By Chris Farrell
The final factor is intriguing: The entrance of innovative entrepreneurs. The overall price tag for an ADU ranges widely around the country, but $200,000 is a reasonable average. Entrepreneurs are seeking to significantly lower the cost of ADU ownership by focusing on building tiny homes, modular housing, repurposed shipping containers and similar structures. Companies often offer standard blueprints and design options to keep costs down. The structures are often built inside factories and then assembled on-site.
“A number of people are doing high quality prefab,” says Mark Thieroff, a land use attorney and ADU advocate in St. Paul. “The prefab approach might help.”
Some pioneers in this field think inside the box
Among the innovators is Into the Box , a St. Petersburg, Florida-based startup that uses recycled shipping containers to build studio, one-bedroom, and two-bedroom units. Among the possible uses are ADUs for aging parents (anticipating growing interest, the startup has launched a wait list.) The containers are not only recycled, but the product is designed as an eco-friendly, fully insulated, and off-the-grid living space. Into the Box is far from alone.
The competition using recycled and prefabricated homes is heating up. “Prefab and modular construction can bring down these costs down quickly,” says AARP’s Harrell. “A lot of promise there. It’s a way to lower some costs and lower the barriers.”
Still, the ADU market remains a work in progress. Local regulations in many regions of the country still erect costly obstacles . Local ordinances can require property owners to live in the single-family home or duplex in order to add an ADU. Municipalities often place onerous street parking restrictions on ADUs. Some areas require the new ADU to build a separate connection to the sewer line in the street rather than tap into the infrastructure of the existing house.
Lenders have not yet jumped on board
Financing remains a hurdle. Part of it is simply the total cost. But most ADUs are funded with cash, a home equity line of credit, a cash-out refinancing or some combination. Although there is work going on, financial institutions haven’t really developed products designed specifically for ADUs.
“Unfortunately, few loan products exist to finance ADU construction, and those that are available often do not go far enough in assisting property owners to build them,” note scholars at the UC Berkeley Center for Community Innovation in their recent report “Reaching California’s ADU Potential: Progress to Date and the Need for ADU Finance.”
ADUs remain too expensive and too many community leaders aren’t aggressively promoting the housing choice for an aging population. The more welcoming experience of California and several other localities demonstrates that the demand for ADUs is there.
The pressure to lower barriers to ADU construction and ownership will only intensify, thanks to the potent combination of too little affordable housing and the swelling demographics of an aging population.
Chris Farrell is senior economics contributor for American Public Media’s Marketplace. An award-winning journalist, he is author of “Purpose and a Paycheck: Finding Meaning, Money and Happiness in the Second Half of Life” and “Unretirement: How Baby Boomers Are Changing the Way We Think About Work, Community, and The Good Life. ”
More from Next Avenue: