May 3, 2023

Accessory Dwelling Unit can expand housing options

As we approach the midpoint of 2023, the crisis of unaffordable housing continues to spread nationwide.

Mortgage interest rates are nearly double what they were 18 months ago, leaving many potential homebuyers wondering how they can buy in to the American Dream. With persistent low inventory, the price of existing homes remains stubbornly high.

Many prospective homeowners are sharing homes as a way to help defray costs and enhance down payment savings.

Nearly 1 in 5 Americans now lives in a multigenerational household - a level that hasn't been seen since 1950. But a permanent housing partnership, even among family – can be a little too cozy for many people.

A growing number of housing authorities suggest that Accessory Dwelling Units, or ADUs, could be another effective way to help relieve the nation’s housing crunch.

Also known as granny flats, mother-in-law units or backyard cottages, ADU residences include separate free-standing structures, repurposed spaces or build-ons.

No matter what the name, granny flats can also be used in many ways beyond providing a place for mom. Most have their own bathroom and kitchens, and average is about 500 to 700 square feet.

Within this market there may be great opportunity: While 62% of U.S. households are made up of one or two people, almost all new and existing homes are designed for at least three or four. The bulk of single-family housing is simply more space than most people need.

Even without an active renter, an ADU can be a wise family investment. When not being used as a separate residence, the space can be a home office, guest quarters, or a short-term vacation rental. Even the potential for an in-law suite is an attractive feature to play up in a sale.

ADUs are also attractive to families with older relatives on fixed incomes, or older homeowners looking to downsize and rent out their main property. ADUs provide at a lower cost.

Because ADU housing has a relatively small footprint, zoning boards in many cities are warming to the concept, expanding residential allowances, and offering fee waivers.

Homeowners should consider future ADU impact on resale. Some buyers shy away from “overbuilt” properties, and an ADU that’s not built to code could be a problem. Know local laws. Zoning regulations differ between jurisdictions and could derail money making plans.