Rising Popularity of ADU’s a Blessing for Retirees

February 23, 2023 — One of the hottest acronyms in the real estate world is ADU, which stands for Accessory Dwelling Unit. Demographic shifts from Covid, exploding real estate prices, and a shortage of affordable places to live has suddenly put them in the spotlight, prompting more states and communities to encourage and approve them. Their rise is a bonus for retirees, who can benefit from them in a multitude of ways.

The idea behind ADUs is pretty simple.

ADUs provide a secondary building unit on one lot. So right off the bat they are less expensive – they don’t require any extra land. They can take the form of a small detached building, a second floor, basement, or other addition to the main home, or a conversion of part or all of a garage into a small home or apartment. Typically they are between 600 and 1,000 sq. ft. They usually have a bedroom, small kitchen, bathroom, and living area. Or they are just a small studio apartment. Prefab models are available, or they can be custom built. Normally they have a separate entrance. An example of “gentle density, they are often called granny flats, in-law apartments, carriage houses, casitas, etc.

One of the overarching benefits of ADUs is their flexibility. People who already have a home can rent out their ADU as a good source of income. For example, your editor has stayed in many ADUs through VRBO and Airbnb, the owners of which are getting nice rental income. Over the years and as circumstances change, so how they might be used. The owners might let an adult child, relative, or friend stay there. It could be a great guest cottage that gives everyone their own space. It could be a studio or workshop. Ultimately, it might become a retirement home next to family, friends, or tenants.

ADUs have many advantages

In addition to the possibility of rental income and convenience, there are many intangible benefits. Family members or friends who share a property can enjoy meals together, babysitting, pet care, etc. And as people age the social and safety benefits of having close neighbors is a huge advantage. In many cases it means that an expensive move to independent or even assisted living can be avoided or at least postponed.

A great solution to the housing crisis

Many communities, particularly in affluent towns and suburbs, have long discouraged ADUs. Worried about the character of their neighborhoods, traffic, and crime, residents and zoning boards have minimum lot restrictions and coverage regulations, effectively blocking ADUs from being built. But Covid and the housing crisis that came with it have turned things around. There are far too many Americans who cannot afford a place to live, as buildable lots in close-in areas get scarcer and more expensive. People have begun to realize that ADUs are an effective solution to the housing scarcity. At least 10 states including California are liberalizing laws to encourage them. Freddie Mac estimates that there are 1.4 million ADUs in the U.S. That is not to say that all regulations on ADUs are helpful. Some are so restrictive that they are hard to implement.

If you decide to go the ADU route
A big issue with more than one generation living in close proximity to one another is to figure how to do it to protect the interests of all partners. There have to be mechanisms in place to resolve financial and other issues, without undoing the partnership. One of the best ways to do that is with something akin to a prenup agreement. Typically that specifies who pays for what, how finances are combined, what happens if a party wants to move out, how household chores will be allocated, and what happens if there is breakup. You can probably find an attorney in your area who is experienced at drafting such a letter.

For further reading:
Multigenerational Housing Gets a New Comeback

Comments? Do you have an ADU or would you like to build one? Are they coming into your neighborhood – and if so, are they welcomed by most of the neighbors? Please share your thoughts in the Comments section below.