Auxiliary Dwelling Unit Grant Program for San Diego

UPDATE MAY, 2023:  The CalHFA ADU grant program is currently closed to new applications until further funds become available. Please read the article below to get ready when the portal opens again.

What is an ADU Grant?

CalHFA (California Housing Finance Agency) is a state agency that aims to increase the supply of affordable housing in California. One way it does this is by offering grants to help homeowners build accessory dwelling units (ADUs) on their properties. ADUs, also known as granny flats or in-law units, are small living units that are attached to or located on the same property as a single-family home.

In San Diego, CalHFA has partnered with the city to offer a grant program specifically for the construction of ADUs. This program, called the San Diego Accessory Dwelling Unit Pilot Program, provides financial assistance to homeowners who are interested in building ADUs on their properties. The grant covers up to $40,000 in construction costs, making it more affordable for homeowners to add an ADU to their property. Typically, this covers the costs of permitting.

In the past, CalHFA requires 100% of the building funds to be available to be put into escrow. This means you will need to contact a lender or mortgage broker to have these funds ready should your application be approved.

Advantages to Building and ADU:

  1. Extra income: Renting out an ADU can provide a steady stream of income for homeowners. This can be especially beneficial for homeowners who are retired or on a fixed income.

  2. Homes with ADUs can see an instant appreciation in property value between $200,00 – $500,000

  3. Additional living space: An ADU can provide additional living space for homeowners who have a growing family or need room for extended family members or guests.

  4. Flexibility: An ADU can be used in a variety of ways, such as a rental unit, a home office, or a space for hobbies and activities. This can provide homeowners with greater flexibility in terms of how they use their property.

  5. Property value: An ADU can increase the value of a property, making it a good investment for homeowners.

  6. Energy efficiency: ADUs can be built to be energy-efficient, which can help to reduce utility costs and the carbon footprint of the home.

  7. Sustainability: ADUs can be built using sustainable materials, which can help to reduce the impact on the environment.

  8. Affordability: Building an ADU can be more affordable than building a separate dwelling or purchasing a new home, particularly if the homeowner receives a grant or other financial assistance.

  9. Properties with ADUs may be easier to sell as lenders will see the potential income from the rental unit favorably when writing loans for buyers

  10. Homes with ADUs can classify a home as residential income or multi-family as opposed to single family residential, which generally pushes the value of the home into a higher tier in value

Overall, the CalHFA grant program for building ADUs in San Diego is a valuable resource for homeowners. It can help to increase the supply of affordable housing in the area and provide a source of income for homeowners. It can also have a positive impact on the environment. If you are a homeowner in San Diego and are interested in building an ADU on your property, consider applying for a CalHafa grant to help make it a reality.

Securing a CalHFA Grant for an ADU

To secure a CalHFA grant for building an accessory dwelling unit (ADU) in San Diego, you will need to apply for the San Diego Accessory Dwelling Unit Pilot Program. This program is a partnership between CalHafa and the City of San Diego, and it provides financial assistance to homeowners who are interested in building ADUs on their properties.

To be eligible for the grant, you must own a single-family home in San Diego and be in good standing with the city (e.g., up-to-date on property taxes and building code violations). You must also meet certain income requirements and agree to rent the ADU to a low- or moderate-income tenant for at least five years.

To apply for the grant, you will need to complete an application and provide supporting documentation, such as proof of ownership, proof of income, and a detailed description of the ADU project. You may also be required to provide a design plan and cost estimate for the ADU.

The grant program is competitive, and not all applicants will receive funding. The selection process is based on a number of factors, including the need for affordable housing in the area, the feasibility of the ADU project, and the applicant’s ability to meet the program’s requirements. If you are awarded a grant, it will cover a portion of the construction costs for your ADU.

It’s important to note that the San Diego Accessory Dwelling Unit Pilot Program is just one of the programs offered by CalHafa to help homeowners build ADUs. There may be other programs available in other parts of California, so it’s worth checking to see what options are available in your area.

How much an ADU can increase your property value can vary based on whether the ADU is viewed as additional living space or as a rental property. But broadly speaking, an ADU in California can realistically add $200,000-$500,000 to your property’s value.

In San Diego, an ADU of 800 square feet can garner around $2000/month in rent. An ADU can be built between $100,000 and $200,000 not including permits, which can add an additional $50. If CalHafa grant is secured for the construction of the ADU, it can offset the cost of the permits. Once the ADU begins to generate revenue, it can pay for itself between 4 – 8 years.

Things to Consider

Before building an accessory dwelling unit (ADU), homeowners should consider the following factors:

  1. Zoning laws: It’s important to check with your local government to see if ADUs are allowed in your area and what the zoning laws are for building one. Some cities have restrictions on the size, location, and use of ADUs.

  2. Building codes: You will need to adhere to local building codes when constructing an ADU. This may include requirements for electrical, plumbing, and other systems, as well as energy efficiency standards.

  3. Costs: Building an ADU can be expensive, especially if you need to make significant renovations or hire contractors. It’s important to have a clear budget in mind and to factor in all of the costs, including materials, labor, and permits.

  4. Maintenance: An ADU will require ongoing maintenance and repairs, just like a regular dwelling. Homeowners should be prepared to budget for these costs and to allocate time and resources for maintaining the ADU.

  5. Insurance: You may need to purchase additional insurance to cover the ADU. This can include liability insurance to protect against accidents or injuries on the property.

  6. Taxes: An ADU may be subject to property taxes and other fees. It’s important to understand what these costs will be and to factor them into your budget.

  7. Tenant relations: If you plan to rent out the ADU, you will need to consider issues such as tenant screening, rent collection, and maintenance requests. You will also need to be aware of landlord-tenant laws and your responsibilities as a landlord.

Overall, it’s important for homeowners to carefully consider the practical and financial implications of building an ADU before making a decision.

For more information on ADUs and a list of pre-approved ADU plans, visit the City of San Diego Planning and Development Services website: https://www.sandiegocounty.gov/content/sdc/pds/bldg/adu_plans.html