The residence known as The Dufour caters to UCSC students and will soon have an adjacent ADU providing more housing units.
(Kevin Painchaud / Lookout Santa Cruz)

‘It’s infuriating’: Why Santa Cruz’s earliest ADU adopters are asking where to find their perks

The original restrictions faced by those who built ADUs when they became legal in 1986 — such as owner occupancy for renting them out, parking and setbacks — are no longer in order for today’s owners taking advantage. So why haven’t the terms been updated for those ADU pioneers?

Royce Fincher, a 30-year homeowner on Santa Cruz’s Westside, built a modest backyard apartment in 2005 with his own callused hands, saving money by using free building plans and pounding nails after work and on weekends.

His legally built accessory dwelling unit (ADU) was tightly restricted by city regulations, limited to 500 square feet, set far from property lines, with two indoor parking spots, fire sprinklers and — most impactful — subject to an owner-occupancy deed restriction.

The deed restriction requires Fincher and any future owner of the home, in perpetuity, to live on site if the ADU is rented out. According to city records, the restriction applies to 530 ADUs built in Santa Cruz between 1986 and 2019.

Owner-occupancy deed restrictions on ADUs were required by Santa Cruz and many other California jurisdictions until 2019. That year, state Senate Bill 13 ushered in a raft of changes aimed at alleviating the state’s housing crisis by encouraging construction of as many ADUs as possible. SB 13 replaced restrictive local zoning rules with looser state rules, and banned the use of owner-occupancy restrictions for five years.

Fincher’s deed restriction didn’t bother him too much until last month, when a new ADU started going up behind a rental home across the street. The house caters to UC Santa Cruz students, and the new ADU was larger than his, with smaller setbacks, no public hearing, no owner on site, no off-street parking requirement, no built-in fire sprinklers, and no everlasting deed restriction.

I totally encourage this guy to do what he wants with his property, but the contrast between what he can build and what I was allowed is just unbelievable.

“I totally encourage this guy to do what he wants with his property, but the contrast between what he can build and what I was allowed is just unbelievable,” Fincher said. “And I’m the one with a serious valuation restriction on my biggest asset. It’s infuriating.”

Fincher gets along fine with the UCSC students and thinks his neighbor should be able to build an ADU. He just wants his deed restriction lifted in the name of fairness.

* * *

The guy across the street, as it happens, agrees with Fincher.

Luhan Winn does not live at The Dufour, the sleek student residence he owns across the way from Fincher’s house. But he’s a longtime resident on nearby Younglove Avenue, and he built an ADU behind his home around the same time that Fincher did, with all of the same restrictions. When he heard about the new state rules, he applied for a permit to add an ADU behind The Dufour.

“It took about five months to get the permit, and so far so good,” Winn said. “The setbacks and such city requirements are looser on the new ADU, but the technical requirements are much more stringent. The biggest difference is that you don’t have to occupy one unit — you can rent both (the house and the ADU) out.”

Like Fincher, Winn thinks the city should eliminate owner-occupancy deed restrictions and level the field for the folks who played by the rules before 2019 and those playing by the rules now.

Unbeknownst to Winn and Fincher, Santa Cruz city staffers foresaw the looming deed-restriction equity gap in 2019, before SB 13 took effect. The issue was discussed by the city planning commission that November, and it recommended that owner-occupancy deed restrictions be eliminated.

The city council heard the issue that December and punted. Staff was asked to develop a community outreach effort to gauge public sentiment. That effort was set to launch in spring of 2020, “and we all know what happened in spring of 2020,” said city Senior Planner Sarah Neuse.

City staff was diverted to address other pandemic-related priorities, and the fate of the owner-occupancy deed restriction is currently in limbo. But ADU owners are peeved, and some are considering legal action.

* * *

The debate over whether, where and how to build backyard cottages has a contentious history in Santa Cruz. The city was actually one of the first in California to legalize ADUs, in 1986. City zoning rules at the time forbade second units in single-family neighborhoods, and public hearings about allowing backyard cottages, or “granny flats,” were long and bitter.

At the time, some ADU opponents openly argued that second units would bring renters and attendant horrors flooding into their neighborhoods: crime, children, noise and — worst of all — people parking on the street in front of their homes. More measured voices claimed that ADUs would encourage housing speculation, inflating values and pushing out everyone but the wealthy. (And yes, this was in the early 1980s, when a single-family home in the city could be had for $150,000.)

Santa Cruz was one of the first cities in the state to allow ADUs.
(Courtesy Santa Cruz County Planning Office)

To their credit, city officials eventually approved rules allowing ADUs on some parcels. But the rules were so restrictive that few were built. The first generation of Santa Cruz ADUs were rent-controlled up until the early ‘90s, and all of them through 2019 had owner-occupancy requirements. Forty-seven of the city’s ADUs remain rent-controlled.

In hindsight, the original arguments against allowing ADUs have not held up over the years. Nearly 60% of Santa Cruzans are renters, many live in single-family neighborhoods, and they haven’t proved to be better or worse neighbors than anyone else. And property values have not been held down in the least by deed restrictions on 530 homes citywide.

State Sen. Bob Wieckowski, who authored SB 13, is determined to do away with owner-occupancy deed restrictions.

“I am planning to introduce legislation to make the prohibition on ADU owner-occupancy requirements permanent,” Wieckowski said in an emailed statement. “We don’t require them for single-family homes, apartment buildings, or duplexes. To me, they are just another unnecessary barrier to limit construction.

“Our goal at the state level, and increasingly in many cities, is to clear a path for more ADUs.”

Timon Read, a retired Metro driver, built an ADU on his property in 1989 — one of only four built that year. He never rented it out, but now that he’s retired, he’d appreciate the flexibility to move and rent if necessary.

“It would be good to be treated equitably, and good to have some options,” he said. “This is a caste system where people who have been here a long time are getting a worse deal.”

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