Encinitas tried to get creative in dealing with its housing affordability problem. It didn’t work.
State law requires the North County coastal city to give developers a chance to build up to 1,000 low-income homes by increasing the amount of development that can take place in given areas. But the city hasn’t been able to find enough locations to please all its residents.
That’s why in November 2014, the city and residents decided on an alternative: They’d try to encourage people to turn illegal “granny flats” into legal homes reserved for low-income residents.
Granny flats, or accessory units, are small homes with limited features that share a property with a primary home, and are often reserved for extended family members of the main home. But homeowners sometimes rent them out, and many don’t comply with existing city health and safety codes.
Encinitas offered a deal to homeowners with out-of-compliance granny flats: If they would fix them up and make them part of the city’s affordable housing stock, the city wouldn’t penalize the property owners for the illegal units. To further encourage people to participate, the city would also waive the $900 application fee landlords normally pay to make apartments part of the low-income housing program. The units would have a 20-year restriction capping the rent at a certain amount in order to keep them affordable for low-income renters. After 20 years, owners would be able to rent them out at market rate.
The hope was it would be a win-win for the city, which needed to provide low-income housing, and residents, who opposed new construction on grounds it would change their community.
A year later, the program managed to add only six low-income units.
On one hand, the city added six affordable units, at a much smaller cost than building new ones. On the other, most of the city’s illegal granny flats remained that way.
It cost too much to make the required upgrades, with not enough financial compensation for those who went through with it. And so, most people simply ignored the idea altogether.
“It was designed to fail,” said Robert Bonde, president of the Encinitas Taxpayers Association and a resident who has been actively calling for reform of the program. “There is absolutely no incentive for anyone in their right mind to sign up for it. It was filled with onerous requirements, that if people signed up for it, they would regret it for the rest of their lives.”
Encinitas planners spent $7,000 sending postcards around the city informing residents about the program. Just over 50 people responded before deciding not to participate. But there are likely hundreds of these technically illegal housing units tucked throughout Encinitas.
City planning staff doesn’t know what persuaded the six people who participated; it does know that two of the units were being investigated by city officials for code compliance issues, and taking part in the program got them off the hook.
According to a staff report on the program, many people declined to participate because the cost of bringing a unit up to safety standards wouldn’t be earned back, because of the rent restrictions needed to keep the homes affordable.
To qualify for the program, the units often needed to replace or provide sprinklers, a new parking space, or electrical and plumbing work. That can costs ten of thousands of dollars.
Given Encinitas property values, people thought it would be easier to sell the old structures and let the new owner decide what to do, staff noted in the report.
One resident who was previously renting out her illegal unit and is now trying to get it approved by the city, Bri Latif, said during a December City Council meeting that the program just didn’t work.
“I am a property owner who has a unit and would love to participate in this,” Latif said. “However, the process is really hard. We’re in the middle of putting together this application and trying to find people to create a site plan and it has been a lot of red tape. And on top of that we have code enforcement coming at us.”
Latif said she and her husband bought their home in Cardiff in 2006 and it had two units in the back. They didn’t know they were illegal.
She said they didn’t even need to advertise the units before people started bombarding them with requests. They began renting them out for about $950 a month.
Then, suddenly, a neighbor filed a code compliance case against them.
Now Latif and her husband are battling with the city to get everything done to bring the units up to code.
They could have instead removed the stoves in the units, and counted them as storage or garage space, which wouldn’t require improvements. Then they could do what many of their neighbors do, she said – use them as vacation rentals.
“But we chose not to,” Latif said. “There are a lot of us out here in the city and this is a way for us to live in our homes, but also provide low-income housing for other people.”
City Council members and Encinitas Mayor Kristin Gaspar voted to extend the program for six months to see if there was a way to get more people to opt in.
City Councilwoman Catherine Blakespear said the program was “clearly a failure” during the meeting.
“I’m personally really in favor of us protecting and preserving these accessory units,” Blakespear said. “They are our true affordable housing in the city.”
The units, even when illegally rented, are usually more affordable than typical Encinitas housing, simply because they are small and old.
Some of the alternatives the city might consider going forward could include adding moderate-income households to the rent restrictions – letting residents get more in rent to close the gap on the cost of upgrades — or reducing compliance requirements, being more proactive with code compliance enforcement to identify more illegal units or cutting fees that are part of the program.
The city could also remove the rent restrictions completely — doing so wouldn’t add to the city’s official low-income housing total, but it could add more housing and much of it would cost less than typical homes in Encinitas. But that won’t help the city meet its state mandate.
Manjeet Ranu, the city’s interim planning director, cautioned about the city and its residents trying to use the illegal units to help meet the state goals regardless. After negotiating with the state about accessory units, state officials told him they would give the city such little credit for 25 converted units that it wouldn’t make a dent in what the state was asking the city to zone for.
“Just want to make it clear about the expectations of what we can accomplish with these units,” Ranu said. “If it’s more about community character, about affordability, about allowing people to live in their homes, then we’re going to get more out of that.”