Beyond the Suburban Ideal: Addressing Southern California’s Strained Affordable Housing Market Through Density Bonus Programs

This study examines how expanding Accessory Dwelling Units (ADUs) could serve as an effective policy solution to address the housing affordability crisis. In San Diego, a Bonus Program has been implemented to incentivize the construction of affordable ADUs by relaxing burdensome regulations. A Differences-in-Differences approach using two-way fixed effects is employed to evaluate the program's effectiveness in promoting ADU development, using city-level data from San Diego and Los Angeles counties. ADU permit applications serve as a key indicator of policy impact. The findings strongly suggest that the Bonus Program influenced increasing ADU permit applications in San Diego. Because the model violated the parallel trends assumption, causality cannot be inferred, only correlation. Two policy alternatives considered alongside the Bonus Program are Community Land Trusts (CLTs) and maintaining the status quo. CLTs acquire land and property to ensure long-term affordable housing, primarily benefiting homeowners. However, because California has a high proportion of renters, CLTs must adapt to include rental properties to effectively support both low-income renters and owners. The status quo is inadequate and will likely become more costly the longer the housing crisis persists. The ultimate recommendation is to continue evaluating the impacts of the San Diego Bonus Program and explore its potential for replication in similar cities. Additionally, integrating ADUs within Community Land Trust frameworks may offer a long-term solution that addresses the needs of both low-income renters and homeowners.