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Pasadena to receive grant funding for ADU rehab and construction

The Pasadena City Council approved a resolution to apply for additional grant funding from Housing and Community Development (HCD) to support the construction and rehabilitation of up to 22 ADUs at the November 15 City Council Meeting. Pasadena is applying for just over $2.5 million in grant funding, half of the maximum amount allowed by HCD. 

Long Beach ADU

The funding will allow for Pasadena residents to apply for loans of up to $150,000 for ADUs and up to $75,000 for low-income projects, for JADUs, and for compliance related projects. This comes on heels of the recently passed ADU ordinance update which removed the requirement for covered parking in the City and streamlined the process for receiving a building permit for an ADU. 

The Pasadena Second Unit ADU Program is an affordable housing initiative incentivizing Pasadena homeowners to build affordable rental units through financial, design, permitting, and construction assistance. Pasadena’s ADU program allows for homeowners to apply for New ADU Construction Loans up to $150,000 for a 3-Year loan with 1% simple interest, and deferred payments for 3 years which must be refinanced prior to end of deferred payment period, or up to $75,000 maximum for a 20-Year loan with 1% simple interest and deferred payments for the first 5 years (Household income must be under 80% area median income) to upgrade existing structures. The first round of City grant applicants from 2020 saw a total of 5 projects funded out of 35 applications. 

The program does have restrictions: for the $150,000 loan, residents are required to show that the primary residence was owner occupied for the previous two years, have a credit score greater than 650, show that the loan payment and monthly debt payments will be less than half of their income, and show that the total mortgage loan and ADU loan will be less than 75% of the home value. The median home price in Pasadena is listed at $1.1 million and median income for a household in 2019 was just over $83,000 (about $40,000 for individuals). The City has made some allowances for the smaller of the two grant programs for single households to increase access to the program, refer to the table below.

Pasadena Area Median Family Income

Priority will be given to projects located within Community Development Block Grant areas, homes valued at less than $850,000, homes with multiple citations, and homes with a clear need based on visual inspection. 

But the ADU loan program isn’t the only action that the City of Pasadena is taking to increase access to affordable housing; Pasadena, like many southern California cities, is in the process of updating the Housing Element of the City’s General Plan as required by HCD.  The Regional Housing Needs Allocation (RHNA) identified the need for almost 1,300 new affordable housing units in the next 8 years. The City must show that there is enough adequately zoned land, either vacant or under-utilized, to accommodate this growth in the specified time frame. If there isn’t enough available inventory the City must then identify and reduce or eliminate impediments to development. Pasadena is hoping that they can meet the majority of the RHNA goal through ADU development alone, although rates of approved projects are falling well short of that goal with 108 ADUs permitted in the city between 2018 and 2020.

Pasadena has also initiated a program for pre-approved ADU building plans (likely to be implemented in 2022) to reduce the cost of building an ADU and is continuing their program to incentivize rental of ADUs to low income individuals where the City helps finance the construction of an ADU in exchange for leasing the unit to a Section 8 housing choice voucher holder for seven years.  As of June of this year, five ADUS were in pre-design for the low-income ADU pilot program. Finally the City reduces impact fees for ADUs over 750 square feet if the ADU is rented to a low income household, to a City’s rental assistance client, or a family member.

Read more about building an ADU in Pasadena.