The Affordable Unit That Costs Me Almost Nothing
How one deed-restricted unit unlocked five ADUs, why its rent cap sits above market, and the $0 lien I have to re-subordinate at every refinance
The Deal Behind the Density
San Diego's ADU Bonus Program is generous, but it isn't free. It let me build five new units on a duplex lot -- far more than base zoning allows. The price of that bonus: one unit must be deed-restricted affordable for 15 years.
For me, that unit is 3316 Luna Ave, Unit 2 -- the second-floor 2-bedroom in Structure B. It has to be rented to an income-qualified household, at a capped rent, with the city's housing agency approving every tenant. In exchange, I got the density that makes the whole project pencil.
The Twist: The "Cap" Is Above Market
Here's the part that surprised me. Everyone assumes an "affordable" unit means renting at a painful discount. Ours doesn't.
The affordable unit is tied to the Moderate Income tier -- 110% of Area Median Income (AMI). That's a much higher ceiling than the "low income" tiers people picture. Run the 2026 numbers for a 2-bedroom (imputed 3-person household):
| Step | Figure |
|---|---|
| 110% AMI, 3-person (2026) | $129,600/yr |
| × 30% (housing portion) | $38,880/yr |
| ÷ 12 | $3,240/mo gross |
| − all-electric utility allowance | −$163/mo |
| Maximum collectible rent | $3,077/mo |
My market ask for that same unit? About $2,895/mo. The affordable cap sits roughly $180 above what I'd charge anyway. The rent restriction isn't a financial constraint at all -- it's barely a ceiling. What it actually costs me is procedure, not money.
What It Actually Costs: Process
The real price of the affordable unit is paperwork and control:
- The city approves the tenant, not me. Per the recorded agreement, "No Affordable ADU shall be rented to a prospective tenant... unless and until the Commission... has verified that the prospective tenant or occupant is eligible." I can't sign a lease until the San Diego Housing Commission (SDHC) signs off.
- The tenant must qualify. Household income at or below 110% AMI, limited liquid assets, no relatives of mine, not a full-time student or my tax dependent, and they can't own other residential property.
- Annual recertification. Every year, for 15 years, the household's income gets recertified and I pay a monitoring fee. Miss a fee and it's a material default.
The clock on all of this starts the day the Certificate of Occupancy issues -- which, as of this writing, still hasn't. So the 15 years haven't begun. Every week of closeout delay is a week of carrying cost that buys me nothing, and it doesn't even shorten the affordability term on the back end.
The $0 Lien That Follows Me Around
To enforce the affordability promise, SDHC recorded two documents on my title on February 25, 2025:
- The Affordable Housing Agreement (Recording No. 2025-0047127)
- A Deed of Trust (Recording No. 2025-0048156)
That deed of trust is the strange one. In SDHC's own words, "This is not a loan. It is a regulatory covenant with a $0 balance." I don't owe anyone anything. There's no payment, no foreclosure risk. It exists purely to enforce the rule.
But on a title report, a deed of trust is a deed of trust. Every lender demands that all liens sit behind their new mortgage -- a process called subordination. So every single time I refinance, SDHC has to sign a fresh agreement stepping behind the new lender.
Why That's a Recurring Headache
I've already lived this once. When we closed the Arixa construction loan, the SDHC subordination was the slowest, most fragile item on the board -- it even got killed and restarted when my first lender collapsed (that's a whole other chapter). It finally recorded alongside the Arixa loan on May 27, 2026.
And I get to do it all again. The moment I refinance into a permanent DSCR loan, SDHC must subordinate the $0 lien a second time to the new lender. A piece of paper with no money attached to it is, functionally, a standing tax on every future financing I do -- paid in weeks of coordination rather than dollars.
The Lesson
The affordable-housing requirement in an ADU Bonus deal is not the villain people expect. If your project lands in a moderate-income tier in a high-cost city, the rent cap may sit at or above market -- the density you unlock is worth far more than the rent you "give up." The real cost is operational: the city vets your tenants, you recertify every year, and a zero-dollar lien rides your title, demanding a fresh subordination at every refinance for a decade and a half. Price that friction into your plans, not a rent discount that may not even exist.