This seaside community has found a way to encourage the development of affordable small-scale, neighborhood-compatible housing.

Santa Cruz has a unique “accessory dwelling unit” (ADU) development program that has won several planning and smart growth awards since being adopted by city leaders in 2002.

Often known as a “granny unit” or an “in-law unit,” an ADU is an additional living unit that has separate kitchen, sleeping, and bathroom facilities. It can be attached or detached from the primary residential unit on a single-family lot. In many cases, the dwelling is a converted garage or a small backyard cottage.

The construction of ADUs is a way to increase affordable housing in an expensive market and encourage in-fill development. First, it is increasing the housing stock. Second, it can help homeowners supplement mortgage payments to make their own housing more affordable in one of the most expensive housing markets in California. The median home price in Santa Cruz County tops $700,000.

Longtime residents were leaving because they could no longer afford to retire in the city and young people couldn’t afford to live where they grew up, according to Carol Berg, Santa Cruz’s housing and community development manager. “The crisis was hitting home for people,” she said.

The ADU program is allowing increased density without changing the character of existing neighborhoods, Berg said.

Started with a $350,000 grant from the California Pollution Control Financing Authority, the program allows homeowners to build these units on their property and combats illegal and poorly constructed granny units.

Santa Cruz’s program regulates the development of ADUs. The city has created a technical assistance program to assist homeowners in designing an ADU. There is also a loan program through a local credit union.

City officials held community workshops to inform the community about the program, prepared technical assistance materials for homeowners and even provided some prototype designs to give homeowners a jump start on creating an ADU.

In Santa Cruz, these units are allowed on residentially zoned lots that are 5,000 square feet or more, and they must meet setback, height, and other requirements.

Before the program, about 10 accessory units were being permitted a year. Since the adoption of the program, the city is averaging about 40 units a year, according to Berg.