The ADU Grant Program for San Diego Residents

This blog post addresses the current affordable housing shortage that affects city of San Diego residents and the state’s effort to help homeowners afford living in San Diego through supporting the construction of Accessory Dwelling Units by offering up to $40,000 to each eligible homeowner.

The city of San Diego is home to over 1,402,838 residents, and by 2050, it is expected to reach a projected 1.9 million residents. There are only so many homes to live in which has driven the cost of living up significantly. “It’s tough. Wages are not rising as fast as prices are,” said Dr. Alan Gin, economics professor for the University of San Diego.

Eliana Lerma
By: Eliana Lerma

“That just makes it really costly to live in San Diego,” said Dr. Gin. In addition to these points made by Dr. Gin, electricity and gas prices have made it tough for people to keep up, especially residents of low to moderate income. Chris Anderson from the San Diego Association of Realtors said “San Diego’s housing market is quite expensive right now and it’s still on the increase. For over a decade, we’ve had hardly any new builds, so we just have not had the supply to satisfy the demand”.

Due to the obvious shortage of affordable housing, the state has taken initiative to increase the amount of housing as well as help homeowners afford living here. They are doing so by making it more affordable to build Accessory Dwelling Units. Dr. Gin says, “The lack of affordable housing is the biggest problem now for San Diego’s economy. Building Accessory Dwelling Units would add more supply that is desperately needed.” 

Accessory Dwelling Units (ADUs) are rising in popularity not only to assist in the affordable housing crisis, but also because of their many benefits to homeowners.

How do ADUs benefit homeowners?

Homeowners who build an ADU can rent it out to generate instant passive income as well as increase their real estate’s overall value. However, due to this recent inflation, building materials and construction costs have risen, and even though the investment is very profitable, not every homeowner can commit to a project of this size. Austin Neudecker with Weave Growth says, “The city should incentivize additional Accessory Dwelling Units to address the local housing shortage and affordability crisis. San Diego is likely short of over 100,000 housing units and ADUs only represented 700 new units over the past five years. We must deploy multiple solutions if we are serious about addressing the problem.”

What is the ADU Grant Program?

The ADU Grant Program, funded by CalHFA (California Housing Finance Agency), for 2023 the agency has allocated a grant amount of $25 million to cover up to $40,000 of ADU project costs to each qualifying homeowner. This is enough funding to assist in the construction of 600 new ADUs across the state. To qualify, homeowners in the city of San Diego must meet a few requirements: 

  • You should be the owner and occupant of the property where the ADU will be constructed.
  • Your household income must not exceed 80% of the area median income.
  • Your property must be zoned for ADUs and should be a single-family home.
  • There should be no outstanding liens or judgments against your property.

Income Requirements to qualify: 

The income requirements are simple! The grant is offered to 58 counties across California and the maximum income number fluctuates by county. Take a look at this list where you will find the income limits per county.

Download the ADU Grant Qualification Guide to learn more about the requirements to qualify for this grant!

What does the grant cover?

Each grant that is disbursed covers pre-construction, otherwise known as soft-costs. These costs are for anything leading up to the construction of your ADU. Some of these include: inspection, estimation, site prep, land surveys, soil tests, impact fees, architectural drawings, project design, and more! These are expensive services that a lot of homeowners do not consider when budgeting for their overall project, but don’t worry, the grant will cover $40,000 worth of these costs!

Is building an ADU worth it in the city of San Diego?

Let’s first take a look at the average rental costs. The average rent of a studio apartment in San Diego costs $2,789. The average rent of a 1-bedroom apartment is $3,197, and the average cost of a 2-bedroom apartment is $4,138. Fully functional Accessory Dwelling Units range from 400 square ft to 1200 square ft. To give you a comparison, the average studio apartment has a square footage of 472 sq ft, the size of a one-bedroom apartment is 714 sq ft, while a two-bedroom apartment has an average living space of 1,006 sq ft. It’s safe to say building an ADU and renting out the unit is a very profitable investment in San Diego.

We’ll help you apply!

If you are a homeowner in San Diego and think you may qualify to receive this grant to build an ADU, consider applying for the ADU Grant Program! Applying is entirely free, and so is booking a consultation with one of our ADU experts. We can discuss the details of your project goals, the financing options, and see if you’re eligible to receive up to $40,000 off your Accessory Dwelling Unit!

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