Lawmakers are considering overhauling a type of structure traditionally reserved for elderly parents and vacation rentals into low-income housing.

San Jose’s mayor recently proposed a program to increase the number of accessory dwelling units (ADUs) to add to the city’s low rental housing stock. Most proposals of this sort focus on removing barriers to building, such as reducing permitting fees and parking requirements. But this proposal would grant up to $20,000 per homeowner in forgivable loans to cover city fees associated with ADU permitting and construction costs.

An ADU is a secondary housing unit on a single family residential (SFR) lot. It can be attached, as in a converted garage, or it can be freestanding, like a casita. ADUs are relatively inexpensive to construct, as they are small — usually just a few hundred square feet — and are often converted from existing structures.

The only catch? Homeowners using the loan forgiveness program will need to agree to rent their ADUs to low-income households for at least five years.

As rents have quickly outstripped incomes, those at the bottom of the income ladder have been pushed off, unable to find affordable housing. As a result, many have moved out of the area, including low-income earners who are essential to communities like teachers and first responders. Worse, San Jose’s homeless population has increased 42% over the past two years, according to the Mercury News. A staggering 83% of the homeless population in San Jose is unsheltered, meaning they are literally sleeping on the streets.

As the problem continues to escalate, the mayor sees his ADU forgivable loan program as an alternative to traditional low-income housing, which has clearly been insufficient. While the city has several low-income housing developments planned, essentially paying homeowners to convert parts of their properties into ADUs is a faster and ultimately less costly way to add to the low-income rental inventory.

The program is a joint venture between the city of San Jose and Housing Trust Silicon Valley, a nonprofit community loan fund serving the Bay Area and surrounding communities. In San Jose, where the Housing Trust is most active, the nonprofit offers workshops for homeowners interested in building ADUs on their properties. The workshops answer common questions and help them get started with the permitting and financing process.

A bold new approach

San Jose’s new approach can only help what has become a full-blown rental crisis for the area.

The only long-term solution to rising rents and rates of homelessness is to construct more low-income housing. But heavy-handed zoning laws restricting height, density and imposing strict parking requirements have held back growth from reacting to demand. Now, San Jose and other California coastal cities are finding themselves in over their heads, unable to construct enough housing quickly enough to fix the problem.

San Jose’s plan to work together with current homeowners to address the rental shortage has the potential to benefit all parties involved. Homeowners get the chance to set up an additional income stream at virtually no cost, since the loans are forgivable. Meanwhile, low-income renters will be given more choices as the rental supply available to their household income grows.

But homeowners will not be required to rent their ADUs to low-income households for long. The program specifies homeowners need only agree to make them available as low-income housing for five years. This is good news for homeowners, who will have the potential to collect more rent down the line. The city’s hope is that their low-income housing developments will have caught up to demand by the end of the five-year commitment period.

Will San Jose succeed? At best, this program will add several hundred or more new low-income housing units to the inventory. At a time when every unit helps, this can only be counted as a win while the rest of the renter population continues to wait on those long-delayed housing developments.

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