top of page

Return of the 'In-Law' Apartment

via Linkedin, Bloomberg, and Bankrate

A nationwide boom in accessory dwelling units (ADUs) — also known as garage apartments, casitas, granny flats, carriage houses or in-law suites — has turned many American homeowners into developers and landlords. The coronavirus contagion has spurred investment in housing, and the pandemic has only increased interest in ADUs, real estate experts say. COVID-19’s fatal spread in nursing homes means some homeowners would rather keep older relatives at home.

Some families facing this difficult choice with elderly relatives amid the pandemic are choosing to house them in ADUs: Unlike basic sheds or semi-finished pool houses, these small, separate units often have a bedroom area, full kitchen and bathroom. They can be standalone structures or over garages, and some owners rent them out for extra income.

This trend toward multi-generational households has been gathering pace for decades. According to Pew Research Center, the proportion of Americans living in such households has almost doubled to 20% since 1980, accelerating after the financial crisis. The impact of the coronavirus on nursing homes, where an estimated 40% of deaths have occurred, is hastening the movement. Now, to escape Covid-19, Grandma’s living in the backyard!

The all-in cost to install this one-bedroom, 495-square-foot model accessory dwelling unit, or ADU, is about $250,000. It has natural cedar siding and a mid-range kitchen package. Abodu partnered with U.K. design firm Koto for the modern, simple design.

Photographer: Abodu

The mini homes have long been talked about as a possible form of affordable housing, particularly in expensive coastal areas. Now, “they are all of a sudden being talked about in the context of Covid—for providing options for granny, because granny shouldn’t be living with other seniors in an assisted living facility,” said Kol Peterson, author of “Backdoor Revolution: The Definitive Guide to ADU Development.”

There was momentum even before Covid toward allowing these structures, which are often restricted by town building codes. “It seems like almost every day there is a new municipality making it easier,” said Mike Koenig, co-founder of Studio Shed, which builds these units. 

In response to affordability challenges and a shortage of housing units, municipalities from Alexandria, Virginia, to San Jose, California, have freshened up ordinances regulating ADUs. Legislation that took effect this year in California and Oregon makes building them easier and more appealing to homeowners, Chicago is also considering allowing them.

A study released this month by mortgage giant Freddie Mac says there are at least 1.4 million accessory dwelling units, or ADUs, in the United States.

Approval and installation can take anywhere from a few months, in cities where building permits are processed quickly, to a year and a half for some custom-built designs. Some come pre-made — largely built in a factory and then quickly put together on site — while others are built from scratch.

Sharing groceries and meals would be easier, and maybe you'll be able to send the kids over in the evening while you and your partner have a glass of wine together and actually talk. Hopefully a win-win for all. Your parents can hopefully get valuable time with the grandkids, and you can get a little pressure off in these unprecedented times.

How to pay for an accessory unit?

An ADU could come with a six-figure price tag. Don’t have an extra $100k in the bank? Here are some alternatives:

  • Cash-out refinance. These have gotten harder to come by in the recession, but it’s an option if you have a plenty of equity.

  • Home equity line of credit. HELOCs and home equity loans also are scarcer now, but they typically can be closed more quickly than mortgages.

  • Construction loan. This short-term financing is designed for building periods.

  • Credit cards. Be careful with this option, of course, but if your credit is strong, you might be able to run up a balance with no interest or penalties for a promotional period.

Contact Real Estate for MDs today to learn more about the current real estate market.

35 views0 comments


bottom of page