San Jose: Mayor proposes new ADU program to boost housing

To boost San Jose’s supply of affordable housing, Mayor Sam Liccardo wants to reward homeowners who are willing to build and rent accessory dwelling units to low-income people.

In a new memo, Liccardo proposed creating a new program to offer forgivable loans and waive fees for residents willing to construct and lease accessory dwelling units — also known as ADUs or granny flats — to low- and moderate-income renters for at least five years.

“We need to do more to take advantage of the untapped potential for adding compatible housing within our dispersed, sprawling neighborhoods,” Liccardo wrote. “We are hearing, however, that construction costs and financing may deter many homeowners, and city fees are not an insignificant barrier either.”

Several years ago, the mayor laid out a goal to build 25,000 homes, including 10,000 affordable homes, by 2022. But the city has struggled to get affordable homes built. And while San Jose is set to devote around $100 million to about a dozen affordable housing projects that will add more than 1,000 units across the city in the next few years, voters in 2018 rejected a housing bond that would have directed more funding toward addressing the city’s housing crisis.

Encouraging more people to build granny flats or convert their garages into housing are lower cost and faster ways to tackle the issue.

In the memo, Liccardo suggests devoting up to $5 million to the program and having a partner like the Housing Trust Silicon Valley manage it. Residents, he suggested, could get up to $20,000 to cover permit fees and construction costs, with a portion of the loan forgiven on an annual basis in exchange for five years of rent restrictions. People wouldn’t be allowed to put units on Airbnb or similar sites during that time, either.

“There’s definitely a gap of financing out there,” said Vianey Nava, who manages the ADU program at the Housing Trust.

And addressing that gap, Nava said, will help more people who are interested in putting a granny flat in their backyard actually get one built. More than 100,000 homeowners in San Jose are eligible to build ADUs, but last year, Nava said, few were completed. After San Jose relaxed rules around ADUs in 2018 — reducing lot size requirements and allowing two-bedroom granny flats — interest climbed, Nava said.

“All these small things, they’re all tying together,” Nava said of last year’s changes and the mayor’s new memo. “Now people feel a little bit more confident about investing in the process.”

The mayor’s memo could come before the City Council as early as June, but even if it is approved, it would likely be months before such a program is up and running.

Liccardo said he wants the city to consider expanding the program using private funds in the future, and to work with organizations like the Silicon Valley Leadership Group to explore the possibility of putting together a short list of ADU manufacturers who can offer all-inclusive packages, with the aim being to “rapidly scale” production.

While they may be known as granny flats, and plenty of people build them for aging parents or grandparents, San Jose residents are also building ADUs for boomerang children and disabled family members who may be ready to move out, but not far away, Nava said.

Carl Guardino, the head of the Silicon Valley Leadership Group, said he has an ADU on his own property that is currently occupied by a young couple “trying to afford the Bay Area.” Before that, an elderly woman lived in the unit before moving into an assisted living facility.

“I think we’re going to see much greater interest in San Jose and beyond for a thoughtful ADU effort than we might even imagine,” Guardino said. “People are concerned about the crisis and they’re looking for a new approach to helping solve the crisis. And accessory dwelling units are going to be part of that solution if we do it in a thoughtful, coordinated way.”