Are ADUs the Affordable Housing Solution Cities Need?
SUMMARY
Accessory dwelling units (ADUs) are being considered as a compact and affordable solution to address the housing scarcity in urban areas, with their potential to utilize some of the 75% of residential land reserved for single-family homes.
Despite some opposition due to concerns about parking, infrastructure, and property values, ADUs are seen as an innovation that benefits individuals, businesses, and communities especially given the current lack of affordable housing for first-time home buyers and workers.
While awareness about ADUs remains low, progress has been made through programs and incentives encouraging ADU construction, such as Los Angeles' Accessory Dwelling Unit Standard Plan Program and Santa Cruz's Forgivable ADU Loan Program.
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Across North America, people are asking their city and town councils to take action on property development fees that drive high new home prices, which in turn drive up the market for existing single family homes. As urban areas grapple with housing scarcity, an innovative approach is steadily gaining ground. With 75% of residential land in the United States reserved for single-family homes, many housing experts see accessory dwelling units, or ADUs, as a compact and affordable solution to the widespread residential crunch.
While the conversation around ADUs may seem new, ADUs have been around a long time. Granny flats, in-law suites, garage apartments, and backyard cottages are some of the more familiar names for ADUs.
ADUs come in all shapes and sizes, but typically have less square footage than the main residence. They can be attached or unattached, brand new, or a remodeled section of the main house. ADUs come with all the amenities required for private and independent living, including a separate entrance, kitchen, bathroom, bedrooms, as well as other living spaces. Many ADUs are one-level, which makes them a good fit for seniors. In some places, you’ll see the term DADU, alongside ADU. DADU is the more precise term for a ‘detached’ ADU.
The ADU Conversation
Not everyone supports ADUs as a housing solution. Opponents have raised questions about the demand for parking, a lack of infrastructure, and concerns about decreased property values. Some worry that easing zoning restrictions could make way for institutional investors to build multifamily housing in single family neighborhoods.
Still, in many regions around the US and Canada, there’s simply not enough affordable housing for first-time home buyers in their 30s and 40s. Rents are also at a new all-time national high, with the average renter spending 30% of their income on housing. In places like New York City, renters pay a whopping 68% of their income toward where they live. The shortage isn’t limited to millennials hoping to buy their first home. A lack of affordable housing also affects businesses dealing with hiring and workforce issues because workers simply can’t afford to live near their jobs. That’s why many cities see ADUs as valuable innovation that benefits individuals, businesses, and communities.
Good for People and Places
While ADUs bring many benefits to residents and communities, a lack of awareness is perhaps the biggest issue keeping ADUs from becoming an affordable housing solution. In a recent Freddie Mac consumer survey, they found that 71% of respondents were unfamiliar with ADUs. However, after learning the definition of an ADU, 32% said they were interested in adding an ADU to their property in the future.
Organizations that support seniors are also helping get the word out about the potential of ADUs. AARP champions the construction of more ADUs because they provide housing and rental income for people of all ages. As older adults retire, the addition of an ADU can provide a supplemental income stream. Alternatively, seniors who move into ADUs are often renting from family members, which helps provide stabilized rent and a predictable cost of living.
Jeff Kruth and Murali Paranandi, professors of architecture at Miami University and contributors to Fortune, note that ADUs bring more residents into a given area. The affordable rents and lower construction costs of ADUs provide low-barrier opportunities for intergenerational living. Kruth and Parandi believe that ADUs enhance rather than hurt communities: “As neighborhood populations grow, they become more attractive to small businesses. Coffee shops, restaurants, and grocery stores are more likely to flourish with more residents in a given area.”
Partnerships to Promote ADU Living
While ADUs help communities, businesses, and homeowners, local governments can make it easier or harder to build. In some places, homeowners may need as many as six permits for ADU construction. Some cities are working hard to get ahead of the hassle. Los Angeles has launched the Accessory Dwelling Unit Standard Plan Program, offering homeowners and developers 20 pre-approved ADU designs. To offset construction costs, a $40,000 subsidy is available from the state of California. Additionally, CityLAB, a UCLA research center, has created a guidebook detailing a step-by-step process for building an ADU.
Los Angeles also has a program to incentivize homeowners to build ADUs specifically for seniors. The LA ADU Accelerator Program works by pairing homeowners with older residents who need affordable housing. In exchange, the program finds qualified tenants, offers tenant case management, and landlords receive stable rental income. In Santa Cruz, the city will loan homeowners up to $40,000 to add an ADU along with loan deferment. If the family rents to a low-income household for 20 years, the entire loan will be forgiven through their Forgivable ADU Loan Program.
California is not the only state that offers financial incentives and resources for ADU construction. Cities from Boston to Seattle are finding ways to encourage residents to be part of the affordable housing solution.
The Bottom Line
In the face of rising home prices and a shortage of affordable housing options, ADUs are gaining attention as a solution. Despite their potential benefits, a lack of awareness and complicated permitting processes can hinder ADU construction. Overall, ADUs provide an innovative approach to addressing the affordable housing crisis, benefiting individuals, businesses, and communities alike.
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