California county helps homeowners build ADUs

Key Takeaways

Napa County, Calif. is working to address its housing crisis through its Affordable Accessory Dwelling Unit (ADU) forgivable loan program, which incentivizes homeowners to build and rent out units on their property at an affordable price. 

The program has created housing for local workers who would otherwise be priced out of renting in the area, as well as homeowners’ aging parents or adult children with disabilities. 

Because of the county’s forgivable loan, Todd and Gabrielle Kuchta were able to build an ADU for their 27-year-old son Jacob, who has autism, obsessive-compulsive disorder (OCD) and attention-deficit/hyperactivity disorder (ADHD). Because of his special needs, Jacob can’t live by himself, but as he got older, his parents didn’t how to provide him with a sense of independence and give themselves some space. 

They looked into having Jacob stay in a living facility, but paying out of pocket for someone to care for him at the level he needed is upwards of $9,000 a month — money they didn’t have. They considered buying a new home with a separate unit where Jacob could live, but there weren’t many homes that fit the bill, and the ones that did were simply out of their price range.

Todd and Gabrielle went to the city of Napa to see what options were available for them, which is when they were referred to the county’s affordable ADU forgivable loan program that had just launched. That was in January 2023, and by December of that year, Jacob had moved into his new home. 

“I’m in construction, including low income, and how you go about providing low-income housing is a very difficult situation, it’s a tough nut to crack,” Todd said. “There aren’t many good options. We looked at housing, we looked at potentially moving, there just weren’t any properties that really worked … This was the most economical low income housing we could have gotten.”

The 480-square-foot, one-bedroom, one-bath unit cost the family a little more than $248,000 to build, according to Todd. Napa County provided $63,000 as a forgivable loan, and Redwood Credit Union — a county program partner — provided an additional $160,000 loan as a second mortgage. 

To qualify for the program, homeowners must commit to rent the ADU to households earning at-or-below 80% of the area median income for a period of at least five years. The Kuchtas could rent the unit up to $2,600 a month, but they charge Jacob $400, which is a portion of his disability income.

Napa County is an agricultural preserve, which prevents over-development in the valley by establishing agriculture and open space as the “best use for the land” through its land-zoning ordinance. As a result, the county has an extremely limited and costly housing supply. Prior to the creation of the affordable ADU forgivable loan program, the county’s housing vacancy rate was less than 1%, according to Jennifer Palmer, Napa County’s director of housing and homeless services. 

Incentivizing people to build ADUs gets around the county’s zoning laws for development and helps provide more affordable options for people living in Napa. 

Researching “innovative uses of existing housing stock was how we got to ADUs,” Palmer said. “Knowing that the traditional affordable housing projects are still going to be going forward, how do we engage residents in a solution and leverage the assets that are already here?”

The initiative started with community workshops in which residents provided feedback to the county on the barriers they faced in creating ADUs. What came out of the conversations was that the average homeowner isn’t a developer, and diving into the complex process of building an entire housing unit was overwhelming for residents, Palmer said. The county then provided technical assistance to interested homeowners, breaking down the process. The next step was to help people access the capital needed to build an ADU. 

“There was a big lending barrier that you couldn’t, at the time, factor in future rental income to justify your ability to pay down the loan,” Palmer said. “So, you basically had to either have the cash in the bank or have enough equity in your existing home that you could refinance and pull that money out, which California, in particular, our housing market just doesn’t support that.”

The county reached out to Redwood Credit Union to pilot a loan product and partnered with the Napa Valley Community Foundation, which provided a loan loss guarantee for the ADUs and allowed underwriting to consider future rental income, according to Palmer. When Napa County launched the program in January 2023, it was a three-year pilot with $5 million attached to it and the goal was to build 80-100 ADUs.

More than 300 homeowners applied to the program in its first year, so Napa County made it a permanent initiative. Once the $5 million runs out, it will be funded through the county’s transient occupancy tax — 1% of which is dedicated to investments in workforce housing. 

Once the initial funding allotment has run out, which is predicted to be within the next six months to a year, the county will reassess what the program will look like moving forward, according to Palmer. Ideas that have been considered include allowing homeowners to rent out their primary residence, and move into the ADU they build on their property (a popular suggestion among Napa County’s aging population) and creating a process to match up homeowners with potential tenants, she noted. 

“Homeowners want [a tenant] who’s a little bit vetted, and our farm worker population — that’s who we need to help find housing for in the community,” Palmer said. “So, we're imagining, how do we put those two together, so that employers can kind of sponsor, recommend or identify, ‘Here are the folks who work in the valley, who can’t afford to live here right now. It would be life-changing for them to not have to commute from two hours away.’”

Any homeowner in Napa County interested in building an ADU through the program can enter the program at no cost and receive technical assistance and a feasibility consultation, where someone comes to their home to assess what would work best for their property. At that point, if they want to move forward, participants then take a series of courses related to the process, including education on construction, managing construction escrow and what it takes to be a landlord. 

“We don’t want anybody to get enticed by the funding and not really understand what they’re doing,” Palmer said. “If they’re at the point that they’re ready, they can apply for a reservation of funds, and that starts the clock on ‘OK, in the next 18 months, you’re going to start construction on your unit,’ so we'll earmark funding for their project, and we continue to be in communication with those homeowners back and forth.”

There are currently 75 homeowners actively in the process of building an ADU through the program and 20 ADUs are either nearing the end of construction or are already being leased, according to Palmer. 

The Kuchtas used Villa Homes, the largest builder of ADUs in California, for their unit. The company uses prefabricated designs, which allowed the family to go through the process in a cost-effective way and quickly, with groundbreaking to final inspection taking less than six months.

Because Jacob lives technically on his own, he now qualifies for supported living services and access to in-home support, which has freed up more time for Gabrielle, who previously spent most of her time caring for Jacob, and given the couple the ability to go on vacations. For Jacob, having his own space has been a “safe haven” and allowed him to have more agency, Todd said.

“It is night and day,” Todd said. “People with special needs still need their own area — they need the independence. So, the arguments we’d have over, ‘Could you turn your music down?’ We removed a lot of that. We’ve given him more of a sense of autonomy, and we’re still hoping he can, at some point, qualify to get a job. The stress in the family is a lot less.”

Friends and family have said they see a positive difference in Jacob having a newfound sense of independence. 

“He likes having his own space and he now feels free enough to invite people over,” Todd said. “We have a very good community of friends, and he’s a huge baseball fan, so he’ll have them over to watch a game. Just the pride of having your own space, as opposed to living in a bedroom in your parents’ house [is everything].”

Todd shared the county program on LinkedIn and said he’s had multiple people reach out for more information, including the Autism Society of San Francisco for a webinar it was hosting on housing people who are neurodivergent. 

“For people who are similar in our situation, we’d want them to know that this is a legitimate option for our adult children with special needs,” Todd said. “It’s scary – where are they going to go? How will they be protected? Who’s going to take care of them? In this case, he’s far enough that we have our privacy, yet we’re there to give him whatever support he needs.”