San Diego Decreases Fees for ‘Granny Flats’ to Increase Construction Projects

In late April the San Diego City Council unanimously approved legislation to sharply decrease fees to build granny flats, which are often nearly equal to construction costs. The objective is to help with the severe local shortage of affordable housing by increasing construction of more granny flats. Granny flats are additional housing units on an existing property and can sometimes be the fastest and possibly the cheapest way to increase the local supply of affordable housing. Granny flats are being increasingly viewed across the nation as a way to create more housing without the need for more land or infrastructure. In a news release, Mayor Kevin Faulconer stated,

One of the fastest and least expensive ways we can increase affordable housing in San Diego is to make it easier to build granny flats. With these new incentives, we’re removing barriers to encourage the construction of new units that San Diegans can actually afford.

San Diego has seen less construction of granny flats than other major California cities since the state loosened regulations in 2016, and city officials believe that’s probably because the city charges fees that are among the highest. Granny flats are considered ideal for senior citizens on fixed incomes that gave these units their colorful name, recent college graduates, and young people with lower-paying jobs. Since last November, San Diego had 64 granny flat applications compared to 1,980 in Los Angeles, 247 in Oakland, 34 in Sacramento, 593 in San Francisco, and 166 in San Jose. Fees to build a granny flat in San Diego typically range from $30,000 to $49,000 per unit, but it varies by neighborhood. The new approved legislation lowers the fees by as much as 50 percent depending on a variety of factors.

The legislation eliminates things such as water and sewer hook-up fees and a development fee based on the city’s general plan. It also decreases fees to help fund amenities needed to serve new housing, such as fire stations, library branches, parks and widened roads. The fee reduction would cost San Diego an estimated $900,000 per year in potential revenue if 100 granny flats are built. According to the San Diego Union-Tribune, a recent survey of the city’s 236,000 single family detached homes estimated that 2,000 to 6,000 granny flats could be built during the next decade. We will have to see if the approved legislation increases the construction of more affordable housing.

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