Accessory Dwelling Units (ADUs) can take several forms and generally offer key benefits. They are “affordable by design” due to smaller size and physical limitations, location (such as behind a garage). ADUs add flexibility to a home, allowing for example, multiple generations to live independently under one roof, older adults to age in place or individuals with disability to live on the ground floor.
Background
What are Accessory Dwelling Units?
Accessory Dwelling Units (ADUs) are housing units added to existing or proposed residential buildings. ADUs are also often called in-law units, granny flats, secondary units, or basement or garage apartments.
The State of California has long promoted ADUs as a strategy to increase the state’s housing supply. In 1982, legislation was passed to require all jurisdictions to allow “secondary units”, unless reasonable justifications were found. The most recent housing crisis in San Francisco finally gained enough momentum for ADUs. In 2014, ADUs were allowed for the first time as a pilot program in small areas of the city. Subsequently the program was expanded in 2015 and then became available citywide in 2016.
In late August 2018, Mayor London Breed issued an Executive Directive to streamline the approval and construction of the hundreds of ADU permits working their way through the entitlement and permitting process. In response to the Mayor’s directive and to meet the four-month deadline. The five key agencies required to review and approve ADU permits (DBI, Planning, Public Works, Fire, and SFPUC) organized biweekly meeting times to concurrently review applications for streamlined approval process.
Why are ADUs important?
In San Francisco, an ADU can provide extra space and flexible living situations for multigenerational families, or help a homeowner maintain rental income for mortgage payments. In larger multifamily properties, an ADU can turn underutilized spaces into extra dwelling units. Adding these additional units to properties that are typically one unit or lower-density contributes to the housing stock and helps provide more homes that are typically affordable by design. However, ADUs are often expensive to build and the lack of financing mechanisms specific to ADUs make it difficult for many smaller property owners to utilize the program. The ADU program is one of the few programs that produces new rent-stabilized units.
Key Trends
Since the first trial ADU program was introduced in 2013 and as of December 2018, 102 new ADUs have been completed.
A little over 80 percent of all ADUs completed in 2017 and 2018 are in multi-unit buildings with 5 or more units.
Most of these larger multi-family buildings have built ADUs in former parking garages, old boiler rooms, or storage spaces.
The completed ADUs are mostly concentrated in Supervisorial Districts 3 and 8.
In 2015 the ADU program began in these two districts, thus leading to a greater number of completed ADUs in these neighborhoods.
As of mid-2019, a total of 1,793 ADU units came through planning applications since program inception in 2014.
Of these applications, a total of 865 ADU units were approved.
What’s Happening Now to Support ADU Production?
The Planning Department developed a team in 2017 to coordinate the review of ADUs and unauthorized dwelling units. In September 2018, Mayor Breed issued an Executive Directive mandating Departments to complete the review of ADU permits within a certain time period. To address issues related to the fragmented permitting process, Digital Services is testing a pilot for the one-stop permit center and for the creation of a fully digital permitting process: the applicant will be able to apply for ADU permits, submit plans, and complete the process online. The Planning Department has also developed a variety of materials to communicate the benefits of and the process of adding an ADU in simplified language. In addition to these materials the City has hosted or attended outreach events targeted to a variety of audience.
The Planning Department is exploring a deed-restricted affordable ADU pilot in the Bayview and surrounding neighborhoods. San Francisco’s potential pilot involves versions of an equity loan or incorporating future income of property to increase loan amounts possible for low-income households. CASA, the Committee to House the Bay Area, is an effort comprised of public policy and housing advocates, developers, elected officials, and others, to develop methods of addressing the regional housing crisis. The recently published CASA Compact, which packages up detailed policy proposals for a 15-year horizon, details a program for junior ADUs, which may be more affordable to build because they are supposedly smaller than the average ADU. The proposed definition at the State level notes that the junior ADU can share sanitation facilities with the main home, and generally is created from existing space within that home. However, this program could use some more details and research for local application, such as the definition of a junior ADU and exploring tenant rights specific to these types of units.
Issues with ADU Production
One of the main challenges for building ADUs has been the lengthy review process by various departments. Small property owners find the process complicated and daunting. The long process was due to lack of allocated staff, lack of coordinated review between multiple Departments, or, in some cases, disagreements between departments.
Within the existing landscape of mortgage products, loans for ADUs either do not exist or are at the early stages of being formed. During summer of 2018, the Planning Department hired an intern to research how financial institutions are responding to the need for a loan product for ADUs. Most traditional lenders are reluctant to consider the future rental income from the ADU when securing financing.
The Department has occasionally heard concerns from tenant advocacy organizations that construction of ADUs have been disruptive to existing tenants. Examples referenced included when common amenities (defined by the SF Rent Board as “housing services”) were being converted to ADUs, or when required seismic retrofitting in combination with new ADU construction required temporary relocation of tenants.
For Future Consideration
The ideas for future consideration that have the potential to increase community stability in San Francisco are described below. They provide a starting point for agencies, decision-makers, and community members to explore stabilization efforts and identify critical pathways forward. Based on preliminary information, staff is qualifying these ideas according to the type of task, scale of resources and level of complexity to underscore that any of these ideas would require time and additional resources not currently identified. These are not City commitments or recommendations, rather informed ideas that will require careful vetting and analysis as to their reach, resource needs, feasibility, unintended consequences, legal implications, and racial and social equity considerations.
Affordable Accessory Dwelling Unit (ADU) loan or financing programs for property owners
The cost of building a new ADU puts the program out of reach of many low- and moderate-income homeowners. The City could develop an Affordable ADU program that would incentivize low income homeowners to add ADUs offered at below market rates. The City could partner with financial institutions to create loan products for ADUs where the rental income/added value for the ADU will be considered. An affordable loan program could also be explored, such as advocating for a California State law to develop a revolving construction loan fund for ADUs. AB 1074 was introduced in early 2019 to dedicate funds to help finance the cost of constructing an ADU, and the bill is currently in committee process.
| Type of Response | Mitigation |
|---|---|
| Type of Task | Funding, Policy Implementation
|
| Resource | Generally only staff time and some program funding would be required
|
| Complexity | Medium – generally some legislation and/or some change of and existing program, and two to three agencies involved
|
| Timing | Long Term (more than 5 years)
|
| Geographic Scale | Citywide or Statewide |
| Partners | Mayor's Office of Housing and Community Development (MOHCD) |
| Key Priority | Yes - Enhancements to Existing City Programs and Policies |
| Benefit | Providing financial assistance could help create more housing in these communities and help stabilize low-income homeowners or help them make needed repairs. |
| Challenge | This would require more resources and funding, as well as a lottery program to select eligible homeowners for financial assistance. Adding an ADU to an existing home incurs additional costs to modify the main home, a homeowner’s expected cost of construction may increase beyond financial feasibility. |
More flexible building options for ADUs
Revising legislation at State and local levels to allow other building forms such as rear yard cottages, home on wheels, or pre-fabricated buildings could reduce the cost of building an ADU and make the program more feasible for property owners.
| Type of Response | Mitigation |
|---|---|
| Type of Task | Regulation
|
| Resource | Generally only staff time would be required
|
| Complexity | Less Complex – generally no or limited legislation and/or an existing program, and one agency involved
|
| Timing | Long Term (more than 5 years)
|
| Geographic Scale | Citywide |
| Partners | Planning, Department of Building and Inspection (DBI) |
| Key Priority | Yes - Enhancements to Existing City Programs and Policies |
| Benefit | The cost of constructing an ADU may decrease if more flexible options in materials and building type are introduced to the program. |
| Challenge | This would require more resources and updates to existing labor laws and existing Building Code. The existing form of SF buildings (side lot line to side lot line) may also create additional barriers/ costs of construction. |
More avenues for ADU outreach
The City could continue to develop outreach materials that explain the process in simple language to a typical homeowner with minimum familiarity of the City’s bureaucracy. These materials should be translated into multiple languages such as Chinese and Spanish. The City could consider conducting ADU fairs in areas of the city with more single-family homes and including marketing materials on local media such as Chinese-speaking stations. Finding a local advocate for ADUs would also help the City create more interest in building ADUs in small properties as well.
| Type of Response | Mitigation |
|---|---|
| Type of Task | Service
|
| Resource | Generally only staff time and some program funding would be required
|
| Complexity | Medium – generally some legislation and/or some change of and existing program, and two to three agencies involved
|
| Timing | Long Term (more than 5 years)
|
| Geographic Scale | Citywide |
| Partners | Mayor's Office of Housing and Community Development (MOHCD), community partners |
| Key Priority | Yes - Enhancements to Existing City Programs and Policies |
| Benefit | This can help create more accessibility to the ADU program. |
| Challenge | This would require more resources and funding. |
Prior evictions data on Property Information Map (PIM)
Service providers suggested that including property evictions data on the City’s Property Information Map would be useful for the public, prospective tenants, and City staff. This entails several key considerations, including the lack of certain types of evictions data and the capacity for the Rent Board or other evictions data collectors to provide the Planning Department with this information.
| Type of Response | Mitigation |
|---|---|
| Type of Task | Data
 |
| Resource | Generally only staff time and some program funding would be required
|
| Complexity | Complex (generally major legislation, and/or new program required, and more than three agencies involved)
|
| Timing | Long Term (more than 5 years)
|
| Geographic Scale | Citywide |
| Partners | Planning Department, Rent Board, community partners |
| Other Sections | Tenant Protection Services |
| Benefit | Would create more accessibility to evictions data. |
| Challenge | Requires funding and resources, might be difficult to maintain. Evictions data shown at such a granular geographic level may be used as a screening tool by landlords, thus impacting prospective tenants. Therefore, data should be at the property level not tenant specific. |
