With housing prices, elder care costs, and childcare expenses all on the rise, more families are opting to go multi-generational by adding a granny flat to their existing homes. While “granny flats” have been around for decades, mostly in the form of above-the-garage apartments and converted basements, federal statistics show there is a growing national market for ADUs or accessory dwelling units that fit the billing for what used to be called a granny flat.
What a Granny Flat Is and Isn’t
A granny flat is a term used to describe the self-contained living quarters for an elderly parent who has moved in with an adult child and their family. But that description no longer fits the bill of what today’s ADUs are being used for—or what they look like. An ADU is a secondary housing unit set on a single-family or multi-family residential lot. They can be attached to or detached from the main house or be converted from an existing space such as a garage or basement.
Unlike some standalone guest houses or casita, ADUs must be self-contained, meaning they must have their own kitchen, bathroom, separate entrance, and, depending on their location in relation to public transit, a dedicated parking space. They can be prefabricated units or custom-designed to seamlessly blend with the style of the main residence. While most are single-story dwellings, two-story ADUs are not unheard of—for example, San Mateo County allows for two-story ADUs of up to 26ft in height. Regardless of their configuration, they remain under the same ownership as the main residence. This means they can be rented out—one of the main considerations in building them—but they cannot be sold separately.
Here are the five types of ADUs currently found in the U.S. housing market:
- Detached new construction: These standalone units are built separately from the main residence providing extra privacy for both households.
- Attached ADU: These units are built against one side or on the back of the main residence.
- Above-garage ADU: These units are built above an existing or new garage.
- Garage conversion ADU: These units are built inside an existing garage.
- Basement conversion ADU: These living units are built inside an existing basement and typically include a separate entrance.
Current Trends in ADUs
As the nation’s affordable housing problem intensifies, there is a growing demand for the legalization and expansion of accessory dwelling units.
According to research conducted by the Federal Home Loan Mortgage Corporation (commonly known as Freddie Mac), the number of first-time MLS listings that included ADUs grew on average 8.6% year-over-year between 2009 and 2019.
Their research also determined that only 1.6% of active for-sale listings had ADUs in 2000 compared to 6.8% of active listings in 2019. These numbers support a rise in both the supply and demand of such housing units. Additionally, they found that the percentage of rental ADUs also increased—from 1.8% of active listings in 2003 to 4.1% of active listings in 2019.
The upward trend in ADUs also follows U.S. population trends. According to 2010 through 2019 population estimates reported by the U.S. Census Bureau, U.S. population growth has been overwhelmingly higher in two regions: the South (11 million increase; 9.6% growth) and the West (6.4 million increase; 8.9% growth). As a result, half of the nation’s 1.4 million ADUs are located in the Sun Belt states of California, Florida, Texas, and Georgia.
Not surprisingly, state legislatures and city officials in urban areas with shortages of affordable housing such as Los Angeles and Seattle are passing laws aimed at making the construction of ADUs cheaper and faster. In October 2019, California Governor Gavin Newsom signed five bills directly promoting ADUs to boost construction and address the affordable housing shortage. The new laws require local governments to standardize size requirements, update setback regulations, establish parking requirements, and approve all ADU permits within 60 days.
The city of Portland, Oregon enacted new code changes in 2020 that allow residents to build up to two ADUs on a single property with no restrictions on layout. This change gives homeowners more flexibility when it comes to design and dramatically increases their rental income potential.
The Benefits of Adding a Granny Flat
So what are the personal benefits to adding a granny flat to your home? Adding a granny flat to your current property could become a new home for your elderly parent who needs more assistance but doesn’t want to move into a nursing facility. It could also accommodate an older parent who has offered to take care of your children after school to accommodate your unpredictable work schedule. Either scenario saves time and money—both yours and theirs. Constructing a detached or attached ADU will provide your parent with the independence they long for. It will also give you peace of mind that they are safe, along with the joy of them being a more vital part of your family.
Alternatively, an adult child may consider moving back to their parents’ home for the same reasons but still wants some sense of privacy by way of a detached dwelling. Perhaps you have a housekeeper or nanny who needs affordable housing but is struggling to find something within reasonable driving distance of your home.
Maybe you have an unused basement or corner of your backyard that could help generate short- or long-term rental income to help pay for a new boat or a special vacation. If you are not interested in leasing out your granny flat long-term, you can always consider the growing short-term rental market found on websites such as AirBnB or VRBO for cities and counties where short term rentals are permitted.
Many residents consider building granny flats as a means of increasing their property values. A 2012 study published by “The Appraisal Journal” concluded that ADUs contribute 25% to 34% of assessed value to each property considered in their study. The study also determined that adding an ADU to a single-family home increased its resale value by a whopping 51%. Be aware, however, that resale values are always impacted by marketing trends in your particular community. Still, you can get a general idea of the potential increase you might see in your property value with the addition of a granny flat by:
- Determining your home’s current market value
- Detailing the construction costs associated with the ADU you are interested in building
- Calculating the potential after-repair value of those improvements by analyzing nearby ABUs that have recently sold nearby that are similar in age, condition, size, and build.
Wrapping It Up
In conclusion, there is an abundant number of reasons for families to consider adding a granny flat to their main residence. The decision can be personal such as your family longing to have grandpa close by, or financial such as adding an above-garage apartment to generate extra income. Consider the many style options available, including attached or detached and purpose and privacy needs of the individual you are designing your ABU for.
Based on current research, accessory dwelling units are growing in popularity, particularly in the South and West, and increase a home’s value, on average, by 51%. As a result, they are well worth considering as an investment that should pay substantial dividends both now and for years to come. For the best bang for your buck in terms of quality and customization, reach out to the ADU experts at Cottage for a free consultation to have the perfect granny flat built in no time.