San Diego's ADU Boom: Continued Growth in Permits Transforms Housing Landscape

Author: SANCO Development

Published: 2:00 PM PDT September 1 , 2024

Updated: 1:46 PM PDT August 30, 2024

San Diego is experiencing a remarkable surge in the construction of Accessory Dwelling Units (ADUs), commonly known as "granny flats." Thanks to recent changes in state and city regulations, it has become easier and more affordable for homeowners to build these units, contributing significantly to the city's housing stock.

Regulatory Changes Fuel Growth

The rise in ADU permits is a direct result of strategic policy shifts aimed at addressing the city’s housing crisis. In 2015, San Diego issued just four ADU permits, a number that skyrocketed to 627 by 2019. This dramatic increase followed several regulatory changes, including reduced fees, expanded zoning allowances, streamlined approval processes, and the elimination of parking requirements. These measures have empowered more homeowners to build ADUs, adding much-needed housing options in a market starved for supply.

The ADU Bonus Program: A Mixed Reception

One of the more innovative steps taken by the city was the introduction of the 2021 ADU Bonus Program. This initiative allows homeowners to build an additional unit for every ADU they agree to reserve for renters earning below a specific income threshold. While the program aims to increase affordable housing, it has seen limited uptake, with only 8 percent of ADU applications utilizing the program. Some homeowners remain hesitant to participate, likely due to concerns over long-term commitments and the complexities involved in managing income-restricted units.

Affordability Remains a Challenge

Despite the growth in ADU permits, the promise of significantly increased affordability remains largely unmet. In 2023, the city issued permits for 87 ADUs with income restrictions, but the majority of these were designated for moderate-income renters—those earning up to 110% of the area median income. Only five units were reserved for low or very low-income renters, highlighting the challenges in aligning the ADU boom with broader affordability goals.

A Growing Trend with Ongoing Potential

The continued growth in ADU permits is a positive development for San Diego, offering a practical solution to the city's housing shortage. However, the mixed results of affordability initiatives underscore the complexities of using ADUs as a tool for solving deeper economic issues. As more homeowners explore the potential of ADUs, the city will need to continue refining its policies to ensure that these units contribute meaningfully to both housing supply and affordability.

In the coming years, San Diego's approach to ADUs could serve as a model for other cities grappling with similar housing challenges. As the city continues to evolve its regulations and programs, the ADU boom is likely to remain a critical component of the broader strategy to increase housing availability and affordability across the region.