The Pros and Cons of ADUs
Here are all the Pros and Cons of ADUs.
An accessory dwelling unit sounds great on paper, but is that always the case? Is building an ADU always a good move (for everyone)? We already tackled the most common myths about ADUs, but now it’s time to discuss whether an ADU is a sound investment.
That’s why today, we’re talking about the pros and cons of accessory dwelling units.
We already know the basics. ADUs are tiny houses on the same lot as your primary residence (usually a single-family home). They are entirely independent in terms of entry and kitchen and bathroom amenities, and they come in many shapes and forms. In other words, you can make your ADU in any way that works best for you.
But, of course, that’s not all. So, let’s unpack this together, shall we?
Because we’re firm believers that ADUs can only make your life better and easier, we’ll start with the pros.
California and especially huge cities like Los Angeles are pricey areas to rent or buy houses. In fact, rent is so high that some people struggle to cover their basic needs. Affordable housing seems like an unattainable dream in California, but is that really so?
ADUs can make a real difference in closing the gap in housing options in California, but what else can they do?
ADUs Increase Property Value
There’s little doubt that ADUs increase property value. Getting more bang for your buck has always been the primary goal when entering the real estate market. However, that’s more true now than in the past.
Today, when millennials are the ones who are becoming the majority of the house-buying (and selling) body, it’s vital that the real estate market caters to their needs. And what do they need?
They need amenities, extra space, future income opportunities, and they want all of that in densely populated areas. Millennials aren’t easy to please, that’s for sure, but adding ADUs to properties as extra space might make existing homes easier to sell.
They Provide More Space
And, speaking of space, we can’t overlook the fact that ADUs provide extra room. Since they are self-sufficient living units, building an ADU on your property means having an additional bedroom and bath. However, the main selling point for ADUs is that this extra space is usable.
ADUs are versatile, and this extra space can easily become your new home office, which will come in handy in the post-COVID era, a guest house, or a place for your older kids to live in and enjoy.
And More Income
Depending on the type of ADU you go for, you can also rent it out without the fear of compromising anyone’s privacy. Of course, you can rent out any type of ADU, but detached ones are usually the ones to find tenants quickly and easily.
The rental housing market in California is abysmal. It can’t cater to most people who are looking for affordable housing. This is excellent news for new ADU owners because ADUs fill in this gap.
They are small, which indulges the millennial need for fewer square feet and more functionality in a rental. They are also affordable, which, let’s be honest, caters to pretty much everyone.
So, if you build an ADU, you’ll have no trouble renting it to permanent or occasional tenants and getting that extra income.
ADUs Allow You to Downsize
As we age, we find our huge single-family homes challenging to maintain. Just cleaning them takes us a few days, and maintenance goes way beyond that. That’s why, for decades, people nearing retirement have been looking to downsize.
However, letting go of a house, you’ve called your own for decades is no easy task. That’s why ADUs are the perfect compromise. With a backyard cottage, you can downsize and rent your original residence to kill two birds with one stone — downsize and get extra income.
Aging In Place and Multigenerational Living
Of course, ADUs aren’t ideal just for the elderly, but they benefit them the most. You might not know, but ADUs are also called granny flats or in-law units because they often house the parents or in-laws of primary residence owners.
So, because we aren’t looking to perpetuate the silly stereotype that everyone hates their in-laws, let’s suppose you have elderly parents or in-laws that can’t live on their own anymore. You want to move them in with you, but you also want to maintain your (and their) privacy.
An ADU is a perfect solution. It also works well the other way around — your in-laws or parents can let you have their primary residence while they downsize with a backyard ADU.
More Density Means More Walkability
A lot of people often complain about ADUs and how they’ll make the areas overcrowded. That’s completely untrue. Sure, ADUs will make an area more densely populated, but that’s actually a good thing.
ADUs are the perfect way to get people into diverse, job-rich areas with access to public transport for an affordable price. That was the goal of the Californian government when they relaxed the building and zoning laws to permit more ADUs, which was a part of a six-bill package that’s supposed to boost housing production in California.
Now, it’s easier to get a building permit to get a square foot or two in your backyard (or 600-1200 of them). That will definitely make your area more populated. But that only means that your neighborhood will be more walkable.
And a Bigger Community
Renting out your ADU (or simply renting one) means you get to pick your neighbors and create a little community for yourself.
Even though ADUs are a great feature to add to your home, they do come with some downsides. However, with the government relaxing the laws regarding ADUs, those downsides dwindled.
Not that long ago, parking requirements were a real pain in the neck for hopeful ADU builders. Today, things are different, especially if you live near public transport or in a historically significant part of town.
Of course, some downsides persist even with these changes.
Losing Basic Storage (And Yard) Space
No matter which type of ADU you go for, you’ll lose some space, whether storage or yard. If you convert your garage, you won’t have that storage space anymore, and if you carve out a piece of your yard to build a backyard cottage, your yard will, naturally, become smaller.
That’s something to consider if you’re a fan of ample space.
Disruption of Daily Life
Getting some extra income from renting your ADU is fantastic. However, it also means that you’ll be sharing your space with someone. That brings disruption to your daily life. Even though an ADU is a separate unit (even if it’s a part of your main residence), it’s still a unit that’s very close to you. You won’t be able to ignore the tenants or pretend they aren’t there. They will bring some sort of disruption.
Moreover, are you ready to become a landlord? Sometimes that’s more hassle than it’s worth. Those are just some of the things to consider before building an ADU.
Cost of Construction
Of course, the cost of construction and financing ADUs are some of the most significant issues hopeful ADU builders have. Nothing in this life is free, so you will have to cough up some money to get your ADU dreams going.
Overall, ADUs can cost anywhere between $150,000 to $400,000. The cost depends on the area you live in as well as the size of the ADU you want. For example, in the California Bay Area, ADU construction costs can go up to between $350,000 and $390,000.
If we’re looking for average cost in California, ADUs cost between $200 to $300 per square foot. That means that an average 600-square foot ADU can cost between $120,000 and $180,000
Increased Property Taxes
ADUs increase the value of your home, but they can also raise your property taxes. However, that won’t be as much of a problem as you’re imagining. For example, building an ADU won’t trigger a reassessment of your home value. That’s excellent news for homeowners who are paying taxes much lower than the actual value of their homes.
Instead, the value of an ADU will be added to your current property, which will come up to around 1% of your original assessment. In other words, your ADU tax will blend with the current property tax, so you’ll see a reasonably small increase.
Cedar ADUs — Sleek Affordable Housing Units
Overall, the benefits of ADUs vastly exceed the downsides. They provide:
- additional living space
- an affordable housing opportunity
- a chance to get some extra income
- an opportunity for aging in place and multigenerational living
That’s precisely what inspired the Cedar team to leave its mark on the California housing market. Our team, which has a combined experience of nearly a century, strives to deliver a gorgeous ADU to each of our clients. We combine the ever-changing spirit of California with the sleek and modern Scandinavian design to bring you a beautiful addition to your property and community.