Council Passes Budget Amendment for ADU Loans

The City Council on Monday approved a budget amendment appropriating $674,500 from the lnclusionary Housing Trust Fund’s unappropriated fund balance to the Housing Department’s Operating Budget to be used for loan funding and third-party project management contract services related to the city’s Second Unit Accessory Dwelling Unit (ADU) Pilot Program.

The loans will go to five homeowners, three that are building new ADUs and two rehabbing unpermitted units.

The applicants applied for the loans through the city’s Second Unit ADU Loan Pilot Program which was launched last year.

The program offers two options with financial assistance: build an ADU through new construction or garage conversion, or rehabilitate and bring up to code an existing unpermitted ADU.

An ADU consultant under contract with the city is providing advice to homeowners in choosing the designers, builders, planners, and contractors needed for the ADU design and construction and assists the homeowner at every stage, from pre-design and permitting to bid preparation and project oversight.

The applicants will have two loan options:

New ADU construction loans of up to $150,000 for a three-year with 1% simple interest. No payments would be required for the term of the loan and must be paid in full through refinance prior to the end of the term, and the homeowner must agree to rent the ADU exclusively to Pasadena housing voucher tenants for seven years.

Under the option for existing unpermitted ADU, homeowners can receive a loan for up to $75.000 for a 20-yeaNEWSr term with 1% simple interest and deferred payments for the first five years.

The loan must be paid in full prior to the end of the term.

Homeowner’s household income cannot exceed 80% area median income.

“Through this affordable housing initiative homeowners are incentivized to create an accessory dwelling unit (ADU) to be operated as an affordable rental unit on their property. The Program provides homeowners with comprehensive assistance for financing and project management assistance for the constructing of a new ADU or rehabilitation of an existing one,” according to a city staff report contained in Monday’s agenda.

The city performed two weeks of community outreach through local newspaper advertising, press releases and social media posts, then held two virtual information sessions.

Over 30 applications were received during the 30-day window. Applications for new ADU construction projects were scored and prioritized based on location in certain census tracts and property valuation thresholds.

Applications to rehabilitate unpermitted ADUs were scored and prioritized based on existing open citations and property location in the census tracts.

“This proposed action supports the City Council Strategic Planning Three-Year Goals in the areas of improving affordable housing, mobility and accessibility throughout the City of Pasadena; and supporting and promoting the quality of life and the local economy,” according to the staff report.