Accessory housing units go by many names: in-law suites, guest houses, backyard cottages, or basement or garage conversions, among others. What all ADUs have in common is that they are a separate living space usually added to a single-family residential lot, and they have a moment.
Building an ADU can increase the value of your property while providing rental income or additional living space for a family member. Then again, adding an ADU can be an expensive hassle you’ll regret.
If you’re thinking about ADU, here are some things to consider before you commit.
Why ADUs are becoming increasingly popular
In recent years, many cities and some states—including California, Oregon, and New Hampshire—have passed laws making it easier for homeowners to build ADUs, partly to address the housing shortage and rising costs. to overcome which has led to an affordability crisis in many communities. ADUs are seen as a relatively inexpensive way to increase the supply of more affordable housing without drastically changing the character of residential areas.
The aging of the U.S. population is also driving demand, says Rodney Harrell, vice president of family, home and community for AARP, which publishes a guide called “The ABCs of EDU.” People are considering adding space for older family members or caregivers. The pandemic may have accelerated that trend, as people sought alternatives to nursing homes, where at least 175,000 Americans have died from COVID-19, Harrell says. ADUs can also provide independent living space for young adult members of families who may not be able to afford their own apartments.
“It’s a housing solution that doesn’t solve every problem, but it helps solve many problems at a time,” says Harrell.
Cost – and acceptance – vary widely
Harrell says that converting an existing space, such as a garage, attic or basement, to an ADU can cost around $50,000, while a new detached ADU often exceeds $150,000. And depending on where you live, getting a permit to build your ADU can be a relative breeze, a long battle, or flat-out impossible.
In California, homeowners have the legal right to build ADUs, and local governments must not create barriers to obtaining permits. Some cities have streamlined the permitting process, and some, including Los Angeles and San Jose, have pre-approved building plans that can further reduce delays.
Some California cities, however, are fighting this trend by delaying or denying permits. Most U.S. cities either don’t allow ADUs or have strict regulations inhibiting their development, says Cole Peterson, ADU consultant and author of “Backdoor Revolution: The Definitive Guide to ADU Development.” Even where ADUs are legal, cities may require zoning exceptions, called variances, demand expensive upgrades or impose fees that can add substantially to the cost, Peterson says. Huh.
Tempted to skip the permit? He’s probably not smart. Real estate appraiser Jody Bishop, president of the Appraisal Institute, a trade group, says non-permitted construction can make it harder to sell or refinance your home and leave you vulnerable to enforcement actions from your area’s zoning department. Could All it takes is one disgruntled neighbor to convert you.
How ADUs Are Like Swimming Pools
If you are building the ADU primarily for additional income, recognize that any rent you charge may be at least partially offset by increased costs, such as higher property taxes, larger homeowners Insurance premiums and payments on loans used for construction of the unit, other expenses.
Bishop says, as with any home improvement project, there’s no guarantee that you’ll get your money back from ADU when you’re ready to sell the home.
He said that ADU has a lot in common with a swimming pool. In-ground pools are an accepted and even expected feature in some areas, so you may be able to recoup at least some of the construction cost when you sell your home. In other areas, says Bishop, pools are uncommon and can detract from a home’s value if buyers are concerned about maintenance hassles or drowning risks.
Similarly, ADUs may not add much value in areas where they are uncommon, he pointed out. Some may prize the ability to rent out an ADU for additional income, while others may not want to be a landlord. And converting an existing attic, basement or garage could put buyers at a disadvantage who would leave those spaces untouched.
Perhaps the best sign, says Bishop, would add an ADU value if your neighbors are making them. And if so, a properly permitted and thoughtfully designed ADU may be worth the investment.
“If it’s well done, it’s well thought out and functional, you’ve probably got something the market will embrace and won’t mind paying for,” says Bishop.
This article was written by NerdWallet and originally published by The Associated Press.