California towns with cute “backyard cottages” are booming – but not everyone is happy about them

Californians are avoiding a severe housing shortage and soaring real estate prices by building cute backyard cottages — but not everyone is happy about this new development.

Advocates say in-law apartments or accessory dwelling units (ADUs) are the quickest and easiest way to get people into habitable housing.

But some experts warn that ADUs can drive down the price of single-family homes in neighborhoods because potential buyers might not want to live near the garden unit tenant.

Others complain that these tiny homes are not a comparable substitute for building more traditional homes to combat the housing shortage.

Despite this, many people continue to build ADUs, often to house elderly parents who need help and no longer need a large home.

After Teddy Gray King’s mother died in 2021, she decided to move her 88-year-old father into a manufactured home on his property in Piedmont, a small Bay Area town just outside of Oakland.

He lived in a 3,000-square-foot home in Millbrae, which King said he was able to sell in order to free it for another family.

King said she bought the manufactured home from an Oakland-based company for $268,000 and had it flown to her backyard in 2022.

“In a place like Piedmont where…a lot of houses have a big yard, it’s kind of an ideal way for infill development (and) the impact is pretty low from a visual standpoint,” he said. she told the San Francisco Chronicle.

Wealthy communities like Piedmont — where the median household income is above $250,000 — are the predominant areas where these cabins are built, according to government data that tracks the type of housing built statewide.

After all, King paid nearly $270,000 for the one-bedroom house his father now lives in, which is higher than the median sale price of an entire house in Cleveland, Ohio, or Buffalo, New York.

King still took advantage of a discount, since there isn’t a single one-bedroom home in Piedmont on the market for less than $389,000.

However, if the goal of ADUs is to house more people who are squeezed by California’s rising rents, it is unlikely to succeed.

A brief from the Virginia Housing Commission found that a significant percentage of ADUs do not rent at below-market rates.

Scott Wild, senior vice president at real estate firm John Burns Research & Consulting, recently authored a report that supports that assessment.

“If rented, ADUs generally generate decent premiums over nearby multifamily rentals, positioning them at the higher end of the comparable rental spectrum,” Wild asserted.

A 2021 New York Assembly bill attempted to address this problem by creating an ADU financing program for homeowners who wanted to build one on their property.

But if they took out a loan through the program, they would have to rent the home at a rate below the market rate in their area.

This proposal never made it out of committee.

Meanwhile, California forges ahead, leading the nation in the number of ADUs built.

Piedmont Mayor Jennifer Cavenaugh said the city doesn’t have a lot of unused land available for housing, which could explain why no new living spaces have been built in Piedmont except for ADU, over the past three years.

ADUs were the only new housing built in two other Bay Area cities in 2022 and 2023: Los Altos and Hillsborough.

Matt Lewis, a spokesperson for California YIMBY (which stands for Yes in My Back Yard), supports loosening restrictions on ADUs in Piedmont, but said cities should also reuse existing buildings to accommodate more people.

“Every city has the capacity to increase the amount of housing within its borders,” Lewis told the Chronicle. “We have some of the most sparse cities in the world and that’s due to the constraints that cities have placed not only on construction, but also on the number of housing units you can put in a building.”

The garden cottage craze is the result of the passage of a California law in 2016 that required cities to approve ADUs if they met parking and size requirements.

More than 31,000 homeowners applied for an ADU permit in 2023, up from 7,000 in 2018, according to state data.

That momentum may only grow thanks to two new bills signed by Gov. Gavin Newsom last year, which allow homeowners to sell ADUs separately from their primary residence and prohibit local governments from forcing homeowners to live in their chalets.

Although it’s all the rage, a San Francisco real estate agent has expressed serious concerns about ADUs and their potential impact on the real estate market.

Rohin Dhar said he sees many single-family homeowners building ADUs to rent out for extra income.

The problem arises, he said, when they list their home, especially if there is a tenant in the additional unit.

“But when they go to sell the house, it sells for *much less* than if they had never built the ADU,” he wrote in an article on single family with someone living in the in-law unit It’s hard to sell!

Another San Francisco real estate agent told DailyMail.com that the buyers she interacts with generally respond favorably when they are shown properties with ADUs.

“For buyers, they open up opportunities for properties with extended guests or additional income,” Naomi Lempert Lopez said. “There are so many things you can do with an ADU and they add flexibility. »

She also said homes with ADUs sell for more than homes without them, although it’s important to note that an additional unit adds square footage, which, almost by definition, would increase the price of a property.

However, Lopez recommends that her clients sell their ADU-equipped home when no tenants are occupying the extra space to reduce complications.

“San Francisco is a city with extremely strong protections for tenants, and so anything that is occupied by tenants, whether it’s the house, whether it’s the ADU, whether it’s a multi- family, it will definitely give buyers pause,” she said.

“I would definitely say that selling vacant premises represents a much greater added value.”