Accessory unit illustration

© Kristen Solecki

Your Questions About ADUs Answered

Find out whether this is a good housing option for your market.

July - August
2018

What counts as an ADU?

It can be detached (a small house in the backyard), attached (typically in the basement), a bump-out from the main house or a carve-out (an independent area within the house). Some refer to them as “granny flats” when describing accessible models that temporarily attach to an existing home.

How big should an ADU be?

Most municipalities limit ADUs to 800 square feet. For a rental, a two-bedroom, 800-square-foot ADU makes sense, says Steve Vallejos, president and CEO of Valley Home Development, which has built more than 100 ADUs in the Bay Area in the last 12 years and aims to build 100 more in 2018.

What are the environmental benefits?

“A totally normal, no-green-features house that’s 1,000 square feet will use fewer resources over time than a green McMansion that’s 6,000 square feet,” says Martin Brown, whose own house is 800 square feet and whose ADU, a converted detached garage, is 400 square feet. “Size is the single biggest influence on environmental impact.”

Which buyers may be most interested?

“An ADU works well for small households just getting started and for empty nesters who are downsizing and want to stay in their neighborhoods,” says ADU developer Eli Spevak. They’re also good for people who need the rental income to live in a pricier neighborhood. And ADUs are good for older people who want to age in place. (They can rent out their main house and live in the small one.) However, most municipalities do not allow owners to rent out both dwellings, which is important information to share with prospective buyers. This rule helps prevent ADUs from “disturbing neighborhood character,” says David Garcia, policy director of the Terner Center for Housing Innovation at the University of California, Berkeley. Sometimes divorced couples choose this option—one in the main house and one in an ADU in the backyard—because it’s easier with kids and saves money.

How complex are local restrictions?

“Be aware of whatever the local rules are,” says Brown. For example, San Francisco doesn’t allow new buildings in backyards because it wants to keep green spaces, but they’re permitted in retail spaces. Portland, Ore., allows a detached ADU but says it can’t be bigger than 75 percent of the square footage of the main home or 800 square feet, whichever is smaller. In areas without specific guidelines, consider pushing for an easier, clearer permitting process so homeowners don’t need to go before special zoning boards and ask neighbors for individual approval.

What can you do to promote ADUs?

In Portland, real estate agents are using language explicitly saying “ADU-ready property,” says Spevak. “It’s a sales point. It’s a bragging point. If the agent knows the rules, she can say, ‘Look. That can make a little dwelling unit.’ ” If a city is unfriendly toward ADUs? “Real estate pros are going to have to become advocates,” says builder Patrick Quinton. They can promote the positives: “It is to the benefit of municipalities to not only allow for ADUs but also to incentivize their development so that homeowners pick up the cost of developing our most affordable housing,” says Lilypad’s Rachel Ginis. “Some cities are releasing how-to manuals and showing testimonials of what it has meant to people to be able to house an emergency responder or a teacher from their child’s school,” says Rachele Trigueros of the Bay Area Council.

Is the yard big enough?

Santa Clara requires a 7,500-square-foot lot. Nunn’s was 7,505, with enough room for a deck with a hot tub for her parents. Portland requires an ADU to be behind the back line of the house. “It has to be set back far enough from the front that no one confuses it for the actual house,” says Quinton. But it can’t be too far from the street, either, since fire hoses typically stretch only 150 feet from the truck. The idea is to create “invisible density,” says Trigueros.

How much do they cost?

The average cost is $156,000, according to the Terner Center at the University of California, Berkeley. With a do-it-yourself kit, a homeowner can build one for as little as $50,000. Typically, it costs about $130 per square foot with a kit and up to $200 per square foot with a contractor. Homeowners who rent out their ADU typically pay off their costs in seven to 10 years. “They kind of pay for themselves twice,” says Lucas Gray, a designer at Portland-based architecture firm Propel Studio, noting the potential rental income and increased property value.

What are the related costs?

Permits, architectural plans, insurance, and fees can add up, as can utilities. Because most houses have excess capacity for water and electricity, they can share them with the ADU. To encourage ADUs, cities are allowing homeowners to tee off existing utilities and not pay an extra utility charge. They’re doing the same with extra fees for schools and park districts.

What about financing?

To pay for construction, home-equity lines may make sense. Some banks may provide loans for an ADU given the rental revenue potential. Another option: The manufacturer Dweller will build and install an ADU at no cost. It owns it, manages it, and rents it. The homeowner, who gets 30 percent of the rent, owns it again after 25 years or at any time through a buyout.

How fast can ADUs be built?

Typically, they take no more than 18 months. Permitting and architectural plans can take longer than construction. For the Nunns, it took two months for the permission, four months for the architectural plans, two months for a variance approval and three-and-a-half months for construction.

Is there strong price appreciation?

It’s hard to say because ADUs are still new. “As ADUs have grown in popularity, appraisers have had to find ways to incorporate them into appraising properties,” says Dulcinea Myers-Newcomb, an agent with Living Room Realty in Portland, Ore., who hired Dweller to install an ADU in her backyard for her father. Their versatility is key. “ADUs provide the opportunity for densification; they create possibility for passive income, allow you to work from home, and live multigenerationally. As long as you can lose a bit of yard, you can gain much more.”

Karen Springen

Karen Springen is a Chicago-area freelance writer and faculty member at Northwestern University's Medill School of Journalism.

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