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ADU Permit Blues

By Datta Khalsa, Broker

A longtime client of mine recently received a letter from the city stating that he needs to provide evidence that he still occupies the home in Santa Cruz where he built and got permits for an Accessory Dwelling Unit on his property several years ago in order for him to be able to continue renting out the unit.

The unit has a tenant living there who rented it when my client was still occupying the house, but since then my client decided to move and rented the house as well, thereby providing accommodations to two sets of happy tenants.

Back when the permit was issued, applicants were required to record a deed restriction that an owner must live in either the ADU or the house in order to rent out the other dwelling. Presumably this was done to preserve the intent of the Single Family zoning designation for residential neighborhoods.

A few years ago, to help people being tethered to their homes to avoid financial strain, the City Council passed a resolution allowing homeowners to rent out both properties for up to two years, provided they notified the city and gave evidence that they were temporarily moving out for valid reasons such as extended travel or remote work.

Flash forward to the passage of SB-9 by the State which took effect in January of last year, mandating cities to allow Accessory Dwelling Units on residential parcels. Under this bill, owners are able to rent both the main house and the newly-permitted ADU unrestricted. The bill also made it easy to legalize existing unpermitted ADUs to further promote housing.

Trouble is, the bill was not retroactive—meaning that someone like my client who abided by the rules and got a permit for his ADU under the old guidelines is still held to the deed restriction that was recorded as a condition of his approval, while others have been allowed to get permits to recognize ADU’s that were illegally constructed and then benefit from the less restrictive guidelines of SB-9.

I had noted this inconsistency in a previous column I wrote back when the bill was passed, and at the time I had surmised that it would get worked out in the mix. But when we see first-hand a property owner notified by the City of their intention to hold him to the letter of his deed restriction, it appears the current agenda is out of line with the public need.

As a result of their policy, in order to comply with the rules and avoid a fine, my client will need to evict the tenant from his ADU, meaning that a person who currently has a place to live will soon not have a place to live. It also means that my client will lose critical rental income that he could earn if the city would allow deed-restricted ADU’s that were permitted prior to the passage of SB-9 to be freed up as viable rentals.

If they would like to demonstrate their commitment to addressing the housing crisis, rather than wait to see what the State does in 2025, it would show some real leadership if the Mayor, City Council and Planning Director would take some initiative to correct this policy now.

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