Image Source: Unsplash
The ADU - or Accessory Dwelling Unit, is an additional residential space that is smaller than the main home. It’s often located above a garage or basement and includes its own kitchen, bathroom, and other basic amenities. The ADU has grown in popularity over the past several years. With home ownership costs on the rise, renting becoming less affordable for many people, and housing shortages in cities continuing to grow at a rapid pace – it’s no wonder that more homeowners are turning to ADUs as a way to generate some supplementary income from their property. Let’s dive into what you need to know about ADUs so you can decide if they are right for you…
What is an ADU?
An ADU is an “Accessory Dwelling Unit”. This is an additional residential space that is smaller than the main home. An ADU can be used as a rental property, in-law suite, or even as a home office. You can also choose to live in the ADU while renting out the main house. An ADU is typically a separate, self-contained living space that can have its own entrance.
Why are ADUs growing in popularity?
First, rising home ownership costs are making it more challenging for people to afford to purchase a home. People who rent their home may not be able to afford to buy a place of their own. And even for those who do have the means to purchase, the costs associated with buying a house continue to rise. Total home ownership costs have grown to $148,000, up from $139,000 in 2011, according to an analysis by the National Association of Realtors. That includes mortgage payments, taxes, insurance, and maintenance. The median annual homeownership cost in the U.S. is $16,000, according to NAR. That includes mortgage payments, taxes, insurance, maintenance, and other expenses. Home prices are also climbing. Data from the S&P CoreLogic Case-Shiller HPI index shows that home prices in October 2018 were about 9.5 percent higher than the same time in 2017.
What is the process for building an ADU?
You’ll want to start the process of building an ADU as soon as you know you want to do so. Most cities will have a set of requirements that need to be met in order to build an ADU. You can find out what these requirements are by contacting your city planning department. Once you have that information, you’ll want to schedule a meeting with a structural engineer to make sure the plans for your ADU meet their standards. Then, you’ll need to schedule a meeting with a contractor who can build the ADU and make sure it meets all the requirements set out by the structural engineer. You’ll also want to schedule a meeting with a contractor who specializes in public health and safety. This is because you’ll need to make sure your ADU meets all the building codes for public safety and that it does not create any health hazards for your neighbors.
Where can you build an ADU?
That will depend on where you live. Most cities have zoning restrictions that will dictate where you can build an ADU. You can find out where you can build an ADU by contacting your city planning department. You should also check the city zoning ordinance before pursuing this project.
Drawbacks to be aware of with ADUs
- Planning: Building an ADU can be a long process that will take some time. You’ll first want to make sure you live in an area that allows ADUs, then you’ll have to go through the planning process and schedule several meetings with contractors.
- Public health and safety: Because you’ll be building in a residential area, you’ll need to make sure that your ADU meets public health and safety standards.
- Zoning: Zoning restrictions are enforced by cities and counties. If you try to build an ADU in a residential neighborhood zoned for single-family homes, you could have a difficult time getting the necessary approvals.
- Renting out the ADU: Some cities prohibit renting out the ADU for several reasons. In some cases, you may be able to get permission to rent the ADU, but only if you live in it at the same time.
Bottom line
If you live in an area where ADUs are allowed, they can be a great way to generate some supplemental income. You can rent out the ADU while living in the main house, or you can rent the ADU short-term if you plan to travel. Building an ADU requires careful planning and engineering to meet public health and safety requirements. You may also need to fight for the right to build an ADU in a neighborhood zoned for single-family homes. But if you can overcome these challenges, building an ADU is a great way to diversify your income and make your property more financially sustainable.
