California Now Lets You Build a “Granny Flat” On Your Property
by Terry Moore, CCIM |
If you’re a homeowner in San Diego County, a recent state law offers you the opportunity to do something good for yourself and our community. Here’s some information about the law and five ways you can take advantage of it.
The Density Bonus Law
Effective October 2019, California homeowners can “by right” build up to a 1,200 square foot additional dwelling unit. Professionals abbreviate this to “ADU.” Most people call it a “granny flat.” You can also add a 400 square foot junior additional dwelling unit (junior ADU).
The density bonus law prevails over all city and county building codes, all homeowner associations, and all conditions, covenants, and restrictions. The state government decided people are more important than parking and has taken away the local jurisdiction’s ability to say “No” to ADUs even in single-family home zones.
Some smart people I love hate this law. They believe the lawmakers erred by allowing extra density in single-family home neighborhoods. Millions of Californians realize that not everyone can live in paradise. Current density already exceeds what owners expected when they bought their home years or decades ago.
Many people who were born and grew up in San Diego can’t afford to buy a home or condo here. Many natives are priced out of their own county and must move to other time zones to buy a home.
Five Reasons to Build an ADU
No matter what you believe, the law exists. Here are five reasons to take advantage of it and build an additional dwelling on the same parcel with your primary residence.
- You can increase your net worth (and maybe have more money to spend)
An ADU might increase your net value from $50-$200,000 above the cost. The exact amount will be determined by many things. They include your ZIP code, design, contractor’s skill and cost, your home and lot’s configuration, and more.
A 1,200 square foot ADU could rent for $2,000, or more, in many single-family neighborhoods. The additional rent will more than cover the higher mortgage and insurance costs. You’ll have more discretionary income for vacations, retirement, health needs, family, charities, or whatever.
- Loved ones can have their own space and still be near you
Maybe your mother-in-law or one of your kids would need and appreciate the privacy of a separate dwelling next to you. Most of the world lives in three generation households. Life has extra texture and perspective when three generations routinely interact in a variety of circumstances over several years.
- Social texture and education
“The rich should know how the poor live and the poor should know how the rich work.” That idea was the biggest thing I learned writing my book, Building Legacy Wealth: How to Lead a Life Worth Imitating. You benefited from observing the choices and impacts or later circumstances in the lives of older people. Most of us can learn from our own mistakes. A few of us are wise enough to learn from others.
A renter, whether it’s that “nice young couple” or a graduate student, or anybody else, can reveal the wonder and complexity of their reality. You don’t have to pay for the movie; they pay you to live in your backyard or above your garage. You get a front row seat on their life.
- Noblis oblige, stewardship, peacemaker, “Be a bridge, not a wall.”
From those to those whom much is given, much is required. The kids living in your ADU may be able to attend better schools than they could in most other local ZIP codes. The adults living on your property will probably have chances at better random meetings in your ZIP code than they would in most rental areas.
Many of us met our spouse or got a lead on a great job by what appeared to be luck or happenstance because of who we knew or where we lived. People who rent from you will have access to many of the people and places that you take for granted.
- Live out your legacy
Legacy is what people say, think, and do because of your influence. As a landlord, you will have immense impact in somebody else’s life. You’ll pick the floor plan, the size, the style, and the rent of their home. You will decide whether they do or don’t have the option of renting from you.
That’s five reasons. But wait, as they say in the infomercials, there’s more.
“If you’re not part of the solution, you’re part of the problem.”
That challenge was VISTA’s slogan when I was a young idealist. Black Lives Matter has a similar nudge now. San Diego County has a shortage of 50,000+ rental units. People work in our county but live in Riverside County or Imperial Valley or in Tijuana. Most of those people would prefer to live in San Diego County. There simply is not enough housing for them. If you build an ADU, then one household can live here.
So, maybe those are more and different reasons than you previously considered. Perhaps you own rentals but have never had a renter on the same parcel as your home. Perhaps your beloved won’t even consider the notion of strangers abiding next to your home.
So, friend, what do you think? What did I miss? Have you ever thought of this? Might you consider it? Are you in the process? Is it a damn fool idea that you’d never, ever do? Call me or email me. Share your thoughts.
Terry Moore, CCIM is an investment real estate broker with a proven history of success in creating value, 1031 (tax deferred) exchanges, and building wealth through apartment investments. He has taught at UCSD, National University’s MBA program, the Appraisal Institute, SD County Tax Assessor, California Association of Realtors and is a National Certified Commercial Investment Member. For more information contact Terry at Tmoore1031@gmail.com, call 619-497-6424 (Direct), 619-889-1031 (Mobile) or visit www.SanDiegoApartmentBroker.com. (License #0091851).