How Much Does an ADU Cost in California?
How much does an ADU cost in California? What’s the actual price of building, and how much will an average unit cost you?
Thanks to the recent (and the not-so-recent) changes in Californian housing and building laws, building ADUs and container homes is no longer a feat equivalent to running an obstacle course that never ends. In fact, given that the government of California has been relaxing the requirements for ADU building for years now, the dream of having your very own accessory dwelling unit (ADU) isn’t as unattainable as it once was.
Today, you can build a couple hundred square foot house in your backyard within weeks and enjoy both the extra space and the potential passive income. But is it really that easy to build a tiny house next to your single-family home?
The answer to that is both yes and no. First of all, the government may have made it easier for you to obtain permits, find financing help, and enjoy lower property taxes, but that doesn’t mean you can build a house out of nothing. You still have construction costs to think about, as well as other expenses that come with making tiny custom homes.
So let’s see how much does an ADU cost in California!
The Abyss That Is the California Housing Market
No matter if you’re a California native or one of the many people who flooded to California in search of better weather and more comfortable living, you’re probably well aware of one thing — the California housing market is a mess.
First of all, nothing on the California housing market is simple. Even though the state is seeing a smaller influx of people over the past couple of years, the housing market isn’t really reflecting that. Housing is still a great luxury. That essentially means that the affordable housing crisis is still in full swing.
Owning a house is practically impossible, given that the median price of a single-family home is, on average, around $600,000. But owning isn’t the only housing option, right? Surely there are others, more affordable ones?
Of course. However, renting isn’t really an affordable option either. California has the 4th highest average rent in the country. Densely populated areas, like the Los Angeles area or the San Francisco Bay area, for example, have extremely high rents, which leaves a lot of people struggling to make that monthly payment and still have enough money at the end of the month.
Due to that, California currently holds the record when it comes to numbers of homeless people. Research suggests that more than 25% of all homeless people in the US reside in California.
These numbers are crushing, and the government can no longer ignore them, which is why it’s investing resources in affordable housing options such as ADUs and container homes.
These alternative housing options are:
- cheaper to build
- easier to implement
- more affordable as long-term rental units
Potential Solutions — ADUs and Container Homes
So, alternative housing really seems to be the close-to-perfect solution to the affordable housing crisis. ADUs are easy to build and allow people to dwell in already densely populated areas (without the need to restructure the entire neighborhood in order to build more living space) without paying an arm and a leg for rent. They are also more eco-friendly than traditional building, and they help with stopping the urban sprawl.
On the flip side of that same coin, building accessory dwelling units, be they detached ones or garage conversions (or even shipping container homes), allows homeowners to expand their total livable space and earn a bit of rental income by finding tenants for their new dwelling units.
But how much does one have to invest in order to get that extra income from their rental properties?
How Much does an ADU Cost in California — a Study of Averages
An ADU is a great way to make a real estate investment in a state that’s notoriously difficult when it comes to that. That’s part of the reason why ADUs are becoming more and more popular in California. Not only that but selling a house that has an extra unit in the backyard is much easier than selling one without it.
On average, an ADU will cost you around $156,000. However, that number doesn’t really tell you much, does it?
Generally speaking, the price of an ADU depends on:
- the size and location
- the construction material costs
In reality, you need to know how much all of these factors cost so you can calculate your building budget. Not to mention, once you actually build your ADU, you also have to furnish it, which increases the overall cost. So, that’s also something to consider.
Major Costs of Building
There are a couple of major building costs that you need to consider. First of all, you have to get your permits. Depending on the type of building you’re going for, you can either get them yourself or have a building company do it for you. Here at Cedar Dwellings, we offer turn-key solutions, which means that we take care of everything for you and the final cost of the ADU includes everything, even the permits.
Building permits may cost you anywhere between $25 and $4,000. Now, that’s a very wide range of prices, but it really depends on your location. Aside from that, you may also have to pay for the zoning permits, which cost anywhere between $450 and $15,000.
So, right from the start, you’re looking at a hefty expense. That’s why turn-key solutions might be a better option. Our Cedar units all have affordable prices that include all expenses. Depending on the size you’re looking for, you’ll pay upwards of $189,000 for the entire finished unit.
If you’re opting for some other solution, then you’ll also have to factor in the:
- architectural design fees that will probably be around 8% of your total costs
- sire preparation costs
- building costs which, on average, costs between $100 and $500 per square foot
- system upgrade costs
- interior finishes, which will be around 10 to 50% of your initial investment
ADU Tax Deductions and Benefits
Now, if you’re doing quick calculations while reading this article, you’ve probably come to a pretty big number, right? But don’t worry. ADUs actually come with significant financial benefits that will make the investment easier.
First of all, aside from expanding your living area, an ADU will also earn you extra income and increase the value of your home. So, right there, you’ll see some immediate and some long-term returns on your investment.
However, there are also significant tax benefits that are in place to encourage people to build more ADUs.
If you’re thinking about building another dwelling in your backyard, you’re probably worried about the tax. Will it trigger a new assessment and increase your taxes exponentially?
The short answer is no. Building an ADU or a shipping container shed that you’ll use as an extra dwelling is not only cheaper in terms of building costs but also in terms of taxes. Thanks to Prop 13, increasing the value of your home won’t increase your taxes by much. They’ll remain at 1$ of the current value with a capped increase rate of 2%.
The Average Cost of Container Homes
Another version of alternative housing that’s even more affordable than ADUs are container homes. These cost less than the average ADU project and are even easier to build, given that most of the manufacturing project is done off-site.
Types of Container Units
A container home is a tiny dwelling that’s made in an adapted shipping container. Generally speaking, tiny home containers aren’t a novelty on the market. However, they’ve seen a steady increase in popularity over the past few years.
Container shed homes are:
- durable (they are made out of reusable steel intermodal containers)
- easy to construct in a time-effective manner (you can either purchase a container and adapt it yourself or hire a builder to adapt one to your needs)
- cost-effective (compared to both traditional housing and ADUs)
- made out of recycled materials and thus eco-friendly
Because they are so adaptable and yet compact, container homes can be used in numerous ways:
- vacation-like rentals that you can rent out
- long-term rentals for small families
- tiny homes for your loved ones (friends or family members)
- extra livable space (home offices, home gyms, guest houses, etc.)
- temporary housing for government officials as well as first responders
The beauty of container homes is that they are readily available and cut the building time down by a lot. There are over 14 million discarded shipping containers in the US, ready and waiting to be reused.
A container home can cost you anywhere between $35,000 and $175,000. This, of course, depends on the size and amenities you’d like to have. Another huge benefit of container homes is that there’s a lot of flexibility when it comes to building.
You can choose the floorplan, where the doors and windows go, etc., based on how you’ll use your space. Depending on your needs and desires, if you’re looking for an average-sized container home, it will cost you between $70,000 and $150,000. Of course, the larger the unit and the more customization it requires, the higher the cost.
However, that doesn’t necessarily mean you can’t lower the price. Your builders will probably be willing to lower the cost (at least that’s how we do things here at Cedar) or at least negotiate with you. Every unit is special and unique, so at the end of the day, average prices aren’t really that telling.
Build With Cedar Dwellings – How Much Does an ADU Cost in California?
So, how much does an ADU Cost in California? The answer is that it depends on your needs and desires. On average, an ADU will cost you around $156,000, while a shipping container home will be a little cheaper (between $70,000 and $150,000).
The bottom line is that the cost of alternative housing is worth it. The initial investment, no matter how big, will eventually pay off, thanks to the extra income you’ll earn by renting the unit out and the fact that it increases the value of your home.
If you’re interested in gracing your backyard with an extra unit, be it an ADU or a tiny container house, give us a call! We’d love to discuss your future project for you and give you a preliminary quote!