Housing in San Francisco and the Bay Area is expensive and unaffordable, but it’s also difficult to find, which is why people are starting to look for alternatives for housing and extra cash. The Bay Area faces many challenges when looking to build housing to accommodate the explosive growth the region has had. One way that could help many homeowners make money and new residents moving into the area is through the use of accessory dwelling units (ADU) attached to single family homes.
Natalie Sandoval, director of ULI San Francisco, said if cities in the Bay Area made it easier for homeowners to build these units on their property, it would provide tens of thousands of additional housing units. “One of the things that we learned from the Terner Center was that if 10 percent of the homes in the Bay Area were to put in an accessory dwelling unit, we would have another 100,000 housing units without actually impacting the neighborhoods very much,” she said. Sandoval added that while there are some of these units in the Bay Area, limited land size in the geography makes it a perfect market for ADUs. San Francisco and East Bay could benefit greatly from these units, she said. In those areas, Sandoval said, “There’s a lot of single family homes that would potentially have space for an ADU.”
Jumpstarting the Market for Accessory Dwelling Units: Lessons Learned From Portland, Seattle and Vancouver, a new April 2017 report from the San Francisco chapter of the Urban Land Institute in conjunction with the Terner Center for Housing Innovation at UC Berkeley explores the successes of these units and the ways in which those three cities have utilized ADUs to offer some affordability relief.
Groups in the area are calling for legislation to help bring more ADUs into the cities. “Recently, there was legislation passed to help ease regulation for accessory dwelling units,” Sandoval said. The legislation aimed to make it easier to build these units by waiving fees in utility and relaxing design regulations and parking restrictions. Even with that legislation, lessons learned from Seattle, Portland and Vancouver show that there are more changes that could be made.
But what Sandoval said is missing is education around the units. “One of the big challenges people faced in Portland, Seattle and Vancouver was in terms of education,” she said. “They were able to create a lot more accessory dwelling units once there was a lot more resources for homeowners, whether that was design guidelines or tools and technical assistance that the city could offer, that made a huge difference.”
While some parts of the area could benefit from more information regarding the units, some cities are already providing people with tips and information. “The city of Santa Cruz has moved a long way in providing that for homeowners. I think the Bay Area could learn a lot from them to really help educate property owners,” Sandoval added.
Perhaps the biggest challenge people face when looking to build ADUs comes down to financing. “In general, it’s hard to get a loan for an ADU, and it’s hard to borrow against the potential value of your home in regards to what it would be worth once you had an ADU,” Sandoval said. While the Terner Center report found that the average cost of an ADU in Portland, Seattle and Vancouver was approximately $156,000 to build, with construction labor and materials being the two largest costs, according to the report. Seattle homeowners paid around $230 per square foot for the development while Vancouver homeowners paid about $318 per square foot and Portland around $161 per square foot.
The largest landlord in San Francisco proper has a different idea of how to utilize ADUs in the city. “The way we understand ADUs is it’s less about the in-law unit that attaches to a single family home and, for us, is more about multifamily and large apartment buildings, so it’s a very different way of looking at ADUs,” said Yat-Pang Au, CEO of Veritas.
“We’re participating in it in a relatively non-traditional way,” Pang said. “We’re looking at it from the perspective of how can we [bring] additional density in units in a very diffused way for a multifamily apartment building as opposed to an in-law unit.”
The way Pang and his company goes about utilizing ADUs is revamping underutilized existing spaces like parking areas and unused storage areas. Pang said sometimes they add as few as one additional unit to their apartment buildings and as many as four or five. He said this is a way for them to increase density across multiple buildings without having to completely start from square one.