ADUs are an amazing tool for housing choice in your community, but who actually signs up and gets one built?
We got to spend the day with Steve Vallejos from www.prefabADU.com as part of an ADU policy roundtable hosted by AARP. Steve had some amazing insights from his 13 years of building ADUs in the San Francisco bay area.
A lot of people love the idea of ADUs, but many folks are still anchored to the American suburban dream of having their own house on their own lot, and don’t want to share that dream with a stranger. This comment isn’t intended to judge, but to provide a dose of honesty to better address how to convince more people of the value of an ADU as a great housing choice.
Design can help with concerns about privacy, as can the overall layout of a neighborhood. Communities that were originally laid out with alleys provide the great opportunity to have an ADU face the alley, allowing for the main house to maintain a private backyard. Houses that engage alleys also provide for safer, more engaged alleys by providing more “eyes on the street”. Unfortunately, communities with functional alleys tend to be the exception, and not the rule for a majority of American cities and towns.
The majority of people that sign up to buy an ADU from Steve come from a somewhat non-choice market. They tend to be Gen Xers that have an aging parent or parents with increasing care needs. Often times these care needs are triggered by an event that forces change. Folks realize the best care outcome would be to have the parent living close and have realized that building an ADU tends to be the best housing option to provide this proximity.
Cautionary comment- I am going to talk about demographic groups like Millennials and Generation Xers. These are comments on a huge range of people, and there are many exceptions to these thoughts below. These thoughts are also ours, not Steve’s.
There is a lot to unpack in this assessment. Everyone talks about Millennials driving so many societal changes, but less so with ADUs for a few reasons. First, their parents are not as old as Gen Xers. Second, Millennials are way more broke (comparatively) due to the unfortunate dual component of coming into the job market in the midst of the Great Recession, and arriving there with significantly more student debt than previous generations. They still are struggling to purchase their first home, and face a constrained housing market with significantly high prices. Many Millennials were/are also forced to move back in with their parents due to lack of income and lack of alternate affordable housing choices, another form of non-choice multi-generational housing.
Gen Xers however, had a chance to buy into the housing market from 2000-2005, before housing prices tended to get really crazy in the final years before the crash in late 2008. They were also better positioned to buy a house from 2010-2014, when housing prices were at a much more reasonable cost compared to income. This means that a lot of folks bought into neighborhoods they desired, often times in more urban areas with better walkable features. Rapidly rising home prices also means that they probably cannot afford similar neighborhoods with those amenities, enhancing their desire to stay in their current communities.
Many of these great intown communities have not allowed ADUs for decades, limiting the types of rental housing choice that an aging parent could move into and be close to their Gen X child. As cities change policy, children are realizing that it is on them to build the ADU for their parent. These children also likely really love their community, and the thought of moving to where their parents currently live is likely a non-starter for a host of reasons.
Folks that bought their house in the time windows described above are likely sitting on a reasonable amount of equity in their homes. This is a critical component because current financing options for building an ADU are highly limited. The two most common methods of finance are a Home Equity Line of Credit or a Cash-Out Refi. Gen Xers tend to be more likely to have the equity in their homes to take advantage of these limited tools, and the advanced age of their parents (compared to Millennials) means they are more likely to need to leverage it to build an ADU.
If you are reading this blog and find yourself loosely in the Gen X demographic, have a parent(s) that has a large house in the suburbs that is increasing more than they need to care for, have are starting to face mobility challenges, probably shouldn’t drive everywhere, and definitely don’t want to move into a care home, you may really, really want to start thinking about an ADU.