Yahoo Finance Granny flats could 'make a dent' in the housing market’s inventory crisis
Granny flats — otherwise known as accessory dwelling units, or ADUs — could be the latest solution to ease some of America’s housing shortages, one expert put forth.
“I think this is one of many options that governments and developers have to make a dent in the problem,” Joe Gebbia, Airbnb’s co-founder, told Yahoo Finance Live (video above). “And the price, for California, is fairly competitive when you take into consideration labor costs.”
Gebbia, who noticed the need for flexible dwellings or small homes, launched his new venture Samara to provide ADUs called Backyard in November 2022. The prefab houses — only available in California now — measure between 430 square feet and 690 square feet and start at $289,000 for studios and $369,000 for a two-bedroom unit. All models include a kitchen, bathroom, storage, and built-in appliances.
For some folks, those prices are a steal. According to Realtor.com, the median listing price in Orange County, Calif., was $1.2 million. In San Bernardino, the median sold home price was $488,000.
“In California, cities have mandates to add more housing over the next couple of years and neighborhoods love ADUs because rather than putting in a multifamily mid-rise in the middle of the neighborhood, they can actually have similar amounts of density without adversely affecting the visual character of the neighborhood,” Gebbia said. “So it's a win across the board.”
‘California is ahead of the curve’
New California legislation this year made it easier for homeowners to build ADUs, allowing folks to build up to two-story units, providing more flexibility on the location of an ADU on a property, and granting the right to flip a garage into a new modular home.
The measure could help California address its housing deficit, which was short 1 million homes as of February 2022, the San Francisco ADU building company Cottage found.
According to Cottage, for every three ADU permits submitted in 2021, only one was completed by the end of 2022. The study found that if all ADU permits submitted across California in 2022 had been approved and built, the state would have created 50% more homes.
“I think you know, we are well positioned to tap into this existing customer demand,” Gebbia said. “And I think we'll actually expand the market by making it even easier for people to acquire a dwelling.”
A separate report in Seattle found that ADU permits jumped to a record high of 988 units in 2022 from 280 in 2019. The analysis revealed that about 12% of ADUs in Seattle could be offered for nightly rentals like Airbnb or Vrbo. They could also be a lower-cost ownership option compared with new single-family homes.
Other cities, such as Austin, Texas, and Philadelphia, are also documenting a rise in ADUs after their respective state governments made it easier for homeowners to request building permits for these small homes.
“People are using this not only for income but for a multitude of other reasons and use cases,” Gebbia said. “If you think about how life changes over time, having extra space in your backyard can provide for you. It can [also] be income on demand as needed.”
‘ADUs can adapt to people over time’
Although ADUs can bring in extra income if you choose to list as a rental property or Airbnb or Vrbo temporary stay, they can also enable intergenerational living.
Regarding a New Hampshire measure – later codified into law – the state general court declared that the ADUs could generate “affordable housing opportunities for citizens.” They could be utilized for elderly or disabled citizens who wanted to live independently from caregivers or family or for adult children who wish to have a semi-independent home while saving money.
“There's also use cases of housing elderly parents close by, college graduates when they come back post-graduation, or working from home having a quiet, productive space, quite productive office right in your backyard,” Gebbia said. “So I think the benefit of this form factor of housing is that it can be many things, and it can actually adapt with people over time depending on the needs that they have in their life.”
Gabriella Cruz-Martinez is a personal finance reporter at Yahoo Finance. Follow her on Twitter @__gabriellacruz.
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