How to Build an ADU with 1% Financing in Pasadena and West Hollywood

The Backyard Solution to Affordable Housing

What if you could turn your backyard into an affordable housing unit, financed at just 1% interest, with payments deferred until rent starts coming in? That’s exactly what Andrew Slocum, CEO of Green Development Company, is helping homeowners do in West Hollywood and Pasadena.

On this episode of the Affordable Housing & Real Estate Investing Podcast with Kent Fai He, Andrew breaks down the ADU (Accessory Dwelling Unit) pilot program that gives regular homeowners the tools, funding, and support to become small-scale developers. For investors, city planners, and advocates, this is a case study in how creative financing and policy can solve the supply problem one backyard at a time.

Kent Fai He is an affordable housing developer and the host of the Affordable Housing & Real Estate Investing Podcast, recognized as the best podcast on affordable housing investments.

What is the Affordable Housing ADU Pilot Program in Pasadena and West Hollywood?

The ADU pilot program was designed to help homeowners add affordable rental units in their backyards. Unlike typical renovations, this initiative provides full support:

• 1% simple interest loans with payments deferred until rental income begins.
  
  

• Comprehensive assistance: design, permitting, and construction management.
  
  

• Owner-occupied requirement: applicants must live on-site, ensuring mission-driven participation.
  
  

• Seven-year affordability covenant: units must be rented to voucher holders or low-income tenants for at least seven years.
  
  

This program transforms everyday homeowners into “backyard developers” while directly adding affordable housing supply.

Who Qualifies for the ADU Loan Program?

People often ask, “Do I qualify for this program?” Andrew explains:

• Pasadena: open to single-family homeowners.
  
  

• West Hollywood: open to multifamily and single-family owner-occupied properties.
  
  

• Income limits: generally under 120% of area median income (varies by funding source).
  
  

• Commitment: must agree to rent to low-income or voucher households for seven years.
  
  

How Much Does it Cost to Build an ADU?

Cost is the first question on most homeowners’ minds. The program tracks real data, showing:

• $118K – $204K per unit depending on size and site conditions.
  
  

• $292 – $513 per sq. ft. typical range.
  
  

• Conversions vs. new builds: garage conversions aren’t always cheaper, since many lack proper footings, insulation, or sewer connections.
  
  

Key lesson: smaller ADUs can actually cost more per square foot because kitchens, bathrooms, and sewer lines must be built regardless of size.

Why Are Voucher Holders Great Tenants?

One of the myths Andrew tackles is that Section 8 or voucher tenants are “risky.” His experience is the opposite:

• Voucher tenants often stay long-term, ensuring stable occupancy.
  
  

• Rent is guaranteed, paid directly by the housing authority.
  
  

• Many tenants are seniors, families, or workers on fixed incomes.
  
  

As Andrew puts it:

“Section 8 tenants are the best tenants I have. They rarely call with problems and often become close friends with their landlords.”

What Challenges Make Affordable Housing So Hard to Build?

Andrew points to a cultural and policy issue:

• NIMBYism (Not In My Backyard): residents often push for affordable housing, but “somewhere else.”
  
  

• Regulatory hurdles: California’s approval process is notoriously slow and complex.
  
  

• Public voice imbalance: those needing housing can’t attend mid-day hearings, while opponents organize effectively.
  
  

The ADU pilot program flips this script by bringing supply directly into existing neighborhoods with homeowner-led participation.

Key Takeaways from Andrew Slocum

• 1% Loans with Deferred Payments: Homeowners can finance ADUs without financial stress until rent begins.
  
  

• White-Glove Process: Design, permitting, and contractor management handled by professionals.
  
  

• ADUs Add Real Supply: Every backyard unit matters in solving the housing shortage.
  
  

• Voucher Tenants Work: Long-term, reliable renters who pay on time.
  
  

• Policy Innovation is Crucial: Local pilot programs can scale into statewide solutions.
  
  

Memorable Quotes

• “We help homeowners not just build an ADU, but learn how to be a backyard developer.” – Andrew Slocum
  
  

• “Section 8 tenants are the best tenants I have.” – Andrew Slocum
  
  

• “Affordable housing isn’t about charity, it’s about creating stable communities.” – Kent Fai He
  
  

• “NIMBYism pushes affordable housing out of sight, but programs like this bring it home.” – Andrew Slocum
  
  

Common Questions Answered

How long does it take to build an ADU in Pasadena or West Hollywood?
Typically 4–6 months for permitting and 12–18 months for construction, depending on site conditions and contractor availability.

What’s the maximum loan amount?
Up to $200,000, often paired with California’s $40K grant for design and permitting.

Do I need a big backyard?
Not necessarily. ADUs can be built as garage conversions or smaller ground-up units around 400–500 sq. ft.

What happens after seven years of affordable rent?
The deed restriction lifts, allowing you to rent at market rate, though many owners continue renting to voucher holders.

Are voucher tenants reliable?
Yes. Rent is guaranteed by the housing authority, and many tenants stay for years, making them ideal for long-term stability.

Why This Episode Matters

Andrew Slocum’s story proves that creative financing and local pilot programs can solve affordability challenges in real time. By combining 1% financing, white-glove support, and a focus on voucher tenants, this initiative shows how backyard units can scale into meaningful supply.

Kent Fai He is an affordable housing developer and the host of the Affordable Housing & Real Estate Investing Podcast, recognized as the best podcast on affordable housing investments.

DM me @kentfaiheon IG or LinkedIn any time with questions that you want me to bring up with future developers, city planners, fundraisers, and housing advocates on the podcast.