[REN #447] In-Law Units Out-Lawed No More

picture of plant on table for Real Estate News for Investors Podcast Episode #447

It’s a great housing concept with a biased name. Granny flats are not just for grannies, they are for the young, the old, and the middle-aged. And, with the affordable housing crisis in full swing, new rules are making it easier than ever for homeowners in California and other U.S. metros to build them or make their unpermitted units legal.

These “granny flats” or “in-law units” are officially called “accessory dwelling units” or ADUs. They are typically under 1,000 square feet in size, and are built on the property of an owner-occupied single-family home.

They’ve been around for decades but many have been built without permits, to avoid local regulations. To help address the critical lack of housing in California, new rules are opening the floodgates for their construction.
 

New ADU Rules

These new rules establish statewide design standards for ADUs and a requirement for “ministerial approval” of a permit request instead of one that is “discretionary.” They also limit parking requirements, and eliminate some fees, making ADUs less expensive to build.

They also create a way for property owners with illegal units, to make them legal. A Business Insider article, on the embracing of ADUs in California, said, there are as many as 50,000 illegal ADUs in the Los Angeles area alone. Historically strict rules forced people to build their units without approval.

The article said, the number of permits have skyrocketed since the state rules were adopted in January of last year. It says the city approved just 644 permits between years 2003 and 2016. In 2017, permit requests jumped to almost 2,000. Permit requests have also risen sharply in San Francisco, San Jose and Oakland where housing affordability is also a serious problem.
 

Eye-Popping Results

Although housing experts expected a jump in permits, they didn’t expect such eye-popping results. State Senator, Bob Wieckowski, said of the legislation, “The power should go to the homeowner, not the government, if they want to help with the housing crisis. We should let them chip in.”

The Curbed blog reported, Wieckowski, who authored the legislation that passed last year, discovered another major roadblock to the building of ADUs and introduced new legislation this year. It will help cut impact fees that are the same for “any” size home (whether it’s a mansion or a granny flat) and can add tens of thousands of dollars onto construction costs. He’s hoping to get a vote on that bill later this spring (1).

This new legislation will also grant amnesty to ADUs built over the last few decades and provide automatic approvals to permit requests if local agencies don’t do it themselves in 120 days.
 

Grassroots Housing Solution

Curbed wote, “ADUs may not be the perfect solution to our multifaceted housing crisis, and there aren’t great statistics on usage.” But, it says, “As a grassroots housing solution, they can be an important tool to help increase density and reduce sprawl.

UC Berkeley’s Terner Center for Housing Innovation said, ADUs can provide a cost-effective way to address the housing problem in pricey California. It said, the average cost of an ADU is $156,000 while the average cost of an affordable home is $332,000 statewide. Affordability in San Francisco is much higher with an average cost of $591,000 per unit (2).

In addition to providing much-needed housing, ADUs can help homeowners who could use help paying their mortgage with some rental income. Or, they could help seniors who want to “age in place” but also downsize and supplement their monthly pensions. Or, it could be a student, immigrant family, or other homeowner who needs the extra space for an extended family.
 

L.A. Pilot Program

Los Angeles is taking the idea a step further with a pilot program to encourage the building of ADUs for people who are formerly homeless or who qualify for Section 8 housing assistance. Property owners who want to participate will get up to $75,000 in funding to build an ADU on their properties. That ordinance was approved in August. Another ordinance to reduce ADU construction fees is pending.

Portland, Oregon has embraced ADUs for years now. According to Business Insider, the city began waiving development fees for ADUs in 2009. That chopped about $15,000 off the cost of building or converting a unit. The blog reported, over the next six years, ADU permits tripled in number, and ADUs are helping Portland to meet its housing goals.

New York City planners are considering a new pilot program that would convert up to 39,000 basements in single-family homes, into legal apartments. The idea hasn’t gained widespread support yet. Dana Cuff, of CityLAB and UCLA where she teaches architecture and urban design, said of the New York City proposal, “People are naturally, and probably rightly, skeptical about neighborhood change, but I think over the long run neighborhoods are going to find that this is an extremely beneficial change to our single-family-housing fabric.”

She told Business Insider, the modern household has changed. It’s no longer a mix of bread-winning dads, stay-at-home moms, and 2.5 kids. She said, the new scenario includes college kids that move back home, property owners who need space for nannies, caretakers, and aging parents, and homeowners who need “cash flow.”

She said, “There’s an infinite number of ways our housing should be made more flexible for our complete lives.” She continued, ADUs help “get that ball rolling.”

It’s a fascinating turn of events for people who’ve wanted to build a stand-alone, rentable home on their own property.

Links:

(1) Curbed Blog Post

(2) UC Berkeley’s Terner Center for Housing Innovation

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