Do you have an unfinished basement that could easily be turned into an apartment for a student? 

Would you consider turning an unused garage into an in-law suite for rent to an elderly person?

Many homeowners have dwelling space in their homes or on their properties that could be converted into liveable space for another person or family. They face challenges that discourage them from pursuing these projects: the cost of renovation and construction, the cost and time of the permitting process, and zoning regulations set by localities.

A movement is afoot in several cities struggling with high homelessness and housing affordability to help homeowners overcome these hurdles. By increasing the number of accessory dwelling units (ADUs) or secondary housing units on single-family residential lots, policymakers can expand the supply of rental units, which will drive rent prices down in their areas and provide renters—particularly low-income and fixed-budget renters—with financial relief.

At the same time, property owners generate steady rental income to supplement their household budgets or even replace their primary income sources.

For women who are looking ahead to retirement or are even retired, ADUs can become a source of financial security.

What are ADUs?

Accessory dwelling units have common traits that separate them from other dwelling spaces: 

  • accessory and adjacent to a primary housing unit
  • significantly smaller than the average house
  • one of two units owned by one owner on a residential lot
  • possesses a kitchen 

A bonus room in a home, such as a sunroom or family room, is probably not an ADU.

ADUs come in many forms:

  • Detached structures such as backyard cottages and granny flats
  • Garage conversions
  • Above garage or workshop units such as the apartment that the Fonz from ‘Happy Days’ lived in above the Cunningham family’s garage.
  • Additions or bump-outs that are added onto the primary house
  • Basement conversions, also known as basement apartments, mother-in-law units, in-law units, secondary suites, English basements, etc.
  • Internal units that are part of the primary house but other than the basement 

There are potentially millions of illegal ADUs in the U.S.

Policymakers who support ADUs point to several public benefits beyond increasing affordable housing options. ADUs can support multigenerational family arrangements and provide opportunities for aging in place. The added tax revenue is no doubt also a consideration.

What the government can do

Policy reforms, partnerships, and innovations can clear the way for new ADUs and bring those operating in the shadows into the light.

The range of municipal land use and zoning regulations is broad and differs by ADU types and styles. Some regulations are so restrictive or the permitting processes so onerous that property owners can’t build ADUs or operate with permission, which could lead to living in unsafe conditions.

Surprisingly, California provides an example of good regulatory reform in this area. In 2016, the legislature enacted new laws easing restrictions for ADUs, such as easing or eliminating the off-street parking requirements and (often enormous) utility hookup fees that homeowners face when they create a second dwelling.

Even if states pursue regulatory reforms, city, county, and local ordinances may not follow, creating uncertainty and conflicts.

However, some states and cities are recognizing that to address homelessness and rapidly rising rents, they have to work together on regulatory reforms and to incentivize property owners to create ADUs.

California launched a grant program offering up to $40,000 to qualified homeowners to reimburse ADU pre-development costs. To qualify, a homeowner must have a low or moderate income. 

Boston’s program offers loans to owner-occupants to carve out smaller, independent units in their homes.

Opponents of ADU expansions often use NIMBY arguments, such as that they change the character of neighborhoods, lead to overcrowding, drain public resources, and are just ugly. These arguments can be debunked

Similar to the expansion of Airbnb, some homeowners and policymakers want to stop or restrict innovation. While their concerns should not be dismissed, they have to be balanced against the positive benefits to homeowners and communities. 

Bottom Line

Addressing housing needs while providing financial security for older Americans—especially women—may require innovative new ideas that may be right in our backyards. Encouraging ADUs can be one solution.