SANTA CRUZ, (By Fred A. Bernstein, NYTimes) February 6, 2004 - 70 miles south of San Francisco, is one of America's least affordable cities. With the average home price at $700,000, hundreds of Santa Cruz residents have resorted to living in "granny flats" or "mother-in-law apartments." But until a few years ago, building those units was illegal. "We had a black market in affordable housing," said Mark Primack, an architect and former member of the City Council.

In 2002, Santa Cruz took a radical step in a different direction, approving a series of changes not only to permit the construction of so-called accessory dwelling units (or A.D.U.'s) but also to encourage it. It even published a book of architects' plans for A.D.U.'s - a kind of catalog meant to show residents how they could increase density without sacrificing aesthetics.

The book is available for $22 by calling up www.ci.santa-cruz.ca.us, the city's Web site, and searching under Programs and Services. It includes a futuristic apartment that occupies the space of a two-car garage, designed by Peterson Architects of San Francisco.

Thinking of garages as potential housing is an unusual approach to a housing shortage. Santa Cruz's program "isn't the typical approach in American suburbs," said John Peterson, the firm's principal.

In many suburbs, accessory dwelling units are not just illegal but despised. They are said to bring noise, pollution, crowding and - perhaps most disturbingly for some - reduced property values. Some East Coast municipalities count bags of garbage, and keep tabs on gas meters, mailboxes and doorbells to spot illegal units.

But in California, accessory dwelling units are seen as a way of accommodating population growth without increasing sprawl. The California Legislature has for years been encouraging cities to lower barriers to their construction.

Santa Cruz is ahead of the curve. "There are planners in other towns who can't believe we got this passed," said Mr. Primack, who has lived in Santa Cruz for 30 years.

The city went far beyond merely permitting accessory dwelling units. To make the units more affordable, it offers homeowners mortgages, at 4.5 percent, in conjunction with a local credit union. It will also cover a part of the wages paid to some female construction workers under its Women Ventures Project.

And, in many cases, it no longer requires public hearings before approving accessory dwelling units. "The last thing most people want is to stand there as supplicants in front of their neighbors," Mr. Primack said. "Hearings were a major deterrent to A.D.U.'s."

The multipronged program has won awards from planning, architecture and environmental groups. And it seems to be having an impact. In 2001, before the program began taking effect, the city granted eight building permits for accessory dwelling units. Last year, it granted 39, and Carol Berg, the city's housing and community development manager, expects the number to be higher this year.

Mr. Primack recently designed a unit for Tori Milburn, a single mother of two teenage boys. The older boy, Kyle, 18, wanted to attend college locally, but he didn't want to actually live in his mother's house.

Mr. Primack figured out a way, he said, to convert Ms. Milburn's garage, attached to her 1970's clapboard house, to an apartment for $36,000. "And this in a town," he said, "where a subsidized housing unit costs about $400,000 to build."

Kyle is living in the apartment, which faces the street. "It's very independent, which is good for both of us," Ms. Milburn said. When he leaves someday, the apartment will be a source of income, she said. And, eventually, she may live in it herself and rent out the main house. That arrangement, Mr. Primack said, "could enable her to live out her years in Santa Cruz - literally tending her own garden."

Before 2002, the unit would have been illegal, because zoning law required every resident to provide covered parking - making it impossible for Ms. Milburn to use her garage for anything else. And without the unit, Ms. Milburn might have ended up like some other Santa Cruz retirees - forced to sell her home and leave this town of 56,000.

Market forces may drive home prices even higher. The city's largest employer, the University of California at Santa Cruz, is growing, and Silicon Valley is just a few miles north and east. In the 1980's the city established a greenbelt of protected lands that pretty much keep the city within its current borders.

In 2001, the city brought together local and regional housing advocates and experts to study its affordable-housing problem. When Ms. Berg, the city's housing manager, learned that the California Pollution Control Financing Authority was offering grants for programs aimed at curbing sprawl, she submitted an application. The city was awarded $350,000 over three years for the accessory dwelling units program.

Some of the money was used to hire architects to come up with appealing designs. The city issued a request for proposals, and architects as far away as Germany responded. A committee selected six architects, who were paid to design 500-square-foot houses in a variety of configurations and styles. (Mr. Primack also submitted plans, but as a City Council member he wasn't paid.)

The city has sold more than 200 copies of the plan book and accompanying manual for building and maintaining accessory dwelling units, according to the city's housing programs coordinator, Norm Daly. In addition, he said, more than 100 California cities have requested copies of the books.

The free-standing accessory dwelling unit designed by Mr. Peterson may be the most radical of the seven. The walls are made of metal panels intended for refrigerated warehouse buildings; the windows are garage doors fitted with glass; and the roof is designed to be planted.

"We were looking to push the envelope," he said.

James Herbert, a principal of the architectural firm SixEight Design, created a unit reminiscent of the "case-study" houses - experiments in modernist design that were built in and around Los Angeles after World War II.

Others are more traditional, like the cottage designed by the architect Eve Reynolds, with a gabled roof.

But no matter how well they blend in, the accessory dwelling units will always be unpopular with some suburbanites.

Mr. Peterson, who teaches architecture at the California College of the Arts, has his students design accessory dwelling units. To stimulate the students' thinking, he is planning to bring in speakers who oppose them.

"I want students to understand that there are real reasons - including reasons of class - why people would resist this," he said.