The Latest Quick Fix for the Housing Crisis? Granny Flats

The Latest Quick Fix for the Housing Crisis? Granny Flats

Megan Kellogg and her husband, Kenneth, with their two children, Jaden and Amara, and Megan's mother. They're standing outside a "granny flat" in Megan's mother's backyard, where she now lives.

SourceSean Culligan/OZY

Why you should care

This quick, affordable housing solution could avoid the political scrum.

For years, Steve Vallejos felt like he was shouting into a void. He owned a company that specialized in building small homes — accessory dwelling units, or ADUs — on people’s properties. He was convinced they offered a path to building affordable homes fast, yet red tape made the construction of such units painfully difficult for builders.

That dam opened in early 2017, when his state of California passed legislation that loosened rules to build ADUs — also cheekily called granny flats, in-law units or casitas. Today, Vallejos has built nearly 200 units in the Bay Area and runs a company that expects to assemble 1,400 prefabricated, off-site “kits” for ADU construction across Northern California next year. They’re a quick fix that Vallejos calls the “low-hanging fruit” of affordable housing policy. It’s one that’s now catching on across a country that faces an estimated shortfall of 7 million rental units for low-income renters, according to the National Low Income Housing Coalition.

Developers argue that complicated regulatory processes make construction of traditional houses onerous, costly and lengthy. In some California cities, for instance, it can take four years to secure permits and costs more than $150,000 per unit in development fees alone. In several cities, single-family zoning laws only allow for the construction of detached, single-family homes on residential land — preventing the building of apartment buildings, senior housing, student housing and multiunit low-income housing. Those with a “Yes in My Backyard” (YIMBY) philosophy argue for boosting building density in cities with skyrocketing rents and swelling homelessness counts, while NIMBYs (“Not in My Backyard”) oppose reforms they worry could erode neighborhood character and decrease local autonomy.

But more cities are now turning to these granny flats as a quick housing solution that avoids the political scrum. Because ADUs can be legal within a single-family zone, homeowners and builders can bring new units onto the market without the need to fight zoning rules. At the same time, community members retain control and don’t need to purchase additional land to convert a room or build from scratch.

California’s 2017 reform allows for the construction of one ADU per single-family home, without earlier regulations that builders viewed as roadblocks. Oregon similarly passed a bill in 2017 requiring qualifying cities and counties to enable the construction of these units, while Washington, D.C., relaxed requirements in 2016. In June, the Seattle City Council approved legislation to streamline the ADU building process.

It’s one of the few kinds of housing that everybody can agree on.

Debra Sanderson, urban planning expert

The rise in ADU permit applications since these changes points to pent-up demand. More than 10,000 permits have been filed in Los Angeles since 2017, compared to just a few hundred each year before the new regulations, according to the city. “The places where we’ve seen the most strident opposition to changes in zoning … are nevertheless seeing a huge uptick in applications for ADUs,” says Matthew Lewis, director of communications for California YIMBY, a pro-housing advocacy organization.

Granny flats offer a steady income stream for homeowners who can’t afford to maintain their properties and face pressure to sell, says Debra Sanderson, a retired urban planner in Berkeley, California. They appeal to those caring for an aging parent, to seniors who need to downsize but don’t want to leave and to adults with disabilities who can live independently while remaining close to family members.

Investors too are diving into this uncharted terrain: Companies like Los Angeles–based Cover, launched in 2014, design and build backyard homes. ADU Builder constructs units at no cost to homeowners and finds a tenant in exchange for a portion of the rent. AddUp, a D.C.-based startup, helps homeowners navigate the whole process, while Symbium Build offers a visual platform similar to a Google Earth for ADU rules.

Even proponents of granny flats acknowledge that ADUs are a Band-Aid solution for a pervasive national housing shortage. But it’s a fix that’s attracting an unlikely but powerful coalition of potential beneficiaries: homeowners and those experiencing homelessness, millennials and the elderly, governments and businesses. “It’s one of the few kinds of housing that everybody can agree on,” Sanderson says. And it’s still in the early adoption phase, says Vallejos. “We’re on the first few footsteps on this path of where we need to go.”

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Megan Kellogg and her husband, Kenneth, with their daughter Amara. Photo Sean Culligan/OZY.

As cherry blossoms bloomed in spring 2016, Megan Kellogg was homeward bound. Kellogg hadn’t planned to return to Richmond, California, after living in the D.C. area with her husband. As opera singers with a young child, putting a down payment in the spandex-tight Bay Area housing market wasn’t in the cards.

But Kellogg’s 73-year-old mother, Sandy McQuillin, was struggling to maintain her house. Multiple surgeries had taken a toll; the yard across the 6,100-square-foot lot had become tangled and overgrown. The family pooled resources to build an ADU there, which McQuillin moved into, while Kellogg and her family settled into the house — rent-free.

Theirs is no one-off instance. A rapidly expanding number of empty nesters on fixed incomes live in houses bigger than they need but can’t afford to relocate or enter nursing homes, says Lewis of California YIMBY. Sure, those living in areas where real estate prices have jumped exponentially could sell their properties for more than a million dollars. But the national median cost of a private room in a nursing home was roughly $8,400 per month in 2018, according to Genworth’s 2018 Cost of Care Survey, whereas home health aides cost $4,000. For those who don’t need intensive care, downsizing nearby involves paying an untenable 2019 market rate. “What do you do when people have too much house, but either can’t afford to move,” Lewis says, or “are really committed to their community and want to stay there?”

That’s why some are designing ADUs that cater to the needs of aging adults and people with disabilities. Features could range from an entry without steps to lever-style door handles, says Fred Buzo, a housing expert with AARP California. States focused on climate change also view these units as opportunities to build environmentally conscious housing, as they require less energy, water and building materials than typical homes.

A construction process of less than one year makes them attractive to cities, given how fast housing and land prices are rising, says Bob Wieckowski, a California state senator who has authored several ADU bills. Land costs rose by nearly double the inflation rate between 2010 and 2016, while building a 100-unit affordable project in California rose from $265,000 to nearly $425,000 per unit between 2000 and 2016, according to the UC Berkeley Terner Center for Housing Innovation.

That’s not to say that building an ADU is easy. The permitting process varies across cities and can take several months. While some people now breeze through in less than a month, Kellogg — who applied before legislation changed — waited for 10. And one-size-fits-all statewide laws are creating unintended consequences, says Keith Gurnee, a board member of Livable California, a nonprofit that pushes for local control over urban development.

“What the state is doing is trying to shoehorn them into single-family residential areas without any local review,” says Gurnee, who lives in San Luis Obispo, California, a college town that’s home to more than 20,000 undergraduate students at California Polytechnic State University. Removing requirements for parking spots there, for instance, could create congestion and infrastructure problems in a residential community where as many as six students might live together in one house.

ADUs, while cheaper to build than housing from scratch, are also still out of reach for many. Building a basic ADU costs between $100,000 and $200,000, according to a survey released in 2017 by the Terner Center. For those living paycheck to paycheck, a long-term income stream from renters could be a compelling reason to front those costs. But without regulations to keep ADUs affordable, homeowners could charge high market-rate rents to tenants, escalating housing pressure in their communities rather than easing it.

For Kellogg though, building the ADU for her mom has meant eliminating her own housing anxiety. She was able to move home when most of her old friends have either been priced out or have delayed having children, and she can lean on her mom for help with the kids.

This proximity has allowed the relationships between her mother and her two children — she had a second child after moving back — to blossom in a way that would have been impossible coast to coast, she says. And for McQuillin, it has meant not having to say goodbye to the home where she shaped her adult life while watching her grandchildren grow up before her eyes.

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Dan Tenenbaum and his partner, Kim Sherman, in front of their newly constructed 125-square-foot home. Photo courtesy of The Block Project.

In October 2017, Dan Tenenbaum and his partner, Kim Sherman, welcomed Robert — a 77-year-old man of Cree and Métis ancestry — into a newly constructed 125-square-foot home on their residential Seattle property. The three of them hit it off, finding common ground in their introverted demeanors and love of gardening. Robert walks their 8-year-old Goldador while they’re at work, and they took a road trip together this summer to the Oregon coast.

Tenenbaum and Sherman are the first hosts of the BLOCK Project, an initiative managed by Seattle-based nonprofit Facing Homelessness. Volunteers lease spaces to the organization, whose architects and volunteers build detached ADUs at no cost to homeowners or residents. Case managers at local social service providers screen and refer clients to the BLOCK Project, which facilitates matching processes for hosts and residents to determine if they’re compatible. Nine Block Project homes will be completed by the end of 2019 and more than 100 homeowners have expressed interest, says Jennifer LaFreniere, an architect involved with the project.

For Tenenbaum, becoming a host was one way to contribute to addressing a crisis that’s ballooned since he moved to Seattle in the 1980s. Today, a half-hour stroll will almost certainly include clusters of tents, wheelchairs and baby strollers belonging to those living outside. “We’re just ordinary people and we didn’t know what to do,” Tanenbaum says. “All we have to do is provide some space and be a good neighbor to Robert.”

Hosts aren’t compensated and tenants don’t pay rent in this arrangement, but other initiatives have experimented with attaching financial gains. In 2017, Los Angeles County approved a limited 18-month pilot project in which qualifying homeowners could receive as much as $75,000 in incentives to build an ADU. They faced a streamlined permitting route in exchange for renting units at subsidized rates, including to those who have experienced homelessness.

But offering short-term incentives could create long-term problems, suggests LaFreniere, pointing to a program launched in 2018 in which Multnomah County, Oregon, is offering to build detached ADUs for free. After five years of housing someone who experienced homelessness, homeowners can purchase and rent the ADU at market rate, potentially making it unaffordable for those the program is meant to serve, she argues.

Megan Kellogg and her husband, Kenneth, talk with Megan’s mother outside of her home. Photo Sean Culligan/OZY.

To be sure, supporters and skeptics alike agree that ADUs at best address symptoms — rather than treat the root causes — of housing insecurity. Even so, supporters and developers believe granny flats could make a dent in America’s housing woes. California passed a law in September that allows for two ADUs per property rather than one. Meanwhile, cities like San Jose are introducing reforms to make it faster to build ADUs, says Vallejos, who lists Austin, Atlanta, Salt Lake City and Chicago as other cities to watch.

Ultimately though, it’s not just cities but also those who feel disturbed by the sight of homelessness who have the power to do something about it, in Tenenbaum’s eyes.

“All people need is a break, a chance and a place to stay until they get on their feet.”

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