Is there really a housing solution that can benefit renters, create multi-generational living and turn any home into an income potential property? The answer is yes: meet the Accessory Dwelling Unit (ADU). ADU’s go by many names – granny pods, guest cottages, guest quarters, backyard homes/cottages… even tiny homes. Regardless of what you call it – the concept is the same: ADU’s are “broadly defined as secondary, self-contained housing units located on the same lots as the primary single-family home. Size and structural form vary, but in most cases, ADUs include the following amenities: a bathroom, kitchenette, living area, and separate entrance” (Mortgage News Daily, July 2020).
Growing In Popularity
ADU’s have been around a long time, though since post-war zoning laws limited high density housing units, many older versions were not permitted. A study completed in San Francisco less than 10 years ago determined that 90% of such units lacked building permits.
In recent years, ADU popularity has been on the rise to help create inventory and in turn affordable housing from a renter viewpoint, generate income from a homeowner standpoint and drive intergenerational housing trends from an aging population vantage. In response, many municipalities have made it easier to get an ADU permitted and constructed – taking steps such as removing or changing minimum lot sizes, streamlining permitting processes, decreasing property setback guidelines and increasing the number of bedrooms allowable.
The Stats
| The national ADU growth rate has averaged 8.6% per year from 2009 – 2019.
| In 2000, just 1.6% of active MLS Listings had ADU’s, compared to 6.8% in 2019.
| California has a higher concentration of detached ADU’s than the mid-west or east coast, in which attached units are more popular.
| Cities in the West & South have the highest ADU growth, with the Portland-Vancouver-Hillsboro,OR-WA region hitting an average ADU growth rate of 22.3%, followed by Dallas-Plano-Irving, TX and Seattle-Bellevue-Kent, WA (growth rates around 18%). The Los Angeles and Miami metro growth rates for ADU’s are nearly 15%.
The Process
While construction is never easy, cities in need of affordable housing are updating ordinances almost annually to simplify the process and encourage applications. The first and often most relevant source of information is often your local municipality. That is where you can find the latest ordinance updates and property guidelines. (Click here for ADU links for San Jose, Campbell, Los Gatos, Morgan Hill and Gilroy).
Another critical aspect of the process is figuring out how to finance it. The Housing Trust of Silicon Valley offers a variety or resources related to this including information on a financial assistance program. Homeowners with equity may wish to review lending options via a home equity loan or cash-out refinance (rates are at historic lows making now an ideal time to take a look!). Construction loans and PACE (property assessed clean energy) financing may also be applicable.
And nope… we didn’t forget about the fun part! The design and floor planning process can be exciting; your city may even be able to provide preapproved plans from authorized designers/vendors. (See San Jose’s ‘Preapproved ADUS’ here.)
If you are thinking an ADU might be a great addition to your current home, or if you need help finding a property that could accommodate one, please do not hesitate to reach out. We love ALL facets of real estate – including those that create opportunity.
If you win, your parents win, your renters win and your property gets some great added value, our communities win. And THAT makes a place we are all proud to call home.
All my best,
Mark Barber
_ _ _
Previous Homes of SIlicon Valley Blogs On ADU's
Pre-Approved Adu’s: Why, Where & How Much
Resources
Mother-In-Law Units Helping to Fill Housing Demand