Under existing law, the California Housing Finance Agency (CalHFA) administers the Accessory Dwelling Unit Program, for the purpose of assisting homeowners in qualifying for loans to construct accessory dwelling units and junior accessory dwelling units on the homeowners property and increasing access to capital for homeowners interested in building accessory dwelling units. Existing law requires the CalHFA to convene a working group to develop recommendations for the program, as specified.

This bill would require CalHFA to evaluate the program and report CalHFAs findings to the Legislature by January 1, 2025.

Under existing law, the California Housing Finance Agency (CalHFA) administers the Accessory Dwelling Unit Program, for the purpose of assisting homeowners in qualifying for loans to construct accessory dwelling units and junior accessory dwelling units on the homeowners property and increasing access to capital for homeowners interested in building accessory dwelling units. Existing law requires the CalHFA to convene a working group to develop recommendations for the program, as specified.

This bill would require CalHFA to evaluate the program and report CalHFAs findings to the Legislature by January 1, 2025.

Under existing law, the California Housing Finance Agency (CalHFA) administers the Accessory Dwelling Unit Program, for the purpose of assisting homeowners in qualifying for loans to construct accessory dwelling units and junior accessory dwelling units on the homeowners property and increasing access to capital for homeowners interested in building accessory dwelling units. Existing law requires the CalHFA to convene a working group to develop recommendations for the program, as specified. Existing law requires the working group to finish developing recommendations by July 1, 2023, for CalHFA to consider in the next update of its accessory dwelling unit guidelines.

This bill would additionally require the working group to report its recommendations to the Legislature by April 1, 2024, as specified. The bill would also require CalHFA to evaluate the program and report CalHFAs findings to the Legislature by January 1, 2025.

Under existing law, the California Housing Finance Agency (CalHFA) administers the Accessory Dwelling Unit Program, for the purpose of assisting homeowners in qualifying for loans to construct accessory dwelling units and junior accessory dwelling units on the homeowners property and increasing access to capital for homeowners interested in building accessory dwelling units. Existing law requires the CalHFA to convene a working group to develop recommendations for the program, as specified. Existing law requires the working group to finish developing recommendations by July 1, 2023, for CalHFA to consider in the next update of its accessory dwelling unit guidelines.

This bill would additionally require the working group to report its recommendations to the Legislature by January 1, 2025, April 1, 2024, as specified. The bill would also require CalHFA to evaluate the program and report CalHFAs findings to the Legislature by January 1, 2025.

Existing law provides for the creation of junior accessory dwelling units by local ordinance, or, if a local agency has not adopted an ordinance, by ministerial approval, in accordance with specified standards and conditions. Existing law requires a permitting agency to either approve or deny an application for a permit pursuant to these provisions within 60 days from the date the local agency receives a completed application if there is an existing single-family dwelling on the lot. If the applicant requests a delay, existing law requires this time period to be tolled for the period of the delay.

This bill would change that time period to 45 days. By imposing new duties on local agencies, this bill would impose a state-mandated local program.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

 CONSENT  

Bill No: AB 932

Author: Ting (D)

Amended: 5/18/23 in Assembly

Vote: 21

SENATE HOUSING COMMITTEE: 11-0, 6/20/23

AYES: Wiener, Ochoa Bogh, Blakespear, Caballero, Cortese, McGuire, Padilla, Seyarto, Skinner, Umberg, Wahab

SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8

ASSEMBLY FLOOR: 80-0, 5/30/23 - See last page for vote

SUBJECT: Accessory dwelling units: Accessory Dwelling Unit Program: reports

SOURCE: Author

DIGEST:

This bill requires the California Housing Finance Agency (CalHFA) to conduct an analysis of its Accessory Dwelling Units (ADU) Program and report its findings to the Legislature by January 1, 2025.

ANALYSIS:

Existing law:

1. Establishes the ADU Program for the purpose of:
   1. Assist homeowners in qualifying for loans to construct ADUs and junior accessory dwelling units (JADUs) on their property; and
   2. Increase access to capital for homeowners interested in building ADUs.
2. Requires CalHFA to convene a working group to develop recommendations for the purposes of the ADU Program.
3. Requires the working group to include, but not be limited to, representatives from federal mortgage agencies, private lenders, community development financial institutions, community-based organizations, local housing trust funds, joint powers authorities, regional housing finance authorities, and credit unions.
4. Mandates the working group to explore:
   1. The feasibility of different options to increase program utilization;
   2. Opportunities to mitigate risks for lenders;
   3. Opportunities to increase outreach and education to inform homeowners about the various loan and grant products available to them;
   4. Expanding financing options to construction costs and factory-built ADUs; and,
   5. Opportunities to ease constraints that limit the loan process for homeowners.
5. Requires the working group to finish developing recommendations by July 1, 2023.
6. Requires CalHFA to consider the working group’s recommendations in the next update of its ADU guidelines.

This bill requires CalHFA to conduct an analysis of its ADU Program and report its findings to the Legislature by January 1, 2025.

Background

California’s high — and rising — land costs necessitate dense housing construction for a project to be financially viable and for the housing to ultimately be affordable to lower-income households. Yet, recent trends in California show that new housing has not commensurately increased in density. In a 2016 analysis, the Legislative Analyst’s Office (LAO) found that the housing density of a typical neighborhood in California’s coastal metropolitan areas increased only by four percent during the 2000s. In addition, the pattern of development in California has changed in ways that limit new housing opportunities. A 2016 analysis by BuildZoom found that new development has shifted from moderate but widespread density to pockets of high-density housing near downtown cores surrounded by vast swaths of low-density single-family housing. Specifically, construction of moderately-dense housing (2 to 49 units) in California peaked in the 1960s and 1970s and has slowed in recent decades.

Recently, there has been a national trend to allow for more "gentle density" (e.g., ADUs, duplexes, four-plexes, townhomes, and other moderately dense developments that were common before the imposition of zoning). In recent years, the Legislature has taken a more active role in facilitating such gentle density. In 2016, AB 2299 (Bloom, Chapter 735, Statutes of 2016) and SB 1069 (Wieckowski, Chapter 720, Statutes of 2016), permitted ADUs by right on all residentially-zoned parcels in the state. By permitting an ADU as a second unit on all single-family lots, these laws effectively doubled their allowed density.

Prior to the Legislature requiring ministerial approval of ADUs in 2017, ADUs were less than one percent of permitted new construction. Now they are approximately 10%, at over 9,600 completed units in 2022. Additionally, because ADUs are typically smaller than the average home in a community, they tend to be more affordable than other market-rate units. A survey of ADU owners found that, in the Bay Area, ADUs rents were affordable to households making the median income.

Comments

1. Author’s Statement. According to the author, “As we all know, California has a housing crisis where a lack of housing supply has in turn increased rents and exasperated the cost of living. ADUs are the fastest way that we can grow housing but unfortunately many homeowners struggle to get financing to build ADUs. AB 932 requires that California Housing Finance Agency conduct an evaluation of its ADU Grant Program, which utilized $100 million in grants to build up to 2,500 ADUs. This report will allow the Legislature to consider which programs provide the best value for the funding when it comes to ADU programs.”
2. Financial Barriers to Creating ADUs. Research has shown that property owners with a new ADU on their property are more affluent than the typical homeowner in California. A recent survey of property owners who build ADUs revealed that 62% utilized cash and 43% utilized mortgage products that rely on the homeowner having equity in their primary unit.

The FY 2019-2020 and 2020-2021 state budgets collectively included $100 million to CalHFA to help low- and moderate-income households finance ADUs. CalHFA's ADU Grant Program provided up to $40,000 towards pre-development and non-reoccurring closing costs associated with the construction of the ADU. According to CalHFA, all of the $100 million has now been deployed, and is expected to yield between 2,200 – 2,400 new ADUs.

This bill requires CalHFA to conduct an evaluation of this program and report its findings to the Legislature no later than January 1, 2025.

Related/Prior Legislation

AB 157 (Committee on Budget, Chapter 570, Statutes of 2022) created the ADU Program and the requirements for a working group to make recommendations to CalHFA on how to implement the program.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No

SUPPORT: (Verified 8/15/23)

Bay Area Council

OPPOSITION: (Verified 8/15/23)

None received

ASSEMBLY FLOOR: 80-0, 5/30/23

AYES: Addis, Aguiar-Curry, Alanis, Alvarez, Arambula, Bains, Bauer-Kahan, Bennett, Berman, Boerner, Bonta, Bryan, Calderon, Juan Carrillo, Wendy Carrillo, Cervantes, Chen, Connolly, Megan Dahle, Davies, Dixon, Essayli, Flora, Mike Fong, Vince Fong, Friedman, Gabriel, Gallagher, Garcia, Gipson, Grayson, Haney, Hart, Holden, Hoover, Irwin, Jackson, Jones-Sawyer, Kalra, Lackey, Lee, Low, Lowenthal, Maienschein, Mathis, McCarty, McKinnor, Muratsuchi, Stephanie Nguyen, Ortega, Pacheco, Papan, Jim Patterson, Joe Patterson, Pellerin, Petrie-Norris, Quirk-Silva, Ramos, Reyes, Luz Rivas, Robert Rivas, Rodriguez, Blanca Rubio, Sanchez, Santiago, Schiavo, Soria, Ta, Ting, Valencia, Villapudua, Waldron, Wallis, Ward, Weber, Wicks, Wilson, Wood, Zbur, Rendon

Prepared by: Mehgie Tabar / HOUSING / (916) 651-4124

8/16/23 14:22:05

**** END ****

SENATE COMMITTEE ON HOUSING

Senator Scott Wiener, Chair

2023 - 2024 Regular

Bill No: AB 932 Hearing Date: 6/20/2023

SUBJECT: Accessory dwelling units: Accessory Dwelling Unit Program: reports

DIGEST: This bill requires the California Housing Finance Agency (CalHFA) to conduct an analysis of its Accessory Dwelling Units (ADU) Program and report its findings to the Legislature by January 1, 2025.

ANALYSIS:

Existing law:

1. Establishes the Accessory Dwelling Unit Program (Program) for the purpose of:
   1. Assist homeowners in qualifying for loans to construct ADUs and junior accessory dwelling units (JADUs) on their property; and
   2. Increase access to capital for homeowners interested in building ADUs.
2. Requires CalHFA to convene a working group to develop recommendations for the purposes of the Program.
3. Requires the working group to include, but not be limited to, representatives from federal mortgage agencies, private lenders, community development financial institutions, community-based organizations, local housing trust funds, joint powers authorities, regional housing finance authorities, and credit unions.
4. Mandates the working group to explore:
   1. The feasibility of different options to increase program utilization;
   2. Opportunities to mitigate risks for lenders;
   3. Opportunities to increase outreach and education to inform homeowners about the various loan and grant products available to them;
   4. Expanding financing options to construction costs and factory-built ADUs; and
   5. Opportunities to ease constraints that limit the loan process for homeowners.
5. Requires the working group to finish developing recommendations by July 1, 2023.
6. Requires CalHFA to consider the working group’s recommendations in the next update of its ADU guidelines.

This bill:

1. Requires CalHFA to conduct an analysis of its ADU Program and report its findings to the Legislature by January 1, 2025.

COMMENTS:

1. Author’s statement. “As we all know, California has a housing crisis where a lack of housing supply has in turn increased rents and exasperated the cost of living. ADUs are the fastest way that we can grow housing but unfortunately many homeowners struggle to get financing to build ADUs. AB 932 requires that California Housing Finance Agency conduct an evaluation of its ADU Grant Program, which utilized $100 million in grants to build up to 2,500 ADUs. This report will allow the Legislature to consider which programs provide the best value for the funding when it comes to ADU programs.”
2. Second Units as a Solution to the Housing Crisis? California’s high — and rising — land costs necessitate dense housing construction for a project to be financially viable and for the housing to ultimately be affordable to lower-income households. Yet, recent trends in California show that new housing has not commensurately increased in density. In a 2016 analysis, the Legislative Analyst’s Office (LAO) found that the housing density of a typical neighborhood in California’s coastal metropolitan areas increased only by four percent during the 2000s. In addition, the pattern of development in California has changed in ways that limit new housing opportunities. A 2016 analysis by BuildZoom found that new development has shifted from moderate but widespread density to pockets of high-density housing near downtown cores surrounded by vast swaths of low-density single-family housing. Specifically, construction of moderately-dense housing (2 to 49 units) in California peaked in the 1960s and 1970s and has slowed in recent decades.

Recently, there has been a national trend to allow for more "gentle density" (e.g., ADUs, duplexes, four-plexes, townhomes, and other moderately dense developments that were common before the imposition of zoning). In recent years, the Legislature has taken a more active role in facilitating such gentle density. In 2016, AB 2299 (Bloom) and SB 1069 (Wieckowski), permitted ADUs by right on all residentially-zoned parcels in the state. By permitting an ADU as a second unit on all single-family lots, these laws effectively doubled their allowed density.

Prior to the Legislature requiring ministerial approval of ADUs in 2017, ADUs were less than one percent of permitted new construction. Now they are approximately 10%, at over 9,600 completed units in 2022. Additionally, because ADUs are typically smaller than the average home in a community, they tend to be more affordable than other market-rate units. A survey of ADU owners found that, in the Bay Area, ADUs rents were affordable to households making the median income.

1. Financial Barriers to Creating ADUs. Research has shown that property owners with a new ADU on their property are more affluent than the typical homeowner in California.^[1] A recent survey of property owners who build ADUs revealed that 62% utilized cash and 43% utilized mortgage products that rely on the homeowner having equity in their primary unit.^[2]

The 2019-2020 and 2020-2021 budgets collectively included $100 million to CalHFA to help low- and moderate-income households finance ADUs. CalHFA's ADU Grant Program provided up to $40,000 towards pre-development and non-reoccurring closing costs associated with the construction of the ADU.^[3] According to CalHFA, all of the $100 million has now been deployed, and is expected to yield between 2,200 – 2,400 new ADUs.

This bill requires CalHFA to conduct an evaluation of this program and report its findings to the Legislature no later than January 1, 2025.

Related Legislation:

AB 157 (Committee on the Budget, Chapter 570, Statutes of 2022) — created the ADU Dwelling Unit Program and the requirements for a working group to make recommendations to CalHFA on how to implement the program.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

POSITIONS: (Communicated to the committee before noon on Wednesday,

June 14, 2023.)

SUPPORT:

Bay Area Council

OPPOSITION:

None received.

-- END --

1. Ibid. ↑

2. USC Lusk Center for Real Estate and UC Berkeley Terner Center for Housing Innovation, "ADU Construction Financing: Opportunities to Expand Access for Homeowners," July 2022: https://ternercenter.berkeley.edu/wp-content/uploads/2022/07/ADU-Paper-FINAL-July-7th.pdf ↑

3. CalHFA's ADU Grant Program: https://www.calhfa.ca.gov/adu/index.htm ↑

ASSEMBLY THIRD READING

ATR Bill Id:AB 932

Author:(Ting)

As Amended Ver:May 18, 2023

Majority vote

SUMMARY

Requires the California Housing Finance Agency (CalHFA) to conduct an analysis of its Accessory Dwelling Units (ADU) Program and report its findings to the Legislature by January 1, 2025.

Major Provisions

Requires CalHFA to conduct an analysis of its ADU Program and report its findings to the Legislature by January 1, 2025.

COMMENTS

Second Units as a Solution to the Housing Crisis: In California, most of the land suitable for housing has already been developed. The remaining developable areas are typically far from job centers, in high-risk wildfire areas, and/or land that is environmentally sensitive or important for agriculture. Therefore, addressing the housing crisis in an environmentally responsible way will require an increase in density in already developed areas.

Increasing density can occur in multiple ways. In recent decades, this has often meant high-density housing near major transit stops. However, such housing is both expensive to build, and limited in geographic scope. Recently, there has been a national trend to allow for more "gentle density," e.g., ADUs, duplexes, four-plexes, townhomes, and other moderately dense developments that were common before the imposition of zoning. In recent years, the Legislature has taken a more active role in facilitating such gentle density. In 2016, AB 2299 (Bloom), Chapter 735 and SB 1069 (Wieckowski), Chapter 720 permitted ADUs by right on all residentially-zoned parcels in the state. By permitting an ADU as a second unit on all single-family lots, these laws effectively doubled their allowed density.

Prior to the Legislature requiring ministerial approval of ADUs in 2017, ADUs were less than 1% of permitted new construction. Now they are approximately 10%, at over 9,600 completed units in 2022.^[1] Additionally, because ADUs are typically smaller than the average home in a community, they tend to be more affordable than other market-rate units. A survey of ADU owners found that, in the Bay Area, ADUs rents were affordable to households making the median income.^[2]

Financial Barriers to Creating ADUs: Research has shown that property owners with a new ADU on their property are more affluent than the typical homeowner in California.^[3] A recent survey of property owners who build ADUs revealed that 62% utilized cash and 43% utilized mortgage products that rely on the homeowner having equity in their primary unit.^[4]

The 2019-2020 and 2020-2021 budgets collectively included $100 million to CalHFA to help low- and moderate-income households finance ADUs. CalHFA's ADU Grant Program provided up to $40,000 towards pre-development and non-reoccurring closing costs associated with the construction of the ADU.^[5] According to CalHFA, all of the $100 million has now been deployed, and is expected to yield between 2,200 – 2,400 new ADUs.

This bill requires CalHFA to conduct an evaluation of this program and report its findings to the Legislature no later than January 1, 2025.

According to the Author

"As we all know, California has a housing crisis where a lack of housing supply has in turn increased rents and exasperated the cost of living. ADUs are the fastest way that we can grow housing but unfortunately many homeowners struggle to get financing to build ADUs. AB 932 requires that CalHFA conduct an evaluation of its ADU Grant Program, which utilized $100 million in grants to build up to 2,500 ADUs."

Arguments in Support

The sponsor of the bill, the Bay Area Council, argues that it would help maximize the benefits of the efforts CalHFA has made to improve ADU financing, which is important because "ADUs are the fastest way to increase housing, but unfortunately many owners struggle to get financing to build ADUs."

Arguments in Opposition

None on file.

FISCAL COMMENTS

According to the Assembly Committee on Appropriations:

CalHFA anticipates minor and absorbable costs.

VOTES

ASM HOUSING AND COMMUNITY DEVELOPMENT: 8-0-0

YES: Wicks, Joe Patterson, Wendy Carrillo, Gabriel, Kalra, Quirk-Silva, Sanchez, Ward

ASM APPROPRIATIONS: 11-0-5

YES: Holden, Bryan, Calderon, Wendy Carrillo, Mike Fong, Hart, Lowenthal, Papan, Pellerin, Weber, Ortega

ABS, ABST OR NV: Megan Dahle, Dixon, Mathis, Robert Rivas, Sanchez

UPDATED

VERSION: May 18, 2023

CONSULTANT: Steve Wertheim / H. & C.D. / (916) 319-2085 FN: 0000424

1. Per the Department of Housing and Community Development's "APR Dashboard", page 2:

   https://www.hcd.ca.gov/planning-and-community-development/housing-open-data-tools/housing-element-implementation-and-apr-dashboard ↑

2. Chapple et al, Implementing the Backyard Revolution: Perspectives of California's ADU Owners, UC Berkeley Center for Community Innovation, April 2021: https://www.aducalifornia.org/wp-content/uploads/2021/04/Implementing-the-Backyard-Revolution.pdf ↑

3. Ibid. ↑

4. USC Lusk Center for Real Estate and UC Berkeley Terner Center for Housing Innovation, "ADU Construction Financing: Opportunities to Expand Access for Homeowners," July 2022: https://ternercenter.berkeley.edu/wp-content/uploads/2022/07/ADU-Paper-FINAL-July-7th.pdf ↑

5. CalHFA's ADU Grant Program: https://www.calhfa.ca.gov/adu/index.htm ↑

Date of Hearing: May 3, 2023

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Chris Holden, Chair

ABPCA Bill Id:AB 932

Author:(Ting) – As Amended Ver:March 30, 2023

Urgency: No State Mandated Local Program: No Reimbursable: No

SUMMARY:

This bill requires the California Housing Finance Agency (CalHFA) conduct an evaluation of its Accessory Dwelling Unit (ADU) Program and report its findings to the Legislature by January 1, 2025. This bill also requires CalHFA’s ADU Working Group to report its recommendations to the Legislature by April 1, 2024.

FISCAL EFFECT:

CalHFA anticipates minor and absorbable costs.

It is the policy of this committee to place any bill the committee concludes has the primary purpose of creating a task force, a commission, a work group, a pilot project or a pilot project extension, a report or a study, on the committee’s suspense file, regardless of cost.

COMMENTS:

1. Purpose. According to the author:

The California Housing Finance Agency (CalHFA) has convened a working group with housing developers, nonprofits, and finance entities in order to figure out how to encourage lending to build ADUs. In order to see the most benefit from this working group, CalHFA should prepare a report to the Legislature to ensure that we can see all the options available to help homeowners build ADUs. Additionally, AB 932 requires that CalHFA conduct an evaluation of its ADU grant program, which utilized $100 million in grants to build up to 2,500 ADUs. Both reports will allow the Legislature to consider which programs provide the best value for the funding when it comes to ADU programs.

1. Background. Research shows that property owners with a new ADU on their property are more affluent than the typical homeowner in California. A recent survey of property owners who build ADUs revealed that 62% utilized cash and 43% utilized mortgage products that rely on the homeowner having equity in their primary unit.

The 2019-2020 and 2020-2021 state budgets collectively included $100 million to CalHFA to provide grants to low- and moderate-income households to finance the construction of ADUs. CalHFA’s grant program provided up to $40,000 towards pre-development and non-reoccurring closing costs associated with the construction of the ADU. According to CalHFA, the grant recipients have utilized the $100 million, which CalHFA expects to yield between 2,200 and 2,400 new ADUs. This bill requires CalHFA to conduct an evaluation of this program and report its findings to the Legislature no later than January 1, 2025.

AB 157 (Committee on the Budget), Chapter 570, Statutes of 2022, required CalHFA to convene a working group comprised of housing finance experts to develop recommendations by July 1, 2023, to assist homeowners in qualifying for loans to construct ADUs and junior ADUs on their property and increase access to capital for homeowners interested in building ADUs. This bill additionally requires the working group to report its recommendations to the Legislature by April 1, 2024.

Analysis Prepared by: Jennifer Swenson / APPR. / (916) 319-2081

Date of Hearing: April 12, 2023

ASSEMBLY COMMITTEE ON HOUSING AND COMMUNITY DEVELOPMENT

Buffy Wicks, Chair

ABPCA Bill Id:AB 932 (

Author:Ting) – As Amended Ver:March 30, 2023

SUBJECT: Accessory dwelling units: Accessory Dwelling Unit Program: reports

SUMMARY: Requires the California Housing Finance Agency (CalHFA) to provide reports to the Legislature regarding its work on Accessory Dwelling Units (ADUs). Specifically, this bill:

1. Requires CalHFA’s ADU Working Group to report its recommendations to the Legislature by April 1, 2024.
2. Requires CalHFA to conduct an evaluation of its ADU Program and report its findings to the Legislature by no later than January 1, 2025.

EXISTING LAW: Establishes the Accessory Dwelling Unit Program (Program), including that:

1. The purpose of the Program is to:
   1. Assist homeowners in qualifying for loans to construct ADUs and junior accessory dwelling units (JADUs) on their property; and
   2. Increase access to capital for homeowners interested in building ADUs.
2. CalHFA must convene a working group to develop recommendations for the purposes of the Program.
3. The working group must include, but not be limited to, representatives from federal mortgage agencies, private lenders, community development financial institutions, community-based organizations, local housing trust funds, joint powers authorities, regional housing finance authorities, and credit unions.
4. The working group must explore:
   1. The feasibility of different options to increase program utilization;
   2. Opportunities to mitigate risks for lenders;
   3. Opportunities to increase outreach and education to inform homeowners about the various loan and grant products available to them;
   4. Expanding financing options to construction costs and factory-built ADUs; and
   5. Opportunities to ease constraints that limit the loan process for homeowners.
5. The working group must finish developing recommendations by July 1, 2023.
6. CalHFA must consider the working group’s recommendations in the next update of its ADU guidelines (Health and Safety Code Section 51531).

FISCAL EFFECT: Unknown.

COMMENTS:

Author’s Statement: According to the author, “As we all know, California has a housing crisis where a lack of housing supply has in turn increased rents and exasperated the cost of living. ADUs are the fastest way that we can grow housing but unfortunately many homeowners struggle to get financing to build ADUs. The California Housing Finance Agency (CalHFA) has convened a working group with housing developers, nonprofits, and finance entities in order to figure out how to encourage lending to build ADUs. In order to see the most benefit from this working group, CalHFA should prepare a report to the Legislature to ensure that we can see all the options available to help homeowners build ADUs. Additionally, AB 932 requires that CalHFA conduct an evaluation of its ADU Grant Program, which utilized $100 million in grants to build up to 2,500 ADUs. Both reports will allow the Legislature to consider which programs provide the best value for the funding when it comes to ADU programs.”

Second Units as a Solution to the Housing Crisis: In California, most of the land suitable for housing has already been developed. The remaining developable areas are typically far from job centers, in high-risk wildfire areas, and/or land that is environmentally sensitive or important for agriculture. Therefore, addressing the housing crisis in an environmentally responsible way will require an increase in density in already developed areas.

Increasing density can occur in multiple ways. In recent decades, this has often meant high-density housing near major transit stops. However, such housing is both expensive to build, and limited in geographic scope. Recently, there has been a national trend to allow for more “gentle density,” e.g., ADUs, duplexes, four-plexes, townhomes, and other moderately dense developments that were common before the imposition of zoning. In recent years, the Legislature has taken a more active role in facilitating such gentle density. In 2016, AB 2299 (Bloom, Chapter 735, Statutes of 2016) and SB 1069 (Wieckowski, Chapter 720, Statutes of 2016) permitted ADUs by right on all residentially-zoned parcels in the state. By permitting an ADU as a second unit on all single-family lots, these laws effectively doubled their allowed density.

Prior to the Legislature requiring ministerial approval of ADUs in 2017, ADUs were less than one percent of permitted new construction. Now they are approximately 10 percent, at over 9,600 completed units in 2022.^[1] Additionally, because ADUs are typically smaller than the average home in a community, they tend to be more affordable than other market-rate units. A survey of ADU owners found that, in the Bay Area, ADUs rents were affordable to households making the median income.^[2]

Financial Barriers to Creating ADUs: Research has shown that property owners with a new ADU on their property are more affluent than the typical homeowner in California.^[3] A recent survey of property owners who build ADUs revealed that 62 percent utilized cash and 43 percent utilized mortgage products that rely on the homeowner having equity in their primary unit.^[4]

The 2019-2020 and 2020-2021 budgets collectively included $100 million to CalHFA to help low- and moderate-income households finance ADUs. CalHFA’s ADU Grant Program provided up to $40,000 towards pre-development and non-reoccurring closing costs associated with the construction of the ADU.^[5] According to CalHFA, all of the $100 million has now been deployed, and is expected to yield between 2,200 – 2,400 new ADUs. This bill requires CalHFA to conduct an evaluation of this program and report its findings to the Legislature no later than January 1, 2025.

In 2022, AB 157 (Committee on the Budget, Chapter 570, Statutes of 2022) created an ADU Program at CalHFA. The purpose of this program is to assist homeowners in qualifying for loans to construct ADUs and junior ADUs on their property and to increase access to capital for homeowners interested in building ADUs. This bill also tasked CalHFA with creating a working group comprised of housing finance experts to develop recommendations to help implement CalHFA’s ADU program. Through early April 2023, CalHFA had constituted the working group of over 50 members, and held three meeting with the group. AB 157 requires the working group to finish developing recommendations by July 1, 2023, but does not include any reporting requirements. This bill requires the working group to report its recommendations to the Legislature by April 1, 2024.

Arguments in Support: The sponsor of the bill, the Bay Area Council, argues that it would help maximize the benefits of the efforts CalHFA has made to improve ADU financing, which is important because “ADUs are the fastest way to increase housing, but unfortunately many owners struggle to get financing to build ADUs.”

Arguments in Opposition: None on file.

Related Legislation:

AB 157 (Committee on the Budget), Chapter 570, Statutes of 2022: Created the ADU Dwelling Unit Program and the requirements for a working group to make recommendations to CalHFA on how to implement the program.

REGISTERED SUPPORT / OPPOSITION:

Support

Bay Area Council (Sponsor)

Opposition

None on file.

Analysis Prepared by: Steve Wertheim / H. & C.D. / (916) 319-2085

1. Per the Department of Housing and Community Development’s “APR Dashboard”, page 2:

   https://www.hcd.ca.gov/planning-and-community-development/housing-open-data-tools/housing-element-implementation-and-apr-dashboard ↑

2. Chapple et al, Implementing the Backyard Revolution: Perspectives of California’s ADU Owners, UC Berkeley Center for Community Innovation, April 2021: https://www.aducalifornia.org/wp-content/uploads/2021/04/Implementing-the-Backyard-Revolution.pdf ↑

3. Ibid. ↑

4. USC Lusk Center for Real Estate and UC Berkeley Terner Center for Housing Innovation, “ADU Construction Financing: Opportunities to Expand Access for Homeowners,” July 2022: https://ternercenter.berkeley.edu/wp-content/uploads/2022/07/ADU-Paper-FINAL-July-7th.pdf ↑

5. CalHFA’s ADU Grant Program: https://www.calhfa.ca.gov/adu/index.htm ↑