Encinitas tries subsidizing granny flats

Encinitas has tabled a pilot program that would have funded eight new affordable homes - granny flats - and helped the city meet its share of the region's low income housing.

Meanwhile, city planners say there's a shortage of funds for the bigger affordable housing projects some councilmembers favored.

"The cost to provide one affordable unit in some of these developments is upwards of hundreds of thousands of dollars," said city planner Roy Sapau.

The proposal, in the works since last fall, would give homeowners up to $50,000 in zero-interest, forgivable loans to build a granny flat. The units would have to be rented to low income households for at least 10 years.

For each year rents were kept affordable, 10 percent of the loan would be forgiven. An additional $10,000 would be available if homeowners rented to very low income tenants.

Similar terms would nudge along owners of unpermitted units, providing loans up to $25,000 and basing permits on building and fire codes at the time of construction.

Why do homeowners need luring? Encinitas has received accolades for its permit-ready granny flat plans. Yet, the city noticed people were applying for permits and not finishing the units.

That prompted a search for incentives.

Surveys of residents found the biggest issue is the financial burden, from permitting and design costs to fees and utility connections. Next was feeling overwhelmed by the process, and that development standards and plans were too limited.

According to one recent study, it can be hard to finance an unfinished granny flat.

So the city's $400,000 funding pool, part of its $1.4 million affordable housing fund, would pave the way for eight homeowners for the first year. After that, the city would continue to look for new funding sources.

Another idea floated was to partner with builders and contractors to act as "ambassadors" to bewildered homeowners.

Bob Kent, a local affordable housing advocate with Keys4Homes, wrote in a letter that he supported the incentive program, but wasn't sure it was the most efficient use of the funds. The homes, he said, would be mostly for low and moderate income tenants, while the greatest need is very low income housing.

Mayor Blakespeare agreed, saying the program would subsidize eight homeowners who might just build their units anyway.

In 2020, the city issued 128 building permits for accessory dwelling units, and 22 percent were affordable to low and very low income, while 27 percent were moderate.

So far in 2021, there have been 83 applications and 51 permits have been issued. Of those issued, 25 percent were affordable to low and very low income and 23 percent to moderate.

According to the mayor, a consultant is currently evaluating the city's potential to do an affordable housing project, which she considers a better use of the funds. "This money would deplete that."

How close is Encinitas to finding and pursuing such a project?

City planners said there's not enough money in the fund to do any kind of 100 percent affordable. The incentive program is the cheapest way for the city to get eight units, and doesn't diminish other options they've been studying.

"We have talked to several affordable housing developers about how to incentivize more low income units within their development," Sapau said. "Their biggest concern is funding."

The city will pick up the granny flat topic later this summer as part of a broader discussion of affordable housing.