Accessory Dwelling Units
New Life & New Challenges in an American Tradition By Carole VanSickle Ellis If you have read the Little House on the Prairie books by American pioneer girl Laura Ingalls Wilder, then you may remember the book in which the family lives in a dugout underneath a hillside next to a creek while they build a farmhouse in which to live permanently. Wilder describes this time spent “on the banks of Plum Creek” (also the name of the fourth book in the Little House series) as a largely idyllic time in her childhood, but living underground in a home where a cow could put a hoof through the roof at any time could not have been entirely pleasant. However, it gave the Ingalls the home base they needed while they built a larger, more permanent home and, in the process, Laura participated in the long-practiced model of leveraging accessory dwelling units (ADUs) in order to improve housing affordability and access. “ADUs are an American tradition,” observed AARP “Livable Communities” authors in 2019 as part of an initiative to familiarize the Gen X and junior Boomer populations with the concept of possibly living in a “granny unit” once they hit retirement age. “[For centuries], people with wealth and acreage regularly populated their lands with secondary mansions and ancillary buildings independent of the main estate,” the report said. Today, ADUs are, once again, an indicator that a property owner is working on building wealth for the future, often by renting out the smaller property or even subdividing it off and selling it. However, these small housing units have become much more than just an outward sign of affluence and prosperity. Today’s ADUs and their associated local legislation can indicate the presence of huge potential returns for real estate investors or, conversely, enormous potential headaches for investors and their neighbors alike. Opportunities & Challenges “The ADU space provides both opportunities and challenges,” said Michelle R. Rodriguez, a partner with the California branch of legal firm Wright, Finlay & Zak who specializes in Compliance, Licensing, and Regulatory issues. Rodriguez is a licensed attorney, a licensed real estate broker, and a member of the board of directors for the California Mortgage Association. She continued, “For investors, when you are considering buying a property, you need to be aware of all the possibilities around ADUs. How many units are there? How many units could there be? How will the deal pencil out? Knowing what the rules are gives you a leg up and differentiates you from the hundreds of other people and entities in the space.” California, where Rodriguez is based, has one of the most proactive state policies on these little dwellings, which many researchers believe are the key to solving the affordable housing crisis without losing the attractive elements of single-family residential communities. In California, a property may have as many as three ADUs on the property, and those units may be built and sold as condominiums instead of remaining with the “parent” property. New construction must go through an approval process and may be taxed at a state or municipal level, may have as many as three bedrooms (but no more than 1,200 square feet and less in some circumstances), and may have a height of 18 feet, or 25 feet if they are attached to a larger structure. The goal of these “relaxed” regulations, Rodriguez said, is to ameliorate the affordable housing problem in the Golden State. “There are certainly communities out there that either do not want ADUs or want to greatly restrict the number and type of ADUs they permit, and often these are the communities where there is a great need for affordable housing,” Rodriguez explained. “The state of California has stepped in with its new legislation in an effort to force municipalities to allow ADUs to a certain extent, such as setting a minimum allowable number of units on a property (3).” This means, at least in theory, that communities will not be able to prohibit property owners from building three ADUs on their properties assuming other building and inspection codes are met; some cities in California have elected to raise that number to five. “Offering a mix of housing types and sizes will always be a boon to affordable housing,” observed Karen Patten, principal of Atlanta, Georgia-based YIMBY (Yes In My Backyard) Consultants. “Here, ADUs are still very much in an experimental stage,” she continued, “so the impact is still to be determined.” In Georgia, some cities, such as Atlanta, and counties (roughly 10% of the 159 counties in the state) permit some closely regulated ADU construction. However, even in a municipal area, communities may have restrictions on who can inhabit an ADU (renter vs. non-paying or related resident) and how many ADUs may be constructed in a given area. At the state level, ADUs may be attached or detached and are permitted to take up no more than just under one-third of the backyard of the house, the only place ADU construction is permitted. Furthermore, the owners of the property must occupy either the main residence or the ADU. “I think they are more accepted in metro-area historic communities where you see a mix of single-family, small multifamily, and commercial together and well-integrated,” Patten said. “I think it works best there [and] they are less likely to face ‘NIMBYs’ [Not In My Backyard].” “So many people are against adding units; you always will have the NIMBYs,” agreed Kristin Weekley, a Boston-based agent and investor who owns one ADU and several other small multifamily properties in the Boston area. Weekley said that for many people in the Boston area, owning a property with a legally rentable ADU can be a gamechanger as the cost of living skyrockets. “Having the rental income is huge for a lot of homeowners,” she said. “I have had clients who, if they had been able to legally convert part of their property to an ADU, could have stayed in their property
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