” Funk said.

For a homeowner, a noninclusionary SDU label was issued distinguishing the difference between the reasons why a homeowner builds this type of dwelling unit versus a developer.

And those goals are quite different.

A noninclusionary SDU, Funk said, has a kitchen and bathroom and can serve as multiple functions. The unit can be used as a guest house, a mother-in-law quarter, or an office.

The noninclusionary SDU used to be restricted to at least low-income housing. Low income, Funk said, is defined by 50 to 80 percent of the area median income.

Funk said this proposal was brought to City Council because of a previous project that was presented to the Planning Commission a couple of years ago.

The topic of a SDU on a single-family residential property raised some awareness.

The Planning Commission felt that putting rent restrictions on homeowners was a burden.

City Council agreed.

City Council members felt that it was time to give homeowners the freedom to rent out their SDU at a fair market rate. Above all, staff said the noninclusionary SDU label was still consistent with the Housing Element requirements.

“The Housing Element counts the inventory of affordable housing opportunities and depends on SDUs to meet those goals,” Funk said. “When the noninclusionary SDUs were rent restricted we were counting them toward the low-income category for the housing element, but we also have to plan for the moderate income.”

Income categories include very low income, low income, moderate and above moderate. The calculations are similar to those used at U.S. Department of Housing and Urban Development.

With homeowners now renting their units at a reasonable market rate, staff expects these units to be at affordable to moderate income levels, which will fall under the Housing Element guidelines.

Recent calculations show that the city of Carlsbad has a total of 215 SDUs. A total of 39 noninclusionary SDUs are part of this number.

“The noninclusionary SDUs are a small percentage,” Funk said.

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