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accessory dwelling unit
Under the proposed pilot program, a homeowner could be granted a zero-interest loan of up to $50,000 for construction of a new ADU if the unit is rented at a low-income level for 10 years. Courtesy photo
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Encinitas postpones talks on proposed ADU incentive program

ENCINITAS — A pilot program to incentivize further development of accessory dwelling units in the city was tabled for further discussion as members of the Encinitas City Council expressed concerns with the program’s funding and questioned whether it would help the city meets its housing requirements.

Accessory dwelling units, also known as ADUs or granny flats, are extensions built onto an existing home that is generally used as a supplemental rental unit. In many cities like Encinitas, ADUs are an important factor in meeting state-mandated low-income housing goals.

Under the proposed pilot program, a homeowner could be granted a zero-interest loan of up to $50,000 for the construction of a new ADU if the unit is rented at a low-income level for at least 10 years. An additional amount of $10,000 would be available if the unit was rented at a very low-income level.

Additionally, for each year the unit is rented at an affordable rate, 10% of the loan would be forgiven.

If the home is sold before the loan is fully forgiven, then the homeowner would have to pay off the balance of the loan.

Also available for loans under the proposed program is a $25,000 zero-interest loan for ADUs that are currently not permitted in the city. This loan would work the same as those for permitted ADUs and it would be forgiven over a 10-year period if it continues to be rented at low-income rates.

This is where some of the problems lie with council members as incentivizing non-permitted ADUs would not help the city in terms of its state housing requirements.

“Though I want them to come out of the shadows, I don’t want to give them money because they’re not going to ever help us with the (Regional Housing Needs Allocation) obligation. And I’m really going after that RHNA obligation,” Councilmember Joe Mosca said.

Mosca, and others, are in favor of incentivizing the construction of new ADUs that will go towards the city’s obligations.

“Because it will bring onto the block a brand new affordable unit that can be used to help us with RHNA obligations in the future,” Mosca said.

The funding for the program would come from the city’s Affordable Housing Acquisition fund which Encinitas says has a current balance of $1,435,476. The city says it would prepare to hand out loans to just eight ADUs meaning the maximum amount taken from the fund would be $400,000.

“I don’t currently feel convinced that I’m comfortable depleting our Affordable Housing fund for this program for eight units that I think are likely to be built anyway by relatively well-off homeowners who are already building affordable units,” Mayor Catherine Blakespear said. “I also think that once we get started on this we’re almost certainly going to deplete this entire fund to zero because next year we’ll do it again.”

To that end, it was decided the council would table any further discussions on the program until the council has a discussion on more housing topics it will be hearing later this month, including an agenda item surrounding the inclusionary housing ordinance and in-lieu fee previously approved by the city’s Planning Commission.

“There is some additional programming that we’re recommending with the in-lieu fee that could potentially increase the potential for additional fees to be deposited into this account,” said Roy Sapa’u, assistant director for development services. “So I see the benefit there for the council to have this discussion before you grant the use of funds from this account.”