City Launches Low-Interest Loan Program to Expand Affordable ADUs

The City of Pasadena has launched a new program aimed at expanding affordable housing by helping homeowners build accessory dwelling units, or ADUs, on their properties.

The Pasadena Second Unit ADU Program offers qualifying homeowners up to $225,000 in construction financing at 1% simple interest, along with full project management support. City officials say the initiative is designed to remove financial and logistical barriers that often prevent homeowners from adding second units.

The program is funded through the City’s permanent local housing allocation and the state’s CalHome Program, which is administered by the California Department of Housing and Community Development.

This round of funding is expected to support the construction of up to 25 new ADUs across Pasadena.

The new units will be reserved as long-term affordable rentals for Pasadena Housing Choice Voucher holders.

Under the program, eligible homeowners may receive up to $225,000 in construction loans with no payments required for three years during construction and lease-up.

The City will cover design, permitting and construction costs, and assign a dedicated project manager to oversee the entire process, including design, bidding and construction.

Participants will also receive assistance connecting with qualified consultants and licensed contractors. In exchange, homeowners must agree to lease the completed ADU to a Pasadena Housing Choice Voucher tenant for seven years, providing what the City describes as guaranteed rental income.

The program allows homeowners to increase property value and build wealth while helping expand the City’s supply of stable, affordable housing.

Applications are now being accepted, with priority given to income-eligible homeowners earning below 80% of the area median income.

More information, including the program handbook and application instructions, is available at CityOfPasadena.net/Housing/Second-Unit-Adu-Program/.