The Controversial Housing Law That’s Changing San Diego’s Landscape

In the minds of most Californians, accessory dwelling units — ADUs, short — bring to mind words like “small,” “subtle” and “cute.”

None of which describe the side-by-side ADU duplexes on E Street.

Perched at the edge of San Diego’s desirable Golden Hill neighborhood, there’s nothing dainty or diminutive about these three-story structures. “Backyard cottage” is another term used to describe accessory dwelling units, but these are out front, practically hiding the five-unit multiplex to which they are technically “accessory.”

Like dozens of small and not-so-small apartment buildings across San Diego, the structures on E Street are ADUs in only one way: They were permitted under the city’s ADU Bonus Program.

The city’s one-of-a-kind ordinance offers landlords a one-for-one deal. If they agree to construct an ADU and keep the rent low enough for San Diegans making under a certain income, they’re automatically permitted to build a second “bonus” unit, which they can rent at whatever price they like.

In parts of the city far from public transit, the 2021 city program offers a one-off: Alongside the main house and the two ADUs already permitted under state law, the city allows for a maximum of five units on one property.

But in bus-and train-adjacent “transit priority” areas — a designation that covers much of San Diego’s urban core — a landlord can alternate affordable and bonus units again and again and again. Technically, there are limits. City zoning sets a maximum height on buildings, and a more complicated regulatory formula caps how much built floorspace can dominate a parcel.

But you can squeeze in an awful lot of ADUs within those parameters. Hence, the project on E Street: A single-family lot with nine apartment units on it, four of them ADUs, two of them affordable. And that’s not an especially extravagant use of the program.

A typical ADU bonus project application includes between 4 and 7 additional units, according to data provided by San Diego’s Development Services Department. Projects with a dozen or more units are not unheard of. The largest proposed project to date, planned for the city’s gentrifying majority Black and Latino Encanto neighborhood, is 148 units.

David Pearson, whose design shop, PALO, designed the E Street duplexes, said his largest permitted project, located behind an existing 76-unit apartment building, comes with 36 “ADUs.”

There’s a word for 36 units stacked in a row on top of one another. Even Pearson can’t help but grin and use scare quotes when he uses the term “ADU.” The city’s “crafty little maneuver” allows developers to “effectively build an apartment building out of ADUs.”

“It’s really ADUs only in name,” he said.

Depending on your perspective, San Diego’s “crafty little maneuver” is either an ingeniously clever use of state law to provide a much-needed boost to the local housing supply or a sneak effort to foist an intolerable degree of construction and density upon unsuspecting residents while only providing a token degree of affordability.

The program is just beginning to take off. A total of 159 projects with 1,200 units have been submitted to the city as of October. Less than half of the projects have actually been permitted. Far fewer have broken ground. Even so, supporters, detractors, researchers and policymakers are sitting up and taking note.

“San Diego may have stumbled on to the quickest solution to producing a lot of ‘missing middle’ housing,” said Andrew Wofford, a graduate student researcher at the UC Berkeley Center for Community Innovation who has been evaluating the program for the state’s housing department.

“Missing middle” describes an approachable (and, one hopes, more affordable) scale of development that occupies a middle ground between uber-dense highrises and sprawling single-family homes. Adding an ADU behind an existing home represents the mildest housing of this type. The novelty of San Diego’s program is in redefining “ADU” from a specific building type to a broad privileged regulatory chute into which developers are now encouraged to throw small apartment buildings.

Meanwhile, local critics of the program have already begun to mobilize. Signs inveighing against “granny towers” and “backyard apartments” are common lawn ornaments in many of the city’s residential neighborhoods. The local backlash has already spilled over to other areas of local housing policy and now threatens Mayor Todd Gloria’s broader “Yes In My Backyard” vision.

Even some supporters are surprised by the program’s ambition. Denise Pinkston said her experience with local housing politics would have led her to rule out anything quite so far-reaching. A San Francisco real estate developer and the go-to ADU whisperer for state lawmakers hoping to hop aboard the “backyard revolution,” Pinkston is also the founder and board president of the Casita Coalition, a nonprofit that advocates for ADU-friendly policy.

But looking at the results so far in San Diego, she paraphrases Shakespeare: “What’s in a name?”

“Actually, it doesn’t really matter what you call it,” Pinkston said. “What you get is more housing.”

San Diego: ‘Above and beyond’

California legislators have spent the last half-decade passing bill after bill to encourage homeowners to build backyard cottages.

Now, anywhere in California, city permit review is limited to 60 days. Development fees and construction-cramping setback requirements are capped. Public hearings and design reviews are banned. In many cases, so are the impositions of costly parking, landscaping and storage requirements.

As a result, California has experienced an ADU boom. While other, more ambitious and controversial pro-housing policies have flamed out in the state Capitol or made it through the legislative gauntlet only to produce less impressive results in the real world, ADUs now make roughly one-in-six of all new units permitted.

Some cities have found ways to quietly obstruct those efforts. Others have rolled along with them. None have gone quite so far as San Diego with its bonus program.

Leaning in on development-friendly housing policy is on brand for San Diego. The city has a history of serving as a laboratory of YIMBYism for California.

Earlier this year, Gov. Gavin Newsom signed a bill ramping up the added density afforded to apartment projects in exchange for additional affordable units. It was modeled on a San Diego ordinance. When state lawmakers passed a law banning local parking requirements for many new housing projects, they were following San Diego’s lead. And as California rolled out its various laws greasing the skids for ADUs, San Diego passed its own rules that greased them further.

“In a lot of cities, the only reforms they’re doing on housing are those that are triggered by the state,” said Colin Parent, a state Assembly candidate and CEO of Circulate San Diego, a nonprofit that advocates for public transit and dense housing. “San Diego has done a bunch of things that go above and beyond what the state reforms require.”

The ADU bonus program is the latest example.

In 2019, state lawmakers passed a bill requiring local governments to “incentivize and promote” the building of more affordable ADUs. City planners in San Diego took this directive to heart in a way that no other city did.

To fans of the program, San Diego offers a policy lesson that goes far beyond backyard cottages. Cities don’t “have to reinvent the wheel to build more housing,” said Muhammad Alameldin, a researcher at the Terner Center for Housing Innovation, who wrote an overview of San Diego’s ADU program earlier this year. The promise of nearly unlimited density is an irresistible perk for many developers. Cities that want more of a particular type of housing — or more housing in general — can tack on an uncapped density bonus and watch the permit applications flood in, he said.

“They found the formula.”

But there are reasons to believe that this particular formula might not work quite so well in other parts of the state. Even by the standards of auto-oriented Southern California cities, San Diego’s lots are on the big side, making it easier for developers to pack more onto the average parcel while staying beneath other zoning limits.

Local economics play a role, too. In San Diego, the median apartment rent (roughly $2,700 a month, according to Zillow) is less than $400 over the maximum allowable rent for a state-designated affordable apartment in San Diego County. That’s good news for landlords, who don’t have to take quite so large a hit when they set aside certain units for lower-income renters. In places where that gap is larger, the incentive to participate is smaller.

Jake Wegmann, a professor of urban planning at the University of Texas at Austin, said he thinks the same “slam dunk economics” of the program in San Diego would likely apply in “other very high rent regions, like the Bay Area,” though perhaps not so much in lower-cost metro areas, such as Sacramento or Fresno.

Even within San Diego, there are only so many parcels where it makes sense to pack in a cluster of multiplexes: Some lots are just weirdly shaped or lack access to water and power, for example. “We should be cautious in assuming it’s going to run rampant over the whole city like kudzu,” Wegmann said.

Waiting for copycats

Jared Basler, an ADU architect and the Casita Coalition’s policy director, said “There are a lot of people who are already looking into how to take it up to the state level” — though none of the state legislators interviewed for this story would confirm as much.

But even a program booster like Basler isn’t quite so sure going statewide with the idea would be a good thing: “When we take these really successful local programs statewide, they do get watered down.”

A “watered-down” version of the program might include higher affordability requirements or some of the stringent labor standards that have been tacked onto other high-profile housing bills. Those added requirements would raise costs and result in fewer overall units. That’s a trade-off proponents aren’t willing to make.

Other places — and even the state as a whole — are welcome to take a look at the program, said Gary Geiler, assistant director of the Development Services Department. But they should proceed with caution.

“Other jurisdictions might have a different geography and topography and built environment,” he said. Instead of opting for the “unlimited option,” allowing for as many affordable bonus pairs as can fit on the lot, a single bonus allowance “could always be the starting point,” he said.

Pushing that “unlimited” option also carries a broader political risk.

One of the reasons ADUs have been such a political success in California is that backyard cottages are, generally speaking, human-scale. Grandma’s backyard bungalow will not cast unsightly shadows on nearby parks or jam the nearby side streets with cars. Unlike large apartment complexes that might be railed against as the work of faceless, greedy developers, ADUs are generally paid for by and stand to financially benefit a neighbor.

Turning ADU policy into a backdoor apartment program threatens to bring those faceless developers back into the debate, upending a tried and true strategy, Parent of Circulate San Diego said.

“Most people who own a house — the vast majority of them — are never going to build an apartment building,” he said. Under the San Diego program, “there are some projects that are really, really big because there are an unlimited number of allowable units,” he said.

“That word ‘unlimited’ is going to be challenging for some people.”

Backlash begins

From the roundabout at Adams and 49th, in San Diego’s historic Talmadge neighborhood, the two ADU duplexes peek over the single-story house out front like a pair of peeping Toms. To Geoffrey Hueter, they’re about as welcome here.

These are the first ADUs built under the San Diego bonus program and the reason that Hueter got into housing activism. They’re the reason he rallied his friends and co-founded Neighbors for a Better San Diego. They’re the reason that just a few houses down, a front yard sports a sign calling for “No Backyard Apartment Buildings.”

Hueter is the soft-spoken, bespectacled face of the political backlash that housing advocates like Parent worry about. With a retired software engineer’s mind for detail, Hueter will respond to a simple question (“What do you think of the city’s bonus ADU program?”) with a seeking verbal essay on the history of Southern California automobile culture, the rate of local land turnover, social housing in Vienna, and optimal property tax rates for small businesses.

But eventually, he will reply: “It’s bad policy.”

Before developers got their hands on the 49th Street site, it was a single home. Now there are six: Four new one-bedroom units, plus a new studio carved off from the main house’s garage. When it wrapped up in the late summer of 2022, Mayor Gloria showcased the project as an example of “gentle density” even as some neighbors started to complain. Their chief sources of angst were a decline in privacy and the prospect of noisy college kids renting out the units.

Standing a few houses down from the 49th Street project, Hueter acknowledged that the buildings aren’t especially imposing or out of character. “It’s not horrible horrible,” he said, though he still worries about the lack of parking and the sheer number of trash cans required to service the new tenants.

More than the details, it’s what he sees as the duplicity of the program that encroaches on “lawlessness” that bothers him most. “Don’t call them ‘accessory’ if they’re dominant,” he said. “If you say something is ‘gentle density,’ it should be gentle.”

In a weekly newsletter published just after his visit to the site last year, Gloria also noted that the project was “a huge improvement aesthetically from what it was before.”

For Hueter, who has helped fundraise to beautify  Talmadge and who is married to the president of the neighborhood historical society, that was an unforgivable insult.

“Don’t tell people they live in a s–t neighborhood,” he said. “Be smarter about who you pick a fight with. This is a very politically active neighborhood.”

The mayor’s administration has learned that the hard way. Earlier this year, Gloria introduced a collection of housing proposals, which he branded “Housing Package 2.0.” One of the proposals would have adopted a 2021 state law that allows small apartment projects of as many as 10 units to skip environmental review if they’re close to transit — so long as a city opts in.

That proposal was swatted down by the city’s planning commission after hundreds of residents, many under the banner of Neighbors for a Better San Diego, led a months-long protest movement against it.

“A lot of the reason [that law] got beaten here is because there was a lot of experience from the bonus ADU law,” Hueter said. “People were already sensitized to what was going on.”

Earlier this month, the city council rejected the mayor’s entire housing package. Gloria has said he plans to reintroduce a revised version next year, but Neighbors for a Better San Diego were happy to consider it a feather in their cap.

Technically affordable vs. truly affordable

Hueter stressed that the group isn’t anti-ADU. The group’s membership leans propertied and graying, so more than a few have backyard units of their own.

Like most local groups pushing back on new housing laws, the members of Neighbors for a Better San Diego have an easier time rallying around what they oppose than what they would like to see instead. At public hearings and protests, historic preservation, a lack of parking, the unseemly prospect of developer profits, an influx of rental apartments — or a more naked condemnation of lower-income renters themselves — all motivate opposition to new city housing policy.

Maybe the most popular argument of all against the city’s ADU program is the claim that the resulting units aren’t “truly” affordable.

In College Area, the residential neighborhood anchored around San Diego State University, a newly built ADU may rent for a little more than $3,000. The “affordable” units are cheaper, but not much. In order to qualify for the program, rent can’t exceed 30% of the monthly paycheck of someone earning 110% of the county’s median income. That works out to $2,249 per month for a studio.

And unlike traditional affordable housing, which has to be set aside at those lower rates for 55 years, the bonus ADU program only requires a 15-year commitment. If a landlord lowers the rent further to someone earning 80% of the typical area income, the commitment is only 10 years.

That second option remains a hypothetical. So far, each of the 159 projects submitted to the city has targeted the highest “affordable” income level.

Asked about the bonus program as an affordable housing solution, city planning director Heidi Vonblum confessed that the question made her nervous.

“We have a lot of neighborhood opposition groups that will go on Zillow and find the most outrageously expensive ADU and then use it to oppose any kind of ADU incentive program,” she said in a Zoom interview.

But even if the program isn’t serving the most desperate, making it easier to build modest duplexes provides an escape valve for young professionals, essential workers and other middle-class San Diegans who would otherwise be competing for the region’s scarce rentals, she said.

“Maybe an ADU that comes online might have really high rents, but then that frees up housing within the housing ecosystem for people to live in,” Vonblum said. “That’s really hard to explain to, you know, an average community member, because everybody wants us to solve everything with some silver bullet right now.”

Pitching the program

On a Saturday morning in early November, Mayor Gloria dropped by a conference center in San Diego’s master-planned Liberty Station neighborhood to meet up with the builders, housing financiers, politicians and academics gathered at the Casita Coalition’s annual convention.

If any of the efforts by Hueter and his fellow activists have shaken his confidence, the mayor doesn’t show it. He recalls his visit to that first ADU bonus project on 49th Street. “It’s no surprise that new developments typically get a lot of notice and a lot of signage,” he said. “But the people I met that live there are service members and college students. And where are they gonna go?”

On paper, the conference is a celebration of the ADU-ification of the California housing market and an industry meeting of the minds. But much of the programming serves as an unofficial advertisement for the host city’s out-there ADU program.

After Gloria departs, the conference attendees line up outside for a morning bus tour of the city’s built-up backyards. The tour passes by the 49th Street site but does not stop in Talmadge. In College Area, outside a seven-unit project, bus riders are advised to keep their voices down, lest an already irate neighbor grow more irate. The ADU tourists disembark at each site to pad around the stacked in-law units on display, cooing with giddy disbelief and inquiring about square footage.

Getting off the bus back at the convention center, Analise Ortiz, a Democratic Arizona state representative marvels at what San Diego has done. Phoenix legalized backyard “casitas” this fall, though without the other developer-friendly goodies that San Diego offers. Recent efforts to permit ADUs statewide and to otherwise make it easier to build dense housing have failed in the Arizona Legislature. The debate there is a familiar one, Ortiz said: Concerns about affordability, neighborhood character and parking dominated.

“I think this shows that a lot of those concerns are exaggerated…We’re going to try again next year, and I think putting a visualization of what it can look like will hopefully help move some of our colleagues along,” she said. “We’re hoping we can have the same thing in Arizona.”