In its quest to increase the availability of affordable housing, Long Beach is offering interest-free loans of up to $250,000 for homeowners who want to build ADUs — but the units have to be rented to low income residents.
The new pilot program will give priority to 10 homeowners who commit to renting for a minimum of five years to a tenant with a housing voucher issued by the city’s Housing Authority. Housing vouchers use federal funds to subsidize the rent of low-income households.
The city loans can be used for financing, designing, permitting and constructing an accessory dwelling unit on their property, according to a city memo.
Preliminary applications for the program are open now through Nov. 30. Loans are expected to be ready to disperse early next year.
Secondary dwelling units with complete independent living facilities – including a living room, sleeping area, kitchen and bathroom – must be completed within two years of loan approval.
The 30-year loans will have zero interest during construction and while the ADU is rented to an income qualified tenant at an approved rent.
There will be a 90-day grace period for homeowners to find a qualified tenant. After that, a penalty of $2,500 will accrue for each month the ADU isn’t occupied by a qualified tenant. Vacancies due to tenant turnover will not count toward that grace period.
After an initial five-year period, ADU owners can opt to rent to another tenant but the loan would accrue interest at 3%.
Payments will begin when the homeowner begins receiving rental income from the tenant.
Rent for each ADU will be determined by the Housing Authority of the City of Long Beach in accordance with federal guidelines.
Multiple factors go into that calculation, including federal payment standards, tenant affordability, utility allowances and comparisons with similar units’ rental rates in the area.
For example, a tenant with a housing voucher renting in the 90815 ZIP code in East Long Beach could be charged $2,266 for a studio, $2,563 for a one-bedroom and $3,245 for a two-bedroom.
Estimated payment standards in other ZIP codes can be found here.
If funding is available, second priority will be given to property owners interested in renting to low-income tenants for a minimum of seven years.
A low-income tenant without a voucher would pay $1,031 for a studio, $1,178 for a one-bedroom and $1,326 for a two-bedroom.
A tenant is considered low income if they are under 80% of the median income for Los Angeles County, according to the U.S. Department of Housing and Urban Development.
For a single person, $77,700 and below is considered low income. For a household of two, $88,800 is the cap.
To be eligible for the program, applicants must be the owner and full-time occupant of the property, have a minimum credit score of 650 and a debt-to-income ratio minimum of 48% including future ADU loan debt and projected income.
Homeowners that have already begun the ADU design/construction process can apply for the program at any point before receiving rental income for the unit. However, the city will not reimburse for any costs incurred before the loan is executed.
City staff will hold a virtual information session on Oct. 9 from 6 to 7:30 p.m. Interested homeowners can RSVP here.
Two other information sessions will be held on Oct. 19 at Cesar Chavez Park and on Oct. 24 at Long Beach Energy Resources Auditorium on East Spring Street.
Currently, there are more than 1,100 project-based voucher units leased in Long Beach, according to a city memo. An additional 334 units are expected to be completed within the next two years.
Editor’s note: This story has been updated to correct links to the city’s ADU program.