Closing the Housing Gap Starts with ADUs

What is the federal government insisting will close the housing gap in the next 5 years?

ADU Overcoming the Nation’s Housing

Discover what you can do to afford homeownership and provide additional living space on your existing property!

By: Eliana Lerma

The Crisis

Whether you are a homeowner or a renter, you are probably aware that there is not enough housing for sale or for rent in communities across the country. This means families must pay more to afford owning their home and renters are left with fewer and fewer options as the demand continues to increase. Homeownership is out of reach for far too many, and those of less financial resources are forced to live farther from adequate-paying jobs. The effects of the housing shortage are without a doubt significant, both economically and socially, and cannot be ignored. Today’s rising housing costs are the result of years of failing to keep up the supply of the growing demand for affordable homes.

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The disconnect between housing supply and demand grew tremendously during the pandemic. A study conducted by Moody’s Analytics estimates that the shortfall in the housing supply is more than 1.5 million homes nationwide. This shortfall burdens family budgets, continues to drive up inflation, and limits economic growth.

Federal Action

2 weeks ago, President Biden announced that tackling the affordable housing shortage is his top economic priority. Just last week, the president released a Housing Supply Action Plan to ease the burden of housing costs and boost the supply of quality housing in communities across the nation. 


The administration’s press release on May 16th announced that their efforts will include:

 

  • Rewarding jurisdictions that have reformed zoning and land-use policies 
  • Offer new financing to build and preserve more housing
  • Expand existing forms of federal financing
  • Ensure existing and new housing remains occupied 


The president has also set a goal to complete the most construction on new homes this year, which if completed, would be more than any other year since 2006. The proposal comes as inflation remains near a 40-year high. This dedication to closing the housing supply gap means more affordable rental housing and homeownership for Americans in communities nationwide!

What are experts saying?

In a recent CBS news report, chief economist at realtor.com, Danielle Hill, was asked what she thought the president’s plan means for potential homebuyers. To answer the question, Hill states that it is time for action since home prices are up double digits and have been for quite some time. In addition, she emphasizes that rental prices are also climbing and have risen close to 20% in the last couple of months. She thinks that housing costs are a big factor that is driving inflation, comprising 30% of the household budget. Hill makes the point that if you want to make a difference, start focusing on the housing market. To this point, she states that Accessory Dwelling Units are a smart way to not only afford homeownership in this rising market but also offer affordable rent in an efficient use of land. She is then asked about the shortfalls of this plan to which she states, “A lot of these incentives are financing and funding driven, so it's going to take time before we see them actually hit the market and have an effect, but the best time to get started other than yesterday, is today.”

[Source: https://www.youtube.com/watch?v=RXvLUw44LJw.]

The Plan

As mentioned in a previous blog post, the Biden-Harris Administration emphasized at the beginning of this year that there is a growing amount of state and local jurisdictions that have made more room to support the permitting, construction, and renovation of ADUs. This is actively being done to offset the cost of homeownership while simultaneously expanding the supply of affordable rental housing. According to a recent analysis by the Urban Institute, this kind of state and local reformation combined with policies to improve financing options could lead to building over 1 million ADUs in the next five years. That’s a lot of ADUs, but is this even possible?

Increase ADU Construction

233,000

There are 1.4 millions and 86.5 million detached single-family homes in the U.S. That is, 1.6 percent of homes have an ADU. Increasing this share to 3 percent over the next five years will create an additional 1.17 millions ADUs over five years, or 233,000 per year.

[Source: Urban Institute.]

Zoning Obstacles

The recent years have shown that ADUs play a major role in easing the rental shortage in urban and suburban areas. Several states now permit ADUs in urbanized areas, especially in our home state of California. The government may sound like they are moving fast, but we have to do our part and continue doing the groundwork to facilitate this growth. Being on the front line of permitting, designing, and building ADUs since their initial spike in popularity, we have had an up-close view of how many restrictions there are regarding minimum lot size, square footage, and specific permits that add costs and delay.

HNS - Johnny wondering about SB9

Zoning Solution

One of our greatest efforts in working with the city of San Diego was put into making pre-approved ADU master plans and using property technology to speed up the feasibility process. We worked with local jurisdictions to create ADU designs that are pre-approved according to their regulations and code requirements, and when used by homeowners, they can avoid costly design, architecture fees, and expenses from the building department. Another benefit is that they are all customizable by materials, color palettes, finishes, specialty lighting, hardware, and accessories to make your ADU feel like the right addition to your existing property. Another one of our products offered to assist in this process is the Preliminary Feasibility Analysis, a report that educates homeowners on what they can and cannot build on their existing land and identifies the right location on a property for those adjustments.

Financing Obstacles

In addition to changes in land and zoning jurisdiction, achieving that goal of building 1 million ADUs in the next 5 years requires simpler and more accessible financing options for homeowners and builders. Yes, the federal government seems to be proactively implementing more financing options for homeowners and renters, but we are not going to see this change happen overnight. Implementation like this takes time to reach full effect, but do not let this discourage you from getting started today.

Financing Solution

We have combined our expertise in project financing and ADUs to ensure everyone has the opportunity to afford this type of addition to their single-family home. Financing a project is unique to every homeowner’s current financial means to find the right loan option. To learn more about some commonly used financing options when building an ADU, check out this blog post.

We are excited to see the federal government take action to help close the housing supply gap in the next 5 years. We will continue to assist by offering simple solutions to homeowners to help them afford the cost of living and provide additional living space on their property. If you are interested in building an ADU, and still unsure of where to start, don’t hesitate. We are here to make the process seamless and get to know your exact project goals with support along the way.

Schedule a FREE 15-minute consultation with one of our trusted Home Solutions Experts who will help you make the smartest moves as a homeowner in this market.

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