There is no question that the Bay Area has a housing crisis. Affordable new home construction lags behind and the demand and rising home prices have priced out many first-time buyers. Statistics for the Bay Area show rents are about $4,170 per month for the median rental in San Francisco; home ownership is at a record low; and overcrowding is more than twice the national rate.
A new state law attempts to increase the housing supply in order to drive down rents. Known as the Accessory Dwelling Units (ADU) Law, it permits homeowners to build rental units on their property, whether through garage conversions, as a home attachment, or as a new, standalone structure. These type of rental units have colloquially been known as “granny flats.”
The ADU law removes many of the prior impediments to building granny flats, including prior costly barriers, such as exorbitant water and gas hookup fees, often put in place by local governments. However, the sheer cost of ADU design plans and construction — which could run up to $200,000 for a new unit — remain a deterrent to the construction of granny flats. Current laws do not permit future rental income to qualify someone for a mortgage loan. In light of the new law, mortgage companies are said to be working with lenders to create an ADU-specific home loan that will take future rental income into account.
Cities, however, still have the ability to regulate granny flats and this may ultimately thwart the new law from making a significant dent in the housing crisis. Cities are free to impose local zoning restrictions, including size and height restrictions.
Before you embark on that granny flat project contact your lawyer. The ADU law may make it easier to build that rental unit, however, it is also ripe for Not In My Backyard local regulation.
The information presented is not intended to be, and does not constitute, “legal advice.” Because each situation varies, and only brief summary information is provided here, you should not use this information as a basis for action unless you have independently verified with your own counsel that it applies to your particular situation.
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