As we mentioned in previous blog posts, Accessory Dwelling Units (ADUs) are invaluable for transforming underutilized spaces like garages or separate areas of your primary single family property into fully functional living areas. Now, there is exciting news for those looking to create an ADU in San Diego. The SD City authorities have initiated a pilot program that promises to provide property owners with enhanced support.
It is important to note: this program is ONLY for income-eligible homeowners living in the City of San Diego. That means your single family home has to be located in a zip code starting with 921XX).
This is the ‘Accessory Dwelling Unit (ADU) Financing Program,’ designed by the San Diego Housing Commission (SDHC). This program will provide financial and technical assistance to property owners in the City of San Diego with moderate incomes who want to start the project or who are currently building an ADU in San Diego. For this purpose, SDHC offers two options that property owners can access if they are interested in participating.
Therefore, if you are thinking about building an ADU or need more information to continue your project, we will explain what the new pilot program from the San Diego Housing Commission is all about and how you can participate.
Financial Assistance
Initially, SDHC offers ADU loans specifically tailored for financing the construction of Accessory Dwelling Units. This funding is exclusively allocated for ADU development. What sets this apart is the array of advantages that come with applying for an ADU loan through the San Diego Housing Commission. The amount extended by SDHC for these loans is designed to be seamlessly refinanced into a first permanent mortgage. Moreover, there is a designated bank affiliated with the program to handle the loan-to-mortgage transition. However, the Housing Commission also affords property owners the flexibility to opt for their preferred lender for the refinancing process.
The ADU loans provided by the San Diego Housing Commission are up to $250,000. This amount is the same as what the associated lender provides for refinancing. Property owners should be aware that the interest rate managed by the Housing Commission will be 1%, while the lender will use the market rate. Furthermore, the organization stated that the repayment term for the loan will have a deferred option for up to three years. On the other hand, the associated lender will establish a fixed rate for 30 years.
Regarding the loan-to-value (LTV) ratio, both SDHC and the lender have set a maximum of 75%. However, the debt ratio will be managed at 50% on both sides. In addition, the San Diego Housing Commission noted that the ADU must be affordable for seven years for tenants with incomes up to 80% of the San Diego Area Median Income (AMI).
Technical Assistance
For property owners who are already building an ADU in the City of San Diego or planning the construction, the San Diego Housing Commission will provide free technical assistance. In this case, interested parties can receive guidance from a consultant designated by SDHC. The specialist can assist in creating the preliminary design of the Accessory Dwelling Unit, explaining the necessary permits for ADU construction, and selecting materials needed for the project or that may be missing.
At SD Casitas, we are ADU contractors in San Diego who can provide assistance in continuing your project. We can also advise you on the internal and external elements to make your new space fully habitable. Additionally, you can review our article ‘7 Benefits of Garage Conversion for San Diego Homeowners’. In it, you will learn about the advantages of garage conversion to expand your property following ADU guidelines.
Since property owners can rent the space and generate extra income with the construction of an ADU, advisors from the San Diego Housing Commission can educate property owners on how to make the most of their property and earn more income. They can even guide property owners through the leasing process.
What is required to apply?
If property owners are interested in the assistance provided by the Housing Commission and want to continue building an ADU in San Diego, they must meet the following requirements:
- Have an income of up to 120% of the AMI. For example, having an income of around $128,300 per year for a family of four.
- Own a residential, single-family, detached property in the City of San Diego – so your zip code has to be 921XX.
- The main residence must be occupied by the owner.
- Have a minimum credit score of 680 points.
- The owner must contribute 1% of the total construction loan amount granted by the San Diego Housing Commission.
How to apply?
If property owners meet the aforementioned requirements, they should fill out an online application through the website https://adu.sdhc.org/.
First, they will need to create a user or log in with an existing one and complete the form, which takes about 30 minutes. Once the application is completed, SDHC representatives will conduct a home visit to confirm the feasibility of ADU construction. They will also verify that the household income qualifies for the program. Afterward, interested parties will need to submit the necessary documentation to continue the selection process.
Finally, San Diego City property owners can contact the San Diego Housing Commission via email at adu@sdhc.org for questions or clarifications.
Undoubtedly, this is a great opportunity to build an Accessory Dwelling Unit with the assistance of professionals and earn income for your future. Remember, you can reach out to our experts at SD Casitas to learn about the benefits and elements you can use to convert a space into a new habitable and comfortable area.