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Cities' interest in granny flats at 'fever pitch' amid U.S. housing crisis

by Carey L. Biron | Thomson Reuters Foundation
Monday, 20 May 2019 09:00 GMT

Granny flats offer a low-cost housing solution because the land is already paid for and plans are underway across the U.S. to loosen regulations

By Carey L. Biron

WASHINGTON, May 20 (Thomson Reuters Foundation) - The U.S. capital is one of the most expensive cities in the country, but Derek Wright hopes to cover his housing costs with a novel strategy that local officials are keen to foster: He is becoming a small-scale landlord.

Very small-scale, that is. Wright is applying for a permit to turn his townhouse's basement into a separate home, the rent from which he expects will cover more than half of his mortgage.

"I got a good deal on the house, but I wouldn't have been able to afford the mortgage without that additional income," Wright told the Thomson Reuters Foundation.

A few miles away, Jay Fazio had the same idea. He has converted the 500-square-foot (45-square-metre) garage that came with the single-family home he bought recently.

The lease started in May, after generating significant interest.

"This (unit) is adding much more value to the property," Fazio said.

These types of projects are technically known as accessory dwelling units (ADUs), but are also called "granny flats", "mother-in-law suites" or "English basements".

And they are gaining popularity around the country, said Cheryl Cort, policy director for the non-profit Coalition for Smarter Growth, as policymakers in expensive cities look to them as a way to boost affordable housing.

Granny flats offer a low-cost housing solution because the land is already paid for, she said, and they are often built in more central parts of the city.

They have long been allowed in Washington, but in 2016 city officials tweaked the application rules with the aim of making the process easier, said Cort.

The city struck down various prohibitions and made it so "a homeowner can build one as a matter of right, for the most part," she added.

Ileana Schinder, the architect who worked with Fazio and Wright on the designs and city approvals for their projects, said she has overseen the construction of about 20 granny flats in Washington over the past few years — and interest is climbing.

Many of Schinder's prospective clients have been young families looking for additional income so they can stay in the city, as well as older people who need the financial boost to continue living in their homes.

"We have reached a point where we are looking to squeeze housing out of the units we already have, and this is where basements and garages are turning into housing for smaller families," she said.


And Washington is not alone: The two jurisdictions closest to the city are debating plans to loosen their own regulations on granny flats, mirroring a trend across the country.

"As we look to the future of how families and communities are living, ADUs are a positive solution desired by many," Hans Riemer, a member of the Montgomery County Council who is pushing for the changes, said in a press statement in April.

Riemer cited particular support from elderly people and young families, while pointing to research suggesting ADUs can help achieve "racial equity goals".

Around the country, the interest in the housing units is "almost at a fever pitch right now," said Kol Peterson, author of a book on the topic.

"Jurisdiction after jurisdiction that are experiencing housing crises ... are seriously looking at this in a big way," he said.

But despite the regulatory action various cities are taking, the eastern half of the country is still seeing only "extremely low numbers" of ADU construction Peterson said, largely due to pushback from homeowners concerned about changes to their neighbourhoods.

In Washington, the number of permits has risen sharply in recent years, but that is partly because it started so low.

The city issued less than five permits in 2015 and nearly 40 in the first ten months of 2018, according to a city zoning official's presentation to real estate agents in November. At the time, there were about 50 more applications under review.


The real action is on the West Coast, said Peterson, where several states have pending legislation that would "show what the potential is for ADUs".

California for example is already well ahead of other states, having ushered in a law in 2017 legalizing ADUs in most places across the state, said David Garcia of the University of California at Berkeley.

California's statewide action is particularly notable as zoning and housing regulations are typically under the mandate of local officials, noted Garcia, who is policy director at the university's Terner Center for Housing Innovation.

Uptake is already high, and the new law creates plenty of potential in California, where 70% of all land is zoned to allow only single-family homes, he said, citing recent research from the centre.

"That's a significant amount of land where virtually nothing is getting built right now," he said.

"So (the new law) has played a big role in addressing the issue of single-family zoning by essentially doubling the capacity of areas ... and it's driven by homeowners themselves," he added.


Housing experts and city officials also see granny flats as an opportunity to help low-income communities resist gentrification.

In Denver, Colorado, a five-year programme is underway to help design, finance and build ADUs in nine lower-income gentrifying neighbourhoods, said Renee Martinez-Stone, director of the West Denver Renaissance Collaborative.

"We're seeing so much wealth and prosperity happening in Denver right now, but there are people drowning in that success," said Martinez-Stone, whose organisation promotes urban regeneration and is leading the programme.

"These (ADUs) can stabilize families and affect the displacement that is occurring, as well as provide affordable housing."

The West Denver programme is building modular ADUs under a design that regulators have pre-approved, making the process faster and cheaper, Martinez-Stone said, while the city is backing a fund to help finance construction.

Last year, the project won national recognition and pilot funding through an innovation competition held by Fannie Mae, a national mortgage backer.

Granny flats are becoming more popular as "a way to bring affordable housing into a market that already has good opportunity," said Maria Evans, a vice-president at Fannie Mae.

"West Denver could be a model for others in how to streamline that process."

(Reporting by Carey L. Biron, Editing by Jumana Farouky and Zoe Tabary. Please credit the Thomson Reuters Foundation, the charitable arm of Thomson Reuters, that covers humanitarian news, women's and LGBT+ rights, human trafficking, property rights, and climate change. Visit http://news.trust.org)

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