PodcastNational Housing Market Outlook

Can ADUs Help ‘Fix’ Housing Affordability?

Dean Wehrli

Dean Wehrli

April 22, 2023

Even as home prices moderate throughout much of the nation, the quest for affordability seems just as unquenchable. Density has long been offered as a solution to this constant concern. Though higher densities are traditionally associated with urban spaces, could there be a density solution even in suburbia?

California seems to think so. That state has gone all in on ADUs—Accessory Dwelling Units—and it might actually be working. Though they have been around forever and built in many places beyond California, this may be ADUs’ time.

Sean Roberts of Villa joins us to wade through the ins and outs of ADUs. What are they? Are they really here in a big way? Who is buying them, and how are they using them? All of that and more on the latest episode of the New Home Insights podcast.

Featured guest

Sean Roberts, CEO, Villa

Just what are ADUs?

  • There are three basic types of ADUs—detached small homes in the backyard, discrete rooms attached to the main home with their own entrance, and converted spaces like garages.
 
  • Call them granny flats, laneway houses, or casitas, but Villa specializes in detached small homes ranging from about 550 to over 1,200 square feet.

Is this a big deal, or is it just a California thing?

  • ADUs have been around for a long time in many places, but California has leaned into ADUs in its constant battle to build homes its citizens can afford.
 
  • Policy changes in California have led to exponential leaps in ADU building in cities across the state, even in wealthy enclaves that have long resisted adding inclusive housing.
 
  • How much growth? Is 20 times the permitting level for ADUs from a few short years enough growth for you?

Ok, but what am I going to do with my ADU?

  • ADUs can be used by homeowners to add space, as a home office, house in-laws or boomerang kids, or to rent out. It’s that last option that has the potential to meaningfully impact housing affordability.
 
  • ADUs can augment the yield from a single-family rental site or at a purpose-built Build-to-Rent community.
 
  • Apartment complexes with excess space—an underused parking lot—can add ADUs to expand their rental roll with relatively minimal costs.
 
  • However, just how big ADUs get nationwide is uncertain. It is still early going, and there can be issues such as how ADUs will appraise and whether policymakers will accept them. With a tailwind like high home prices behind it, though, ADUs might be one of the next big things.

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About The Author

Dean Wehrli
Dean Wehrli
Principal
Dean helps housing sector clients figure out not just what might work and what might not, but why.

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