Diversifying Value: Accessory Dwelling Units

PORTLAND, Ore., May 28, 2010

A building practice that was popular in the early twentieth century is quietly re-emerging around the country. From Portland, Oregon, to Cape Cod, builders are adding value to their homes through accessory dwelling units (ADUs). 

ADUs are one of the most diversified building features. There are attached and detached ADUs. Some builders build complete ADUs, while other builders pre-plumb and pre-wire spaces for easy conversion. ADUs can (and are sometimes required to) operate on utilities separate from the main dwelling. Prefabricated and modular housing systems are also making it more accessible for homeowners to add an ADU to an existing home for minimal costs. The details of a specific ADU are often determined by housing codes and ordinances. Depending on the state, city, or town, the definition of an ADU varies dramatically. But legalities aside, ADUs offer a number of valuable benefits for new homebuyers and existing homeowners. 

The most obvious benefit of an ADU is the potential for rental income. For homeowners and new homebuyers, this supplemental income is an easy way to offset costs associated with buying a home or increasing property taxes. The green housing market, often stuck on the "green homes cost more initially but you will see the returns over time" spiel, is having great success with ADUs. Holly Construction and Design in Bend, Oregon, incorporated an ADU into a recent LEED® for Homes Platinum certified project. "We finished half of the ADU," says Jane Bowerman of Holly Contracting and Design. "It included a full bath and was pre-wired and pre-plumbed for a kitchenette. The ADU just gives you so many options, from a guest suite to a home office. And since this ADU was detached from the main house, it was an excellent rental opportunity and a great selling point."

As Bowerman points out, the value of having a home with an ADU doesn't always have to come in the form of rental income. An ADU allows self-employed individuals the opportunity to have a fully equipped, private home office. Eliminating the daily commute and office-space rent are two immediate savings a home with an ADU can provide. Sometimes called an in-law unit, ADUs allow families the option to live closer together. Greg Welch, owner of Greg Welch Construction in Bend, OR, has seen his houses with ADUs used in a variety of ways. "I've had a couple buy the property, rent the main dwelling year-round, and use the ADU for their vacation home."

Not all ADUs are move-in ready. For sustainable developers such as Stanley Penkin, principal of Penkin Associates, building spaces that can be easily converted into ADUs provide homeowners with flexibility. "We want to give potential homebuyers the option," says Penkin. "By pre-wiring and pre-plumbing a flex-space, the possibilities are almost endless. In a recent project, we included some mockups of the various uses for the space to give homeowners a greater perspective of this potential."

The seasonal nature of a town can also determine whether finishing an ADU is financially viable. College, ski, and coastal towns are all examples of places where a house with a finished ADU makes sense due to the influx of seasonal workers in need of housing. 

Another benefit of ADUs is that they help to mitigate the problem of increasing population size. "ADUs promote density," says Darin Dougherty, Principal of SEED Architecture Studio. Especially in cities, ADUs offer builders a solution to rigorous urban planning, development, or zoning restrictions. Additionally, cities and municipalities with historic significance can use ADUs as a way to increase population density while preserving the integrity of historic neighborhoods.

These benefits are not going unnoticed. Municipalities are beginning to offer incentives and benefits to builders and homeowners for incorporating ADUs into their dwellings. For example, the Town of Wellfleet, MA, offers homeowners tax exemptions based on the portion of their property rented. Santa Cruz, CA, is streamlining permits for ADU projects as long as they are built to one of the many city-approved designs.[1] Builders interested in the potential incentives for an ADU project should contact a local green building representative to determine which incentives are available and which ADU practices are required to qualify.

A dwelling with an ADU isn't for everyone. Renting an ADU is a lifestyle choice that requires sacrifice. Others may have no use for an ADU. However, in a world where land is becoming scarcer and more expensive, the benefits of ADUs are starting to resonate with both consumers and legislators. Terms such as green, sustainable, and environmentally friendly are now household vocabulary; any one of them can be used to describe an ADU. People are more aware of their environmental and financial actions. As the economy slowly creeps back from one of the worst recessions in U.S. history, consumers are savvier about making purchases that will retain value. 

Many municipalities have realized the value of ADUs, but there are many others that have not. Builders are hesitant to build ADUs if legalities or excessive fees significantly affect construction costs. Legislators need to work on adjusting archaic zoning, code, and other building regulations in order to pass the value of ADUs on to the builders, who can then pass it on to the consumer. Despite what still needs to be done, the ADU is making a sustainable, value-added comeback.

References

[1] U.S. Department of Housing and Urban Development, Office of Policy Development and Research. (2008). Accessory dwelling units: Case study. Retrieved from http://www2.huduser.org/publications/PDF/adu.pdf.