The city of Oakland is accepting applications for a new loan program supporting homeowners who want to turn an unpermitted second unit like a backyard cottage or add-on studio into a legal accessory dwelling unit, also called an ADU.

In recent years, the city and state have encouraged residents to build ADUs in order to provide more housing. ADUs are cheaper and easier to build than standard apartments and houses and can allow multiple generations of a family to live together on one property.

New policies have made it easier to get permission from the city to build ADUs. But many homeowners have been quietly using structures on their property as extra housing for years, without permits.

A city report in 2020 found several common barriers to building or converting existing units into permitted ADUs, including “daunting” city procedures and regulations, and high costs of construction, especially in areas where the units rent for lower prices, like East Oakland. 

Because of these challenges, “unpermitted units are prevalent, but there is little incentive to bring these units into the official housing stock,” the report said.

The new Accessory Dwelling Unit Loan Program will offer low-interest, 30-year loans up to $100,000 to convert an “‘almost’ second unit” into a legal ADU. The program includes assistance with designing and building the ADU. 

Low-income applicants in most of East and West Oakland are eligible to apply. In this case, you’re considered low-income if you make up to 80% of the area median income, which is $76,750 for a one-person household and $109,600 for a four-person household. (The city has a check-list for determining eligibility, and an info sheet describing the full process of the program.)

Oakland plans to award about 25 of these loans through February, but you’ll be prioritized if you apply by Dec. 1. There is no fee to apply. Find more information on the city’s webpage.