The Growth of the Backyard Bungalow
The growing interest in ADUs has sparked changes to local and state zoning rules to allow for more construction. Some communities are even pointing to ADUs as a solution for a lack of affordable housing. For example, the city of Portland, Ore., waived impact fees in 2010, making it significantly less expensive to build ADUs in the city. It also prompted construction to soar: The number of ADU permits rose from 86 in 2010 to 660 in 2018, accessorydwellings.org reports.
“ADU is still, for the most part, an affluent homeowner product, meaning you have to have cash on hand to take this on,” Steve Vallejos, CEO of Prefab ADU, told CNBC. His company’s most popular ADU model is a 288-square-foot home that costs about $105,000 to build. ADUs are “addressing financing, it’s addressing standardizing products within cities, and then also it’s creating partner relationships with contractors, architects, and even other builders,” Vallejos says. “There are many different scenarios that people look into based on income, lot size, different zoning rules—so we build ADUs that start at about 150 square feet going up to 1,200 square feet.”
Some homeowners view ADUs as a rental income generator. Some are even turning their ADUs into a retirement plan. Homeowner Lisa Puchalla of Washington, D.C., told CNBC that she and her husband can envision themselves retiring one day in their ADU. The District of Columbia is another city that recently relaxed its building codes to allow for more ADUs. The Puchallas have an ADU in the side yard of their home and rent the ADU out on a monthly basis. “I can definitely see us hanging out there, retiring and traveling, and then renting the main house,” she says.