San Diego ADU Bonus Program and Grants: What Homeowners Need to Know
San Diego has one of the most developed local ADU incentive ecosystems in California. The city's ADU Bonus Program lets homeowners build more units than state law allows. The San Diego Housing Commission offers below-market construction loans. A federal tax credit applies to newly built, energy-certified ADUs. And automatic fee exemptions reduce permit costs on projects under 750 square feet. This guide explains what each program covers, who qualifies, how to apply, and what changed in August 2025.
Note: Program rules, income limits, and eligibility requirements change. The Bonus Program was substantially amended in August 2025. Verify current requirements with the City of San Diego Development Services Department and the San Diego Housing Commission before making project decisions.
Quick Summary
San Diego's ADU Bonus Program lets you build one bonus market-rate ADU for every affordable (deed-restricted) ADU you build — with no cap in Sustainable Development Areas. The SDHC Finance Program offers construction loans up to $250,000 at 1% interest for qualifying homeowners. Automatic impact fee exemptions apply to ADUs under 750 sq ft. The CalHFA $40,000 grant is currently paused.
The San Diego ADU Bonus Program: How It Works
San Diego's ADU Bonus Program is a local city program — separate from state ADU law — that gives homeowners a specific trade: agree to rent one ADU to an income-qualified tenant at below-market rent, and the city allows you to build one additional market-rate ADU that you can rent at whatever the market will bear.
The core ratio is one bonus ADU for every affordable ADU. Outside Sustainable Development Areas, that means you can build a pair: one deed-restricted affordable unit and one unrestricted bonus unit. Inside Sustainable Development Areas (SDAs), there is no cap — you can build multiple bonus units as long as each is matched by an affordable unit.
Income Tiers and Rent Limits
The affordable ADU must be rented to a tenant whose income qualifies at one of two levels, each with a different deed-restriction period:
| Affordability Tier | AMI Level | Deed Restriction | Example 3-Bed Rent |
|---|---|---|---|
| Low Income | 60% AMI | 10 years | ~$2,234/month |
| Moderate Income | 110% AMI | 15 years | ~$3,328/month |
Note: Rent limits and AMI figures are updated annually by the San Diego Housing Commission. The figures above reflect 2025 program data. Confirm current limits with SDHC before setting rents. A $150 annual fee covers tenant income verification during the deed-restriction period.
The affordable ADU must also meet a design parity requirement: its square footage must be within 15% of the bonus unit's square footage, or both units must have a similar bedroom count. You cannot build a tiny 200 sq ft studio as the affordable unit in order to unlock a large 1,200 sq ft bonus ADU.
Sustainable Development Areas (SDAs): Why Location Matters
SDAs replaced Transit Priority Areas as the key geographic category in February 2023, and they cover a broader footprint of San Diego. If your property is in an SDA, the program works without an upper cap on bonus units. Outside an SDA, you are limited to one affordable plus one bonus unit on a single-family lot.
You can confirm your property's SDA status through the City of San Diego's online mapping tools or by contacting the Development Services Department.
What Changed in August 2025
The San Diego City Council adopted significant amendments to the ADU Bonus Program in July 2025, effective August 22, 2025. If you heard about the Bonus Program before that date, many of the rules you read no longer apply. Key changes:
- New density caps by lot size: Single-family lots now have maximum unit limits: 4 total units on lots under 8,000 sq ft; 5 units on lots 8,001–10,000 sq ft; 6 units on lots over 10,000 sq ft. These caps apply across all ADUs and JADUs on the parcel.
- Program eliminated in 8 low-density zones: The Bonus Program is no longer available in single-family zones RS-1-1 through RS-1-11, except for properties in designated high-opportunity areas. If your property is zoned RS-1 or similar, verify eligibility before planning.
- Fire sprinklers now required: All affordable and bonus ADUs built under the program must include mandatory fire sprinkler systems. This adds to construction cost and should be factored into project budgets.
- Community Enhancement Fee: Bonus ADUs under 750 sq ft — which were previously fully exempt from development impact fees under state law — now face a Community Enhancement Fee in San Diego. This is a city-level fee layered on top of the state exemption.
- Parking requirements reinstated: One parking space per affordable or bonus ADU is now required for projects outside Transit Priority Areas.
- Fire hazard zone restrictions: The program is not available in High or Very High Fire Hazard Severity Zones unless the property has two independent evacuation routes.
Applying for the ADU Bonus Program
- 1Confirm your property's zoning and SDA status. The Bonus Program is unavailable in several RS-1 zones and High/Very High Fire Hazard Zones. Check the City's zoning map or contact Development Services.
- 2Work with an architect or ADU designer to prepare project plans. Both the affordable and bonus ADU must meet design parity requirements (within 15% sq ft of each other or similar bedroom count).
- 3Submit your plans to the City of San Diego Development Services Department. The Bonus Program application runs alongside your standard building permit review.
- 4Pay the $600 application fee to the San Diego Housing Commission (SDHC). SDHC reviews and drafts the affordable housing agreement — a process that typically takes 60 to 90 days but can run concurrently with city plan check.
- 5Sign and record the affordable housing agreement. This deed restriction is recorded against your property and remains for the duration of the restriction period (10 or 15 years depending on income tier).
- 6Receive building permit approval and begin construction. Fire sprinklers are now required for all affordable and bonus ADUs under the program.
- 7Tenant qualification: each time a new tenant moves in, their income must be verified against the current AMI limits. The $150 annual fee to SDHC covers this verification.
Financial Programs and Incentives
ACTIVESDHC ADU Finance Program (Up to $250,000)
The San Diego Housing Commission offers a construction loan program specifically for ADU projects that include an affordability covenant. This is one of the most favorable financing options in the state for qualifying homeowners.
| Detail | Terms |
|---|---|
| Maximum loan | Up to $250,000 |
| Interest during construction | 1% fixed |
| Interest after completion | 4% fixed for 15 years |
| Affordability requirement | Tenant income at or below 80% AMI |
| Homeowner income limit | At or below 150% AMI (~$236,000) |
| Credit score minimum | 680 |
| Added benefit | Pre-reviewed construction drawings ($10,000–$25,000 value) |
| Application fee | $600 to SDHC |
The pre-reviewed construction drawings are a substantial benefit. SDHC maintains a library of pre-approved ADU plans that have already been reviewed for code compliance. Using one can cut design costs and accelerate the permit process.
PAUSEDCalHFA ADU Grant ($40,000)
California's statewide ADU grant program provided up to $40,000 for pre-construction costs: architectural plans, permits, soil tests, surveys, energy reports, and utility hookup fees. It did not cover construction labor or materials.
The program exhausted its funding and is currently paused, with no confirmed restart date. When active, San Diego County applicants qualified at 80% of Area Median Income. Applications were processed through CalHFA-approved lenders alongside construction financing — not directly with CalHFA.
Monitor calhfa.ca.gov/adu for updates. When the program reopens, funding is first-come, first-served and exhausts quickly. Identifying a CalHFA-approved lender before the program reopens puts you in a stronger position to apply promptly.
ACTIVEImpact Fee Exemption (CA Gov. Code §66329)
ADUs under 750 square feet are fully exempt from local development impact fees under California state law. ADUs 750 sq ft or larger pay fees proportionally to size, not at the full single-family rate. In San Diego, development impact fees for residential units can approach or exceed $20,000. The exemption applies automatically — no application, no income limits.
Note: the August 2025 Bonus Program amendments introduced a Community Enhancement Fee that applies to bonus ADUs under 750 sq ft within the Bonus Program specifically. Standard ADUs built outside the Bonus Program retain the full state exemption.
TIME-SENSITIVESection 45L Federal Energy Tax Credit (Up to $5,000)
Section 45L of the federal tax code provides a tax credit of up to $5,000 for newly constructed, energy-efficient dwelling units that meet ENERGY STAR or DOE Zero Energy Ready Home certification. Most newly built detached ADUs that are rented out qualify if they achieve the required energy certification.
The credit applies to the person who builds and places the unit in service. For homeowners building their own ADU as owner-builders and then renting it out, this may apply directly. For homeowners who use a contractor, confirm with a tax professional whether and how the credit flows through to you.
Deadline alert: Current credit levels for homes placed in service through June 30, 2026 are up to $5,000 per unit. Credit structure and amounts may change for homes completed after that date. ADUs already under construction or nearing completion may still qualify if placed in service before June 30, 2026. Consult a tax professional to confirm your eligibility and current credit terms.
San Diego ADU Programs at a Glance
| Program | Status | Who Qualifies | Benefit |
|---|---|---|---|
| ADU Bonus Program | Active (amended Aug 2025) | Residential lots; most zones (not RS-1-1 through RS-1-11); not in High Fire Hazard zones without dual evacuation | 1 bonus market-rate ADU per affordable ADU; unlimited in SDAs |
| SDHC ADU Finance Program | Active | Owner-occupants at ≤150% AMI (~$236K); credit score ≥680; must include affordability covenant | Up to $250,000 at 1% during construction; 4% for 15 years after |
| Impact Fee Exemption | Active | All ADUs under 750 sq ft; no income limits | Full exemption from local development impact fees |
| Section 45L Tax Credit | Active (check deadline) | ADUs meeting ENERGY STAR or DOE certification; placed in service by June 30, 2026 for current rates | Up to $5,000 per unit |
| CalHFA ADU Grant | Paused | Owner-occupants at ≤80% AMI; single-family or 2-4 unit property | Up to $40,000 for pre-construction costs |
Homeowner Checklist Before You Start
- ✓Verified your property's zoning — confirm it is not in RS-1-1 through RS-1-11 zones where the Bonus Program was eliminated
- ✓Checked whether your address is in a Sustainable Development Area (SDA) using the City's mapping tool
- ✓Confirmed your property is not in a High or Very High Fire Hazard Severity Zone (or that it has two independent evacuation routes)
- ✓Calculated lot size to determine your density cap under the August 2025 amendments
- ✓Determined whether the SDHC ADU Finance Program fits your income and credit profile (≤150% AMI, credit score ≥680)
- ✓Checked CalHFA for any program reopening at calhfa.ca.gov/adu
- ✓Confirmed your ADU design is under 750 sq ft to retain the full state impact fee exemption (if not using the Bonus Program)
- ✓Consulted a tax professional about the Section 45L credit if your ADU is already under construction or nearing completion
Related Guides
Frequently Asked Questions
What exactly is San Diego's ADU Bonus Program?
San Diego's ADU Bonus Program allows homeowners to build additional market-rate ADUs beyond what state law normally permits — in exchange for deed-restricting at least one ADU as affordable housing. The standard ratio is one bonus market-rate ADU for every affordable (deed-restricted) ADU. In Sustainable Development Areas, there is no cap on the number of bonus ADUs.
Do I have to rent the affordable ADU below market rate permanently?
No. The deed restriction lasts 10 years for low-income units (60% AMI) or 15 years for moderate-income units (110% AMI). After the restriction period ends, you can rent the ADU at market rates. The San Diego Housing Commission charges a $150 annual fee for tenant income verification during the restriction period.
How does the SDHC ADU Finance Program relate to the Bonus Program?
The SDHC ADU Finance Program is a construction loan program that finances ADU projects requiring an affordability covenant. It offers up to $250,000 at 1% interest during construction and 4% fixed for 15 years after, for homeowners who agree to rent to tenants at 80% AMI or below. Many Bonus Program participants use the SDHC loan to finance their affordable unit.
Is the CalHFA ADU Grant available in San Diego right now?
No. The CalHFA ADU Grant, which provided up to $40,000 for pre-construction costs, is currently paused due to funding exhaustion. There is no confirmed restart date. Homeowners should monitor calhfa.ca.gov for updates. When the program was active, San Diego County applicants qualified at 80% of Area Median Income.
What changed about San Diego's Bonus Program in August 2025?
The City Council adopted significant amendments effective August 22, 2025. Key changes: the program was eliminated in eight low-density single-family zones (RS-1-1 through RS-1-11) except in high-opportunity areas; maximum unit caps were added by lot size; mandatory fire sprinklers apply to all affordable and bonus ADUs; a Community Enhancement Fee now applies to bonus units under 750 sq ft; and parking requirements were added in areas outside Transit Priority Areas.
What are Sustainable Development Areas and how do they affect my options?
Sustainable Development Areas (SDAs) are geographic zones in San Diego where ADU Bonus Program rules are more permissive — there is no cap on the number of bonus ADUs you can add per affordable unit. SDAs replaced Transit Priority Areas as the key geographic marker in February 2023 and cover more of the city. If your property is in an SDA, you have significantly more flexibility under the Bonus Program.
Disclaimer: This article is for informational purposes only and does not constitute legal, zoning, permitting, financial, or tax advice. The San Diego ADU Bonus Program was substantially amended in August 2025, and program rules may continue to change. Income limits, AMI figures, and loan terms are updated annually. Verify all current requirements with the City of San Diego Development Services Department, the San Diego Housing Commission, CalHFA, and a qualified tax professional before making project decisions.
Sources
- City of San Diego Planning — Housing Affordability Toolkit (ADU Bonus Program): sandiego.gov/planning/work/housing/toolkit
- San Diego Housing Commission — ADU Finance Program: sdhc.org
- California Housing Finance Agency — ADU Grant Program: calhfa.ca.gov/adu
- California Government Code Section 66329 — ADU impact fee exemptions: leginfo.legislature.ca.gov
- IRS — Section 45L New Energy Efficient Home Credit: irs.gov
- California Department of Housing and Community Development — ADU Handbook: hcd.ca.gov
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