Is your home really a good investment?
By Brett Marlo DeSantis
The average American is getting older and the average American household is getting smaller. Most of us want to age-in-place where we developed our social connections and invested in our community. We are looking for financially sustainable lifestyles as solutions. And luckily, for some of us, ADUs are that answer.
An ADU, or Accessory Dwelling Unit, is a separate living space typically in a single-family zone, generally with the owner living in either the house or the unit. They are sometimes called: backyard cottages, carriage houses, casitas, garden suites, granny cottages, granny flats, granny units, in-laws, mother-in-law flat accessory units, ancillary units, accessory apartments, laneway houses, second units, secondary units, SDUs or secondary dwelling units, sidekicks or DADUs, a detached ADU.
An ADU is typically significantly smaller and less architecturally prominent than its primary dwelling. It may be attached or unattached. They are typically located in single-unit residential zones, have less than an 800 square foot footprint. In fact, codes in your area may dictate the look and size of them.
This smaller economic and environmental footprint is extremely appealing to some. Its compact design easily allows for resource and water efficiency, indoor air quality and utilizing innovative building practices. When ADUs are designed for the intention of aging in place, they can encourage informal care giving and promote companionship with family and friends.
Yes, they are a great investment and include a versatility of living options. You may use them to adapt to many different situations including: rental income, a primary living space, potential extra living spaces, future living space/aging in place, a separate living space for family and friends (or yourself), a separate office space or work space for business (a very short commute), preschool, intentional community or just loving the small house movement and wanting to stay in your neighborhood at a reduced financial burden.
Just think: perhaps you may live in the main house and have a daughter or son live in ADU and take care of you as you get older, OR you can live in the ADU and deed the house to your son or daughter to raise their kids (with your watchful, and ever so helpful, eye) OR rent out both houses for income and travel to your heart’s content!
In September of 2013, a survey and data report on Accessory Dwelling Units was published by Portland State University and the State of Oregon Department of Environmental Quality. The goal of this survey was to learn about how ADUs are being used by Oregon owners in terms of who is using them, the financing mechanisms for them, and with some focus on energy usage and structural characteristics.
Here are the demographics: respondents, the ADU owners, were half male and half female, ages 23 through 75 and older, most falling between 35-74 years old, with an approximate annual household income of $50,000-150,000.
Most ADUs surveyed ranged in size from 400-700 square feet. Approximately ten percent were in the tiny range from 200 to 400 square feet and on the other end, with just over ten percent over 800 square feet. About half of them are a one bedroom, about a quarter studios, and another quarter two bedrooms or more.
So are these ADUs attached or detached to the main house? Surprisingly it was almost split, with forty five percent attached in the form of addition, garage conversion or converted attic or other internal space versus fifty-five percent detached units.
According to the survey, approximately eighty percent of ADUs had been used as someone’s primary residence in the past, with the same intention for the future. Approximately fifteen percent of the ADUs are for short-term housing (less than 1 month stays) and twenty percent are used by main house occupants as an extra room or workspace.
Of those who had current ADU occupants, about sixty percent of those occupants were females, and forty percent males. The occupants were predominately between the ages of 25-34 years old. Monthly rental rates varied from $375 to $1800.
When asked what best describes their relationship to the current occupant when the occupant first moved into the ADU, over half said that they didn’t know each other. Only about seventeen percent of occupants were family members.
One of the questions that struck me is “Do you receive any services from the ADU occupants(s) in exchange for all or part of the rent?” Only about ten percent said yes, and these are some of the services: assistance with yard maintenance, childcare, pet-care, handyman and house-sitting. Bartering, now that’s a tried and true community concept.
So what are the current challenges?
Mostly costs (permit fees, utility connections, construction) and design constraints or challenges due to lot setbacks, height limits, zoning issues and code compliance.
Great news! Some cities, such as Portland, are offering incentives. Portland’s waiver of System Development Charges (SDCs) does not expire until July of 2016. What incentives does your city provide?
City codes are up for interpretation. Be brave, and take your proposal to your city and review it with a planner early in the process. And don’t forget to ask what incentives are available to you!
You can create a financially sustainable lifestyle now. Now that’s thinking ahead and a really great return on investment.