Accessory Dwelling Units: A Flexible, Free-Market Housing Solution

The R Street Institute (a public policy research organization) recently released a policy study about accessory dwelling units which is worth a read, especially if you're looking to convince local leaders that they should be permitted and prioritized in your town. Accessory Dwelling Units or ADUs are small, usually free-standing cottages that homeowners build in their backyards or sometimes above a garage. They can provide housing for renters or family members and are gaining in popularity across the United States. However, there are many challenges and limitations to ADU construction and habitation in most cities.

The R Street study, titled "Accessory Dwelling Units: A Flexible, Free-Market Housing Solution," makes the case for why ADUs should be permitted and show the value they can provide for cities and residents alike.

First, the report outlines the benefits of accessory dwelling units including the rental income they can provide for owners of single family homes, the multigenerational housing options they create (ADUs are often called "granny flats" because they are frequently used as housing for older family members), and the flexibility they offer to homeowners who can utilize them not just as rental properties but also as home offices, guest rooms and short-term rentals.

The paper also explores the main obstacles to ADUs. Coppage writes, "The single biggest obstacle to ADU development is their widespread illegality." He elaborates on the different types of limitations that currently exist for ADUs in most municipalities: These include structural regulations, which "regulate the size, shape and facilities of an ADU, as well as its connection to the broader city utility networks;" occupancy restrictions, which can dictate who's allowed to live in an ADU and what sort of relationship they are required to have with the property owner; and the fact that most ADUs are constructed by homeowners, not professional developers, so navigating the government permitting process can be much more challenging for someone who doesn't deal with it on a regular basis.

Below, we've published a short excerpt from the report, written by Jonathan Coppage.

At a time when many housing markets are experiencing severe supply constraints and housing affordability is under stress nationwide, accessory dwelling unit legalization represents a low-profile free-market solution that requires little from government actors beyond getting out of the way. Production is undertaken by private actors on their own property, and diversifies a local housing stock without introducing large potentially contentious or character-transforming multifamily buildings to a single family neighborhood. This incremental infill further empowers homeowners by allowing them to increase the value of their property and receive an additional income stream. It offers renters more neighborhood options and cheaper rents.

While there are federal-level financing reforms that could further ease ADU development, local governments usually have all the tools they need to take advantage of ADU construction without asking permission or seeking assistance from any higher bureaucracy. Reforming outdated zoning systems to accommodate the changing needs of American households, including the return of multigenerational living arrangements, should be an urgent priority. Such reforms should take care not to introduce new and unnecessary regulations, such as owner-occupancy requirements and short-term rental bans. These could chill the market’s response to ADU legalization.

Accessory dwelling units will not solve housing affordability crises by themselves, nor will they be suited to widespread adoption in every market. But there is little reason for towns and cities to persist in outlawing a flexible housing form that was widespread in the first half of the 20th century, just because it fell afoul of trendy regulations in the second half. The American built environment was notably adaptable throughout the growing country’s many changes up until the postwar land use codes were imposed and accumulated. Given the significant national changes still unfolding, land-use and building regulations need to provide as much adaptability and flexibility as cities can provide. Legalizing accessory dwelling units should be a simple way to engage that process.

Read the full report from R Street.

(All photos by Johnny Sanphillippo)

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