Thank you so much for having me here today. This is an honor. I’m thrilled to be able to talk about accessory dwelling units with people in the US, typically, and here today in France.
I realize that a lot of people don’t have context for ADUs, so I’m going to start with a little bit of a context for what they are, and the talk is going to be about scaling up accessory dwelling units as a 21st century solution to the US housing crisis.
1 About me
I run a couple of websites: buildingandadu.com and another website called accessorydwellings.org. I have a book called Backdoor Revolution, about ADUs. I teach classes for homeowners about ADU development and real estate professionals, designers, builders, lenders, appraisers, builders. I run citywide ADU tours. I run an ADU specialist designation for professionals in the US. I direct ADU academies, which I’ll talk about at the end. I teach classes about ADUs and middle housing. I consult for states and local governments about ADU legislation, and now I do a lot of work related to installing RV hookups on residential properties for tiny houses on wheels, which is another passion of mine: that is another form of very incremental, ultra-low-cost, affordable, distributed development like ADUs.
2 ADUs and United States context
For context, I threw in this slide, which is the typical pattern of US development, not very attractive, single-family, exclusive development. 60% of the United States is covered in this, which is terrible. Automobile-oriented, right?
The US was developed largely after 1920, and so much of our development patterns are what are now called single-family, exclusive single-family residential properties, which is very different than Europe, very different than Asia.
ADUs are a development intervention that allows us to take these single-family residential properties where you can’t otherwise build, say, a duplex, triplex, fourplex. But if the city allows for ADUs, accessory dwelling units, you can build these small units on these ‘single family zoned’ properties.
These are examples of ADUs. We have a detached ADU back there, an attached ADU there, a garage conversion ADU there, and another garage conversion ADU there.
In this slide, we show a family living in an ADU in 2010. In 2020, they have a kid. They have two kids, and so they need more space. Initially, they’re living in the primary house in the front. They’re renting out the ADU in the back. In 2020, they become a nuclear family with 2.3 kids. And then in 2040, the kids go off to college. The parents need less space, so they move into the ADU, and they start renting out the front house.
So the ADU plays different roles over the course of decades as the family changes.
Usually, in the United States, people live in their homes for five to seven years. If you have an ADU on your property, it allows for you to live in that property for decades because your housing needs change and your housing typology changes with it if you have an ADU. You can downsize, and you can shift into one or the other.
3 ADUs and affordability
But the other interesting thing tying into the affordability discussion is that these ADUs, when you build them, are quite expensive. I’ll get into the cost more later.
But they do not add as much value to the property as they cost to construct. In fact, you could roughly say they add about 50% of the value that it costs to construct. So if it costs $300’000, it’ll add $150’000 of contributory value. So it is not a rational thing to build an ADU if you are a speculative developer who wants to buy a property, add an ADU, and sell it. You would lose money. You would go out of business.
The only people for whom it is rational to build an ADU are people who are going to have long-term vested interest in staying on the property, because A) they can create the housing flexibility that they need over time, and B) if they rent out one unit or the other, it eventually does pay for itself. In fact, then it becomes very profitable.
So ADUs are something that only people who have long-term vested interest in the property are going to be predisposed towards building.
It is not going to be built by professional developers, which makes ADUs different than every other type of housing.
I guess 10% or so of the housing in the United States is developed by homeowners, and 90% are developed by professional developers, but with ADUs, it is the exact opposite: 90% of the ADUs are developed by homeowners, and only 10% are developed by professionals. So that makes ADUs very different than every other type of housing.
4 ADUs’ economic model
A lot of the work that I do is to teach homeowners and professionals about that difference and help homeowners to develop ADUs because it is not a traditional thing to do to build housing in the United States for yourself.
If you look at the cost of construction of ADUs, they are quite expensive. They range from $100’000 to $300’000, and the median price might be about $300’000.
The smaller it is, the more expensive it is per square foot, but the less expensive it is overall.
I’m from Portland, Oregon, which is on the West Coast, north of California. Typically people will build the largest ADU that they can build, in part because maybe they need that flexibility of the size of the ADU to be bigger, but also because it is more rational to build a larger unit because the cost per square foot is only marginally more expensive.
But with that cap of 800 square feet, people are building right up to that upper limit. So if you look at the cost, it is pretty expensive to build ADUs.
So in this first scenario, Example A, Joe is building an ADU for 800 square feet. He spends $300’000 to build it. He rents out the house, or he lives in the house and rents out the ADU, and it rents out for $2’200 a month. That’s a $26’000 per year of rental income that Joe can obtain from renting out the ADU, and that’s an 11.3-year payback for Joe.
Scenario B, Joe decides, “Hey, I’m going to be smarter about this. I’m going to move into the ADU, rent out the primary house instead, make more rental income, and then I’m going to make more, you know, $2’900 a month.” That means it’s an 8.6-year payback for Joe.
Scenario C, Joe rents out both the ADU and the primary house, doesn’t live in either one, and then he can make his money back in 4.9 years, but then Joe doesn’t have a place to live.
I the chart below, you can see that the ADU construction cost is $300’000, an 11.3-year payback period. But in fact, if that ADU is adding half of the value, so if you pay $300’000, say you own a property that’s worth $500’000, you add a $300’000 ADU, which means that it adds half of what it costs to build, let’s say, so your property is not worth $500’000 anymore, it’s worth $650’000. Then if you only rent out that property for 5.65 years, you can make back that additional $150’000, and then the cost of the construction will have paid for itself if you then sell the property. That’s the break-even period.
That’s how long you have to wait with the ADU on your property in order to make the ADU a rational investment. And if you live in the ADU and rent out the primary house, it’s 4.3 years. So that’s what I did. I built an ADU, lived in the property for 4.3 years, and then all of a sudden it became a very profitable investment.
5 Statewide legislative impact on ADUs
As a result of statewide legislation in California, the number of ADUs have been taking off in California. And this is kind of the best example in the U.S. of the acceleration of ADUs occurring at the statewide level because of reforms that have occurred at the statewide level.
And California was the first state to do that. Washington is also seeing a similar trajectory with ADUs.
And really the whole West Coast has been kind of on the cusp of this new reform of this new typology of housing that you don’t see in most of the United States. It’s really just the West Coast so far. And interestingly, I did an analysis of the big cities, Seattle in Washington, Portland in Oregon, and Los Angeles in California, and found that these cities had a disproportionate representation of ADUs within these states.
So whereas Seattle is 9% of the population of the state of Seattle, state of Washington, it represents 53% of all the ADUs in Washington. Los Angeles has 10% of the population of California, but has 31% of all the ADU permits in California. Portland has 15% of the population, yet it has 51% of all the ADUs in Oregon. So why is that?
Well, these were the first cities to adopt strong ADU reforms. This graphic here shows the proportion of ADU permits from Los Angeles out of the whole state. And the important thing that Los Angeles did was really just adopt better reforms before other cities in California did.
Similarly, Seattle here shows the percentage of the ADU permits in Washington from the City of Seattle are disproportionate relative to its size.
Portland, same thing. Portland went through its rapid ADU development curve starting in 2010.
And so the key things that helped to precipitate those changes are as following.
6 The Key ADU Legislative Changes
It was mostly zoning changes to what I call the three poison pills for a lot of jurisdictions in the United States that make it very difficult to build ADUs.
They say “if you build an ADU, you must live on the property”. You cannot rent out both units. It’s called an owner occupancy requirement. Most places that say that they allow ADUs have these owner occupancy requirements.
Secondarily, most places that say that they allow ADUs will require you to build an additional off-street parking spot. It is difficult to do so. We’ll talk about that more on the next slide.
And then there’s other poison pills such as saying “if you want to build an ADU, you have to have a half acre or an acre minimum lot size requirement”.
And then other things that I won’t have the time to go into.
But if we just dive into the additional off street parking requirements, we know that the reason that off-street parking requirements make it so difficult to add ADUs is it adds a lot of cost. So it costs like $10’000 to build an off-street parking spot. It’s geometrically impossible to add them in most cases. If you have a 5’000 square foot lot, there simply isn’t enough space to add an additional parking spot. The code, we know, induces automobile dependence by assuming that the ADU occupant will use a car. We know that it will: more parking induces more traffic, more addiction to automobile, which is an addiction in the United States.
We are addicted to driving everywhere. And it’s less safe. You see this picture of McCartney here trying to walk across Abbey Road, almost getting hit by a car. That’s because there’s so many cars. This picture on the lower left here shows all these vehicles with off-street parking spots. And now this sidewalk is no longer as safe. But they’ve also taken away all these public parking spots: they are now no longer part of the public parking spot inventory because they’ve been taken by these private households. So for every public spot that was available, now it’s been stolen by the private homeowner. And so off-street parking requirements essentially steal spaces from the public realm and put them into the private realm.
Portland, where I’m from in Oregon, has started to allow for not just ADUs but duplexes, triplexes, and fourplexes. And in the first year of data from after, we started to allow for middle housing, which is duplexes, triplexes, fourplexes. 76% of all the middle housing units were fourplexes. But more importantly, if you look at the overall graphic of the new housing types that are coming into Portland, the residential infill project has been very successful. 42% of the new housing are middle housing units in general, 42% are ADUs and only 16% are single dwellings.
In the United States, it’s probably more like 90% of the new housing production are single family homes in general. So this is a very radical difference between what’s happening in Portland and what’s happening in the rest of the United States. And also note that because we started to allow for second ADUs, you can have two ADUs on a property now, which is also the case in Vancouver, British Columbia, and the whole state of California, and now the whole state of Washington.
A lot of the properties that are building ADUs are building two ADUs, maybe a basement ADU and a detached ADU.
So in the state of California, they adopted these reforms in 2016 that allow for ADUs to be built by right. They waived parking requirements for ADUs. They froze owner occupancy requirements. They stopped having minimum lot size requirements so you could build ADUs on small lots, like urban infill lots, small lots. And they waived impact fees for ADUs.
And these are the changes that have really skyrocketed the rate of ADU development in California because the cost of land is so expensive in California.
California is the most expensive state in the United States.
In Seattle, Washington, passed similar reforms. They reduced the minimum lot size to say you can build an ADU on smaller lots. They removed the owner occupancy requirements. They eliminated off-street parking requirements for ADUs. And they also have seen a dramatic increase of ADUs before the rest of Washington.
Like I said, Washington has passed ADU reform for the whole state, and that’s about to go into effect in the next couple years, but Seattle led the way.
Portland started leading the way back in 2010, and that’s when we started to see a lot of ADUs there.
7 ADUs lobbying
Same sets of provisions happened in Portland. So what helps cities to pass these types of reforms is having a whole bunch of housing advocates, people like the people in this room, architects, designers, builders, lenders, appraisers, urban planners, discussing regulatory barriers and reforms, organizing initiatives, focusing research.
That has prompted organizations like the YIMBY movement in the United States (Yes, In My Backyard). This is a local chapter of our YIMBY movement that has galvanized support for more abundant housing options in cities like Portland. When we passed this ADU, this really radical residential infill project housing reform in Portland, 160 people came out and testified in favor of the residential infill project. Only 30 people testified in opposition to it, which is also very different in the United States. Typically, when you introduce legislation that allows for more housing units, everybody gets very upset and doesn’t want that.
So that was a big success. Then the statewide reforms started to occur in California, Oregon, Washington, and now we’re seeing this in Montana, New York, Massachusetts.
All over the country, we’re starting to see statewide interventions. In the United States, all the zoning is done at the local level. It’s a new change that we’re seeing States now intervene and say that states can no longer, or cities can no longer, have such onerous provisions for ADUs and other middle housing types.
As I mentioned, I run this event called ADU Academy. The next ADU Academy is going to be in Los Angeles on February 9th. This is where a whole bunch of practitioners, designers, builders, lenders, realtors, appraisers, come together to learn about ADUs.
This is how we are creating the housing revolution with ADUs on the West Coast in the United States.
Thank you so much.
Réutilisation
Citation
@inproceedings{peterson2024,
author = {Peterson, Kol},
publisher = {Sciences Po \& Villes Vivantes},
title = {Comment passer à~l’échelle les logements accessoires (ADUs)
en Californie et dans l’Oregon\,?},
date = {2024-01-18},
url = {https://papers.organiccities.co/comment-passer-a-l-echelle-les-logements-accessoires-adus-en-californie-et-dans-l-oregon.html},
langid = {fr}
}