Saturday, May 1, 2021

Are ADUs About to Become Mainstream?

Auxiliary Dwelling Units (ADU) is a second structure on a property with its own separate cooking, sleeping, and living facilities. 

ADUs can be stick-built, modular, manufactured, 3D printed, and if a city allows, tiny homes. This is becoming more popular due to government intervention, societal trends, and a red-hot real estate market.

Why now?

Low Inventory: If builders could build more, they would. Despite high builder sentiment and consumer demand, builders have yet to return to the glory days experienced in peak years like 2004-2006. According to the National Association of Home Builders (NAHB), the top five issues builders face in 2021 include building material prices, timelines to receive materials, cost and availability of labor, concerns about employment and the economic situation, and the cost of the availability of building lots. That last point is a little concerning. It wasn’t just the builders who took a breather after the Great Recession. Developers weren’t focused on developing land, which is a long, expensive, and often political process.

Politics: Affordable housing is a known issue at the state and local levels. It’s not unusual to see politicians run on grand campaigns of bringing new affordable housing to market only to realize once in office that development is a complex, painful, and political process that can take decades. States like California simply gave up and started regulating at the state level. Not all cities were happy that the state forced their hand, but the new rules help solve their NIMBY problem.

NIMBYs: The not-in-my-backyard movement has more impact than most appreciate. Local electeds are put into office by local citizens. When anything different is introduced that may change the character of a neighborhood, these local advocates come out loud, ultimately stopping projects. However, it’s not just fear that a neighborhood may change. A supply-constrained market is also one where prices typically escalate. So, while some of NIMBYism is fear-based, we can’t ignore economics. When California gave all property owners, by right, the ability to build at least one ADU without the interference of the municipality, it stripped NIMBYism along with it. As municipalities tried to find ways around the rules, state legislators have continually come back to make clear that ADUs would remain a viable option to meet statewide housing goals. Updated rules have included a limit to impact fees, blocking requirements of owner occupancy, and stripping HOAs from blocking JADUs.

Money: Some cities have complained about losing local zoning control and the ability to charge impact fees. However, ADUs solve numerous money-related issues for cities. ADUs leverage existing infrastructure and prevent sprawl adding inventory on the market without the painful and expensive process of development and planning. Cities don’t have to build new streets, expand utility systems, or create new schools. California specifically allows owners to not replace parking as long as the ADU is within a half-mile from public transit, which promotes leveraging systems already in place. Most importantly, ADUs get Main Street money to the table helping cities with affordable housing instead of everyone relying solely on the government.

CLICK HERE to read more of this very interesting article in "THINK REALTY" by Aaron Norris


Gary Fleisher is the Managing Director and contributor to the Modcoach Network and its affiliated blogs. Email at modcoach@gmail.com

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