ADUs are the next big thing in housing — because they’re small. With extreme housing demands in California, sky-high costs, and shrinking household sizes, ADUs offer a solution that provides wins for homeowners, tenants, and city municipalities alike.
What is an Accessory Dwelling Unit (ADU)?
An ADU is a secondary, distinct housing unit on a single-family residential lot. In other words, it has the potential to serve as an independent house. They’re commonly referred to by other names — backyard cottages, granny flats, garage apartments. ADUs might be completely separate from the main house or attached in some way, such as in the basement or connected on the side.
Don’t let the idea of “secondary” mislead you — ADUs are often spacious units with living space comparable to an apartment or condominium. Whether they stand alone on the property or are attached to the house, ADUs provide rooming and income opportunities. They’re unique in their smaller size and informality in structure. In metropolitan areas like Los Angeles and Seattle, ADUs can be found in anywhere from 10% to 20% to homes! ADUs have taken the idea of living in a parent’s garage or basement and innovated it into a smart, profitable use of space and resources.
In California, ADUs are increasingly being recognized as a solution to housing crises in high-demand areas, and the state is making an ongoing effort to encourage the construction of ADUs. As of January 2019, a new state law allows homeowners who previously built ADUs without permits to bring their ADUs into compliance under the supervision of a local building inspector.
Why is it an investment opportunity?
American family demographics are shifting from larger households to just one- or two-person households. These smaller households now represent two thirds of households in the U.S. In fact, the average household size has shrunk from 3.3 in 1960 to 2.5 in 2018. As the traditional model of three- to four-people homes drops in demand, the market potential for smaller, more affordable housing rises.
ADUs bridge the gap between modern small-household needs and the traditional structure of larger-household homes. For homeowners, they’re an excellent low-effort opportunity for an extra stream of income. The potential demographics for an ADU tenant are broadly varied — from young working professionals to new couples to aging retirees. These populations provide demand for long-term leasing, but short-term leasing might provide an even more profitable use for ADUs. They’re the ideal property asset to use as an Airbnb, for example.
ADUs are constructed with wood frames, which are significantly less costly than multi-household buildings. On top of that, building an ADU does not require paying for additional land, major new infrastructures, or parking. Residents of ADUs benefit from the same city infrastructures, eliminating the need for the city to pave new ones. That means they’re highly affordable to construct with massive potential to generate income. As their functionality comes more and more into demand, ADUs increases the value of homes.
Size matters. Evidence shows that a building’s size is the most important determinant in how much environmental impact it has, and is now accounted for by environmental building certifications such as LEED for Homes. By nature, the smaller size and efficiency of ADUs is a clean, green solution to housing needs. It takes less electricity and gas to power a smaller area. What’s more, ADUs take advantage of existing infrastructure, negating the need to construct more utility and transportation means. In addition, ADUs contribute to a city’s environmentally impact by building on density instead of sprawl. Studies show that residential energy uses increase with sprawl, which ADUs prevent, and vehicle and fuel use per household decreases with higher density.
For extended families or families with unique needs, ADUs offer a housing setup that can provide both independence and connection. They’re a multi-generational asset. Consider a typical family with children — as the children graduate from college and enter the workforce, the ADU provides affordable living space in their own childhood homes that still offers independence and privacy. As the parents age, they can choose to simplify their lifestyles by moving into the ADU while generating income by leasing the main house. Another option could be offering the ADU as housing for a caretaker or extended family. And when ADUs aren’t being lived in, they can serve as distraction-free home offices or studios.
To learn more about ADUs, the #PropertyNerds will be hosting an informational workshop at our listing on 965 Katherine Ct, San Jose 95126 this Sunday June 23, from 1:30-4:30 PM! Be sure to visit us and learn the ABCs of ADUs!