ADMINISTRATIVE REPORT
MEETING DATE: August 7, 2025 AGENDA CATEGORY: NEW BUSINESS TO: Housing and Community Development Committee
FROM: Juan M. Heredia, Assistant to the City Manager
DATE: August 1, 2025
SUBJECT: Accessory Dwelling Unit (ADU) Forgivable Loan Program Proposal
[Document Description]
RECOMMENDATION:
Staff recommends Committee receive, file, and approve draft guidelines.
BACKGROUND:
Accessory Dwelling Units (ADUs) are defined as secondary housing units on single-family residential lots.
ADUs provide an affordable and flexible option for homeowners to provide additional independent living spaces for one or more persons. City staff regularly work with property owners and developers to facilitate the development of ADUs in the City of Bakersfield.
Over the last few years, the City has applied to several rounds of the state’s Permanent Local Housing Allocation (PLHA). In total the City has received $638,960.02 for ADU-related projects. In the applications, the City committed to using 100 percent of the funds to serve renters between 60 percent and 120 percent of the Area Median Income. The City has until 2030 to expend these funds.
In 2024, the City entered into a $400,000 contract with Willdan Engineering. The purpose of the contract was to identify illegal ADU conversions and connect property owners with resources to bring identified structures into compliance. Since then, Willdan has identified over 30 properties in the City with at least eight property owners allowing the contractor to inspect and document violations. The most common violations include electrical code violations; inadequate heating; improper water installation; window and egress issues; and missing smoke and carbon monoxide detectors. This contract is funded by the American Rescue Plan Act and funds need to be expended by October 31, 2026.
After considerable research into comparable cities and programs, city staff propose a new ADU Forgivable Loan Program (Program) to provide forgivable loans to qualified homeowners, for the purpose of bringing unpermitted ADUs into compliance. Forgivable loans would be administered by a third-party contractor and require the signing of a five-year covenant to rent at an affordable rate to low and very low -income individuals or families. Loans offered by the contractor would cover building permit fees, design and construction costs, and administrative fees. This program wo uld connect property owners with a dedicated Case Manager who would serve as the subject matter expert and point of contact for the City.
City staff propose hiring a qualified, third-party contractor to carry out this program. The contractor would use the City’s full PLHA allocation of $638,960 to pay for any ADU related fees and repairs. The contractor’s administrative fees would be paid out a projected $80,000 in savings from the ARPA allocation to Willdan Engineeing. The City may pull additional funds from the Willdan contract if the bids submitted by qualified contractors exceed the $80,000 target.
FISCAL IMPACT:
There is no fiscal impact to the General Fund. The proposed program will use existing Permanent Local Housing Allocation funds for the ADU improvements and previously allocated American Rescue Plan Act funds for the administration of a future contract.
COUNCIL GOAL:
Economic Opportunity for All
ATTACHMENTS:
1. Bakersfield ADU Forgivable Loan Program Guidelines
2. Bakersfield ADU Forgivable Loan Program One-Pager