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NAPA, CA (November 29, 2022) – With the passage of the Affordable Accessory Dwelling Unit Forgivable Loan Program, the Napa County Board of Supervisors has taken a major step forward in the development of additional affordable housing units throughout the County.
Napa County’s new program, launching in January 2023, will provide forgivable construction loans for Accessory Dwelling Units (ADU) in exchange for commitments to rent those properties to households earning at-or-below 80% Area Median Income (AMI) for a period of not less than five years or 60 months.
County officials indicated this program is among the first of its kind in the country. They expect other jurisdictions will quickly follow Napa County’s lead.
“Today’s action continues Napa County’s long-standing efforts to support the creation of Accessory Dwelling Units,” stated Ryan Gregory, chair of the Board of Supervisors. “The Affordable Accessory Dwelling Unit (AADU) Forgivable Loan Program is a significant public-private partnership that will help homeowners build vital new affordable housing for local families and workers within our community. Our work to spur ADU development goes back many years, including early partnership with and investment in the Napa Sonoma ADU Center. With this program we finally have a mechanism to bring one of our most pioneering ideas to life.”
Gregory also indicated that County programming will continue to assist homeowners with overall ADU education, feasibility consultation and technical assistance, managed construction escrow services, and tenant selection.
Program Background and Context
Passage of the federal American Rescue Plan Act (ARPA) in March 2021 provided the possibility of significant funding for qualified affordable housing programs. At the Board of Supervisors’ direction, Napa County staff began working with consultants at LeSar Development and the Napa Sonoma ADU Center as well as key stakeholders throughout the County to develop an Affordable Accessory Dwelling Unit (AADU) Forgivable Loan Program.
The program presented to the Board provides forgivable construction loans for ADU development to homeowners in Napa County who occupy their home as their primary residence in exchange for all of the following homeowner commitments:
1. Construction of a new ADU at the homeowner’s primary residence
2. Renting the unit to an individual or household earning at-or-below 80% Area Median Income
3. A maximum monthly rental rate equal to or less than rent that is Affordable Rent for 80% AMI households for a period of not less than five years or 60 months.
In exchange for these commitments, the County will offset a portion of the homeowner's cost of ADU construction with an AADU Forgivable Loan "Base Loan" that ranges in amount based on the number of bedrooms.
In addition, homeowners participating in the program are eligible for certain additional loan incentive amounts for a maximum possible AADU Forgivable Loan Amount of:
Small (Studio ADU): $ 45,000
Medium (1-Bedroom ADU): $ 80,000
Large (2-Bedroom ADU): $105,000
Loans are available to homeowners anywhere in the geographic boundary of Napa County who occupy their homes as their primary residence. All units assisted by the program will be subject to an affordability covenant for the rental term of five years or 60 months. For each 12-month period in which the borrower is compliant, 20% of the AADU Forgivable Loan will be forgiven, including interest.
Upon certification of 60 months of program compliance, the AADU Forgivable Loan will be fully forgiven. A borrower who has received an AADU Forgivable Loan may "opt out" of the program at any time by reimbursing the County for the remaining portion of the forgivable loan, including any interest due. At the time of either certification of 60 months of program compliance, or op-out and repayment of the outstanding loan amount, the County will remove the Affordability Covenant recorded on the unit.
Homeowners will be required to certify tenant income at the time of lease-up, following income certification guidelines established by the California Department of Housing and Community Development (HCD). Homeowners participating in the program will submit tenant income verification documents to Napa County staff for certification. Recertification of an existing/continuing tenant on an annual basis is not required. In addition, eligible households may be related to the homeowner. If a certified tenant vacates the unit during the time of the affordability covenant, a new tenant must be income verified and certified by the County. Finally, any months during which a unit is vacant due to tenant turnover will not count toward the 60-month affordability requirement.