Eager to increase the supply of affordable housing, Long Beach city officials came up with a program that could help a limited number of homeowners build an additional unit on their land.
But before they could launch it, they had to decide what to call it.
“We’ve been toying with a name for a while,” Mayor Rex Richardson said, noting that a press release promoting the program had been delayed for days due to christening reasons. “We’re building the bike as we ride it.”
Long Beach officials settled on the self-explanatory Backyard Builders Program in the hope that a partial solution to the affordable housing shortage would lie in the unused spaces on the properties of city landlords. It’s a concept widely supported by low-income housing advocates, though some argue the city’s version should have included more protections for tenants.
The Long Beach pilot program uses one-time financing that will provide up to 10 property owners with low- or no-interest loans of up to $250,000 to build accessory dwelling units (ADUs) on their lots. Those units would have to be rented to low-income individuals or families for a minimum of five years.
Interested applicants may apply at https://www.longbeach.gov/lbcd/hn/aduloan/.
“Long Beach has been a leader in producing autonomous living units,” Richardson said. “And we’ve done everything we need to do … to make it easy for people to build autonomous living units in their own homes.”
Claremont McKenna College’s Rose Institute confirmed in an April report that Long Beach was among the most ADU-friendly cities in the state, having issued 1,431 ADU permits between 2018 and 2022. While that total lags behind 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 rental 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% 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 offers landlords an additional financial incentive to rent these ADUs to recipients of the Long Beach Housing Choice Voucher Program, which provides a portion of the rent for those who fall into extremely low income, very low income, or low-income categories.
Building an ADU has become more expensive in recent years: labor and materials costs increased 11% and 9%, respectively, in 2021 and 2022, while construction labor costs increased 34% between 2018 and 2023.
The loan covers up to $250,000 in planning, permitting and construction costs, although Kelli Pezzelle, community programs specialist for Backyard Builders, doesn't anticipate the loans having to be that high.
The loan interest will remain at 0% as long as the landlord rents the rental housing unit to a low-income recipient. A condition to qualify for the loan is that the landlord must rent the housing to a voucher recipient for a minimum of five years or to a low-income tenant who does not receive vouchers for seven years.
The loan interest rate will increase to 3% if rented to someone who does not meet the income limits after the five- or seven-year period. The landlord will incur a $2,500 monthly penalty if he or she rents the additional dwelling unit to an unqualified tenant early.
The potential eviction of low-income tenants is a concern for Long Beach Residents Empowered, or LiBRE, an advocacy group that pushes for the creation and preservation of affordable housing and tenant protections.
“We are glad that the city is investing in affordable housing and trying to reduce the housing shortage,” LiBRE project director Andre Donado said by phone. “However, all tenants are at risk of eviction after five years.”
Donado also hoped the city would consider offering $4,500 relocation assistance to low-income tenants displaced through no fault of their own in all cases.
The city offers $4,500 or two months' rent if a landlord demolishes or substantially remodels 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 doled out $125 million to help homeowners cover permitting and planning costs before running out of funds.
The city believes that wealthy homeowners with little cash, particularly seniors, could take advantage of the loan to build an additional housing unit and generate passive income. The program estimates that additional housing units built with its loans would generate more than $1,000 per month for homeowners who rent to voucher holders.
“Maybe you’re a grandmother or someone who has too much backyard space and you want to be part of the solution, but you may find it difficult to find direction or funding,” Richardson said.
To that end, the city is expected to appoint a project manager who will help loan recipients select an architect, builders, planners, contractors and other professionals needed during the planning and construction process. That manager will work as a go-between for the property owner and the general contractor.
One caveat for interested landlords is that a qualified tenant cannot be a relative or caregiver in your home.
As for the loan, payments will be deferred during the construction process for up to two years.
Richardson said that since the program relies on loans that will be paid back over time, it will be self-sustaining. If it is deemed a success — that is, if alternative housing units are built and rented to low-income tenants — he said the city would consider looking for more revenue sources to expand the project.
The City is hosting a series of Zoom webinars to gauge interest in the program and answer questions.
