San Jose leaders kicked off the new year Tuesday by unanimously approving an accessory dwelling unit amnesty program for residents who need to get a permit for their backyard cottages and get them up to code.

The program is one of the final steps in the city’s plan to make accessory dwelling units easier to build and part of a larger statewide effort to increase California’s housing supply.

As Silicon Valley’s available land supply shrinks and leaves less room to build, the cost of existing housing rises. So San Jose lawmakers have implemented a slew of measures that prioritize ADUs, known colloquially as “granny flats,” to increase the city’s housing stock and meet the needs of extremely low-income residents who need housing.

“First and foremost we want to encourage safe housing for all of our residents throughout the city,” city Planning Director Rosalynn Hughey said at Tuesday’s meeting. “Secondly, we really do see this as part of the city’s housing strategy. The housing crisis is driving all of us to really identify ways of bringing in more units into the pipeline and we think that bringing unpermitted ADUs into compliance helps us expand the legal housing stock throughout the city.”

The two year program adopted at Tuesday’s meeting comes a little less than a week after Senate Bill 13, which lowers development impact fees and eases restrictions for homeowners who want to build ADUs, took effect. City officials said that through the five step process to enter the program, homeowners will start by completing a self-assessment checklist, which outlines the program eligibility guidelines, helps them understand the city’s safety and health requirements as well as potential overall costs before applying.

The process to qualify for the program will also require that homeowners work directly with the city’s third party consultant and an ADU amnesty coordinator to perform a pre-application inspection of the unit, a permit application review, and a final inspection before the homeowner can submit their application to the city.

The homeowner may be subject to fees, however, if there are significant health and safety risks in the unit such as “hazardous wiring, structural hazards, inadequate fire protections or exits, a lack of sanitation or water, and a gas appliance in a sleeping room.”

At Tuesday’s meeting, several lawmakers expressed their support for the program, including Councilmember Pam Foley who said ADUs were the “low-hanging fruit” of affordable housing opportunities.

“This is really exciting to see the final piece of the amnesty program come to fruition,” Foley said. “It’s an easy opportunity for us to build additional housing for folks to create housing opportunities for people who are aging, for millennials who need a cheaper place to live, or for a homeowner to earn an additional income.”

San Jose lawmakers first discussed an amnesty program a little more than three years ago, as part of an effort to make illegally built secondary housing safe and compliant with city codes. While city leaders have discussed the program for years, officials waited until state laws such as SB 13 went into effect before moving forward with the city’s proposed plan for the amnesty program.

The city’s program waives certain fees and taxes, such as a business license tax.

Hughey said the average rent for a South Bay granny unit is about $1,850 per month, totaling $22,200 annually. But two times the poverty level equals $24,980 if homeowners rent out their unit at a maximum monthly rent of $2,081, which means that most homeowners who rent out an ADU can qualify for a tax exemption from the city.

Some outstanding taxes and fees for homeowners who want to bring their illegal granny flats up to code, such as a penalty fee for unpermitted construction, will also be waived. These permit fees are based on the size of the ADU and start at $1,435 for a unit smaller than 750 square feet and $2,088 for a unit larger than that threshold.

Through the amnesty program, city officials estimate that 50 permit fees for ADUs can be waived this year, averaging to $5,862 per application and totaling $293,000 in waived fees. For 2020-2021, the city will accept 100 waived permit fee applications, totaling $586,200.

As part of SB 13, park fees, a sort of impact fee for all new ADUs smaller than 750 square feet are also waived, reducing the costs homeowners might have to pay.

“Our intention is to provide an opportunity and incentives for homeowners to legalize unpermitted units and make them safer for tenants without fear of penalty or fines. If implemented carefully, we can expand our stock of safe, naturally affordable housing without opening the door to code enforcement cases,” San Jose Mayor Sam Liccardo wrote in a memo released late Tuesday.

Councilmember Magdalena Carrasco raised concern about potential immigration enforcement of undocumented residents who need to permit their granny flats.

“We always need to think about our communities that are more challenged on the question of documentation,” Carrasco added. “I think making sure that we put that out there as well — we’re not cooperating with any immigration enforcement department when we gather any sort of information and this won’t be held against them.”

Last year, city officials rolled out an extensive plan focused on making it easier for homeowners to build granny flats in their backyards. The plan included a $5 million forgivable loan program to cover planning, permitting and other predevelopment soft costs as long as homeowners do not rent out their ADU at market rate for at least five years, an “express” service at City Hall on Tuesdays for residents to obtain a permit, and a preapproved city ADU design homeowners can adopt to speed up the building process.

In line with the newly-adopted state laws, several of the city’s zoning codes were also updated, eliminating a minimum lot size for a newly constructed unit and allowing the construction of “junior” ADUs — units up to 500 square feet.

City officials said they are looking for more funding to hire additional staff to assist with the new program later this year. The new program will take effect Jan. 21.

Contact Nadia Lopez at [email protected] or follow @n_llopez on Twitter.