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Market trends driving ADU Construction

Accessory Dwelling Units (ADUs) and ADU construction are getting plenty of attention lately … and with good reason. Property owners, renters and municipalities alike are turning to ADUs as a ready way to accomplish their goals:

  • Homeowners want the income ADUs can provide, or they need to create more space for aging parents
  • Renters are desperate for affordable places to live
  • Cities and counties are scrambling to address housing shortages

A 2020 Freddie Mac study found 1.4 million property listings that include an ADU. That study also tallied first-time ADU listing growth approaching nine percent. If current trends driving ADU construction continue, ADUs could reshape investment strategies, expand the fabric of neighborhoods, and encourage ADU-friendly regulations by governing bodies.

Will you participate in the ADU boom?

What are ADUs?

An ADU is a living space built on the same lot as the primary home. ADUs include a kitchen, living area, and entrance. They typically cannot be bought or sold separately. 

Depending on local or regional regulations, ADU’s can be small detached structures, attached external apartments that share at least one wall with the primary home (but have separate entryways), or attached internal apartments completely enclosed by the primary home. 

The cost to build an ADU can vary widely depending on several factors, including location, whether it is attached or detached, size, amenities, and finishes. 

Could an ADU right for you?

What is driving the growth of ADU construction? 

The rapid increase in ADU construction is driven by many forces: Shifting demographics, economic considerations, and changes in social perspectives lit the fire. Local and state governments are adding fuel through regulatory and legislative changes. 

  • For younger people, the internet makes it possible to work independently, and the younger generations are rebelling against the idea that they must live in a large home on a property that could easily support more than one family. Sharing, simplicity, and living on a budget that allows one to play more and work less is a growing theme among them.
  • For homeowners, constructing an ADU can help increase retirement savings or pay for a great vacation next summer. 
  • For prospective homeowners, planning to construct ADU can make a house in a more desirable neighborhood affordable. 

Here are some of the major trends impacting ADU construction 

Let’s get down to specifics about the ADU construction trends. If you’re not convinced yet that ADUs are much more than a fad that will soon fade away … consider the following:

  • The percentage of single-person households has been on the rise since 1970, and by 2019 this group made up the second largest proportion of households in the United States (28%).  ADUs can be a suitable and cost-effective rental option for one or even two people. 
  • The U.S. population is aging,and Baby Boomers – those born between 1946 and 1964 – are retiring at an accelerated pace.  According to a 2020 study by the Pew Research Center, in the third quarter of 2020, about 28.6 million Baby Boomers reported they were out of the labor force due to retirement.  This is 3.2 million more Boomers than who were retired in the same quarter of 2019.  For this group, ADUs can offer the ability to reside near family who live in another location – full or part time – or save money on housing costs to preserve retirement savings.
  • Working remotely, a long-term trend born in the internet age, dramatically accelerated due to the COVID-19 pandemic, and most experts agree this will continue in the future, at least to some degree.  More corporate employees working from home has resulted in an increased need for dedicated office space that is separate from the main house. An ADU can be the perfect (perhaps tax-deductible) solution. 
  • Growing concern about the environmentis making ADUs more appealing to both renters and governments. ADUs can support environmental stewardship by providing more housing within neighborhoods that are walkable to jobs or amenities.  Also, ADUs require fewer resources to build and maintain than full sized homes and use less energy to heat and cool. All this adds up to a lower carbon footprint. 
  • Skyrocketing home values in many cities, along with rapidly increasing college and eldercare costs, have prompted many people to look for supplemental income or new ways to save money.  ADUs can help bridge a financial gap for families by providing supplemental rental income.  ADUs can also enable adult children and their parents to save money by delaying moving out on their own, and it is a less expensive (and more humane) alternative to assisted-living facilities for aging parents. 
  • High rents and a shortage of affordable housing have prompted many cities to ease regulations and laws on ADU construction with the goal of creating more affordable rental options for low and middle-income Americans.   

Need more reasons to consider an ADU? 

How cities and states are helping increase ADU construction 

Many political leaders appear to be siding with the advocates and support changing city, county, and state regulations, making ADUs easier to build.  A number of cities across the country have begun relaxing regulations on ADU construction or enacted legislative changes to spur more development of them. California and Oregon have already passed state-wide legislation aimed at making ADUs easier to build. 

Examples of state and local regulatory or legislative changes implemented or considered include: 

  • Waiving system development fees for new ADUs, reducing construction costs
  • Eliminating limitations on how many ADUs can exist, or how far apart they can be, within a neighborhood
  • Easing setback rules. For example, in California a minimum setback of 4’0” is now allowed so larger setback requirements won’t deter homeowners from building ADUs due to restricted lot space.
  • Lifting off-street parkingspace requirements, or parking replacement in cases where the ADU replaces a garage or carport, for example
  • Allowing ADUs to be bought or sold separatelyfrom the primary residence if certain conditions are met
  • Eliminating requirements that ADUs conform to minimum or maximum lot sizesbased on the percentage of the primary residence, which significantly reduces restrictions on ADU size for homeowners who want to construct larger ADUs
  • Allowing more than one ADUon multi-family lots and multiple ADUs within existing family structures  
  • Creating owner occupancy requirement exemptions, such that the property owner is no longer required to reside in the primary residence before constructing an ADU
  • Limiting the power of HOA’sto restrict ADU construction 
  • Easing of requirementsrelated to the property or ADU itself, such as roof height limits, rear yard coverage limits, tree retention mandates, restrictions on entry door locations, aesthetic requirements, or mandates for design review of ADUs that are more restrictive than those for principal units

Want more information about ADU construction? 

Given the potential benefits of constructing an ADU, and with many communities and governments getting behind them, the time may be right for you to build an ADU.  

Consider your own situation, get a sense of the sentiment toward ADUs in your community, find out if there have been any recent or proposed changes to ADU regulations in your area, and get advice from an experienced ADU builder to decide if ADU construction is right for you.

Still have questions and need to speak to an ADU expert? Call Central Oregon ADU’s experts at (541) 408-0637 or fill out our contact form!

Thank you to freelance writer Craig Zurovsky for his work researching and writing this article.

For ADU help in Bend, Oregon and Central Oregon, call Austin Willis at (541) 408-0637
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