America is facing a new housing crisis. Construction of new homes is performing poorly, and prices of homes are getting higher in the most desirable areas. California is among the most populated states, and effects of this crisis are dire. Rents are very expensive. People pay close to four thousand dollars in San Francisco. Ownership of homes is subtle, and overcrowding is double the national rate.
In this wake, California has a solution to curb the shortage of affordable housing. The new state law by Sen. Bob Wieckowski will enable homeowners to construct rental units on their pieces of land. This would be done either through garage conversion, home structure or new standalone structures. These residents will be known as ADUs (Accessory Dwelling Units) and granny ‘flats.’
Former versions of ADUs in California had many cost barriers like expensive gas and water hook-up fees put in place by the government. There is an enormous latent in the market because the roadblocks are no longer available. It will now be the responsibility of homeowners to rush in and build houses. The Insider got this information from Matt Regan who is housing policy president.
The surprising fact about these new units is that the is freely available. The professor of urban design and architecture, Dana Cuff, reiterates that you will not buy land, which is the most expensive item in the housing to date. However, there is a steep cost the construction and design of the ADU will want. It will run to almost two hundred thousand USD.
Regan says that they his organization is developing new options for financing homeowners to build the ADUs. Since current laws do not allow rental income to allow one to get a mortgage loan, there are plans with national and local banks for creating a particular credit facility for constructing ADUs. People in the qualifying margins will benefit from this offer.
However, banks act slowly, and Regan thinks that sharp-minded entrepreneurs will avail quick and direct consumer solutions for providing private financing and construction. A few years ago, Alphabet and Silicon Valley Behemoths, which is a Google parent company, experimented in the development of pre-fab and affordable homes which are suitable for living in the backyard. California entrepreneurs should be cautious because of the unproven business models and regulatory hurdles.
Since cities have the ability to tailor state laws in their local zoning regulations, plus following height and size restrictions, it will be difficult for the companies awaiting to capitalize on the model that fits everybody.
Regan continues to say that the biggest benefit the homeowners will have to create a single source for administering the process of ADU construction from the beginning to the end, and from permitting to finding tenants. A new asset class in the market for housing is now available, and entrepreneurs have to step up and make money for financing construction. For new entrepreneurs, a start-up model will make them grow pretty fast.
According to a city research team, the ADUs are a logical step in evolving modern cities. They are also developing post-suburban cities where the owners of the homes will benefit from cash proceedings from rent. The ADUs will provide housing for over five hundred thousand households in Los Angeles under the new law.