In an effort to increase the supply of affordable housing, Long Beach city officials have designed a program that could help a limited number of homeowners build an additional unit on their property.
But before they could launch it, they had to decide what to call it.
“We’ve been thinking about a name for a while,” Mayor Rex Richardson said, noting that a news release touting the program was delayed several days because of the christening celebration. “We’re building the bike as we ride it.”
Long Beach officials have opted for the explicit principle of “Backyard Construction Program,” hoping that a partial solution to the affordable housing shortage lies in unused space on the city’s landlords’ properties. It’s a concept widely supported by low-income housing advocates, though some argue that the city’s version should have included more protections for tenants.
Long Beach pilot program The program uses one-time funding that will provide 10 homeowners with low- or no-interest loans of up to $250,000 to build accessory dwelling units, or ADUs, on their land. These units must be rented to low-income individuals or families for at least five years.
Interested candidates can apply at https://www.longbeach.gov/lbcd/hn/aduloan/.
“Long Beach is a leader in ADU production,” Richardson said. “And we’ve done everything we need to do … to make it easy for people to develop ADUs in their backyards.”
Rose Institute at Claremont McKenna College confirmed in an April report Long Beach was one of the most ADU-friendly cities in the state, issuing 1,431 ADU permits between 2018 and 2022. While that total is lower than larger cities like San Diego (2,867), Long Beach produced 317 permits per 100,000 residents.
An ADU, as defined by the city’s Community Development Department for this pilot program, must have self-contained facilities that include a living room, sleeping area, kitchen and bathroom.
In addition to agreeing to the temporary rent limit, owners must live on site and have fewer than four units already on their land.
The units can be rented to anyone earning 80 percent or less of the Los Angeles County median income, which translates to $77,700 for one person, $88,800 for a family of two, $99,900 for three people and $110,950 for four, according to the Los Angeles County Department of Regional Planning.
But the program gives landlords an additional financial incentive to rent these ADUs to recipients of Long Beach’s Housing Choice Voucher program, which provides a portion of the rent to those in the extremely low-income, very low-income or low income categories.
Building an ADU has become more expensive in recent years, with labor and material costs jumping by 11% and 9% respectively in 2021 and 2022, while labor costs in the construction sector increased by 34% between 2018 and 2023.
The loan covers up to $250,000 in planning, permitting and construction costs, although Kelli Pezzelle, Backyard Builders Community Program Specialist, doesn’t expect the loans to be that large.
Interest on the loan will remain at 0% as long as the owner rents the ADU to a low-income recipient. A condition of receiving the loan is that the owner must rent the unit to a voucher recipient for at least five years or to a low-income non-voucher tenant for seven years.
The loan interest rate will increase to 3% if the unit is rented to someone who does not meet the income limits after the five- or seven-year period. The owner will incur a monthly penalty of $2,500 if the ADU is rented to an unqualified tenant before the due date.
The potential eviction of low-income tenants is a concern for Long Beach Residents Empowered, or LiBRE, an advocacy group that advocates for the creation and preservation of affordable housing and protections for tenants.
“We are pleased that the city is investing in affordable housing and trying to reduce the housing shortage,” LiBRE project director Andre Donado said in a phone call. “However, all tenants are at risk of eviction after five years.”
Donado also hoped the city would consider offering $4,500 in relocation assistance to low-income tenants displaced through no fault of their own in all cases.
City Offers $4,500 or Two Months Rent if a landlord demolishes or significantly renovates a building, but only one month’s rent in other cases.
“I think the program has several positive aspects, and we would like to see it become permanent, with some adjustments,” Donado said.
The pilot loans are significantly larger than the up to $40,000 in assistance provided by the California Housing Finance Agency’s ADU grant program, which distributed $125 million to help homeowners cover permitting and planning costs before running out of funds.
The city believes that homeowners who are home-rich but cash-poor, especially seniors, could take advantage of the loan to build an ADU and create passive income. The program estimates that ADUs built with its loans would generate more than $1,000 per month for owners who rent to voucher holders.
“Maybe you’re a grandmother or someone who has way too much garden and you want to be part of the solution, but it can be difficult for you to navigate it or identify funding,” Richardson said.
To this end, the city should appoint a project manager who will assist loan recipients in selecting an architect, builders, planners, contractors and other necessary individuals throughout the planning and construction process. This manager will serve as an intermediary between the property owner and the general contractor.
A word of caution to interested landlords: a qualifying tenant cannot be a parent or caregiver in their household.
Regarding the loan, payments will be deferred during the construction process for up to two years.
Richardson said because the program is based on loans that will be repaid over time, it will be self-sustaining. If it proves successful (meaning ADUs are built and rented to low-income tenants), he said the city would consider seeking new revenue sources to expand the project.
The city is hosting a series of Zoom webinars to gauge interest in the program and answer questions.
