When Cliff Ashcroft’s parents set out to house his aging grandfather on their property 25 years ago, they had no idea the pushback they would get. “The whole neighborhood fought it,” Cliff said. Cliff recalls that 50 to 60 people “literally showed up at the City Council meeting with stickers on their shirts with Xs over ‘second dwelling.’”

But a number of people took the family’s side and showed up in support of its plan, Cliff remembers, and eventually the City Council came down on their side in a 3-2 vote permitting the construction of the second unit.

“My dear grandfather whom I loved very much, instead of being put into a rest home to stay by himself, was able to go into the ADU at my parents’ house and stay with family,” Cliff said.

2020: The Year of the ADU?

Homeowners looking to write that happy ending in 2020 by building an extra unit on their property should find the approval process much easier, thanks to Assembly Bills 68 and 881, passed in 2019 by the California State Legislature.

In order to meet a housing shortage of 3.5 million units statewide by 2025, the State is pushing on local governments to make it easier to build additional housing on land that was once zoned only for single-family residences. These units, once known as “granny flats” or “limited second dwelling units,” now sport a more contemporary name: accessory dwelling unit, or ADUs.

But the laws go far beyond building separate units for aging relatives. To start with, they allow not 1 but 2 separate living spaces on a single property. They also encourage cities to relax regulations regarding parking and setbacks, and to lower city fees supporting infrastructure. And that has critics worried that the California Dream of the suburban neighborhood is being plowed under in the rush to fill the massive gap in California’s housing supply.

The city of Fullerton’s comparison table between new and old regulations offers a sober look at what’s in store for our community. In 2020, the owner of a larger home (2400 sq. ft +) can build an ADU up to 1200 square feet and 2 bedrooms. For homes under 2000 square feet, a 1- or 2-bedroom ADU can be built of up to 1000 square feet.

The law also allows for a second separate living space on the property, a “Junior Accessory Dwelling Unit,” which is limited to using non-living space within the existing footprint of the home, plus a 150 square foot allowance for entry and exit. (In practice, Junior ADUs are usually garage conversions.)

Supporters here in Fullerton see accessory dwelling units as a crucial piece of the puzzle in solving our housing shortage. According to Fullerton’s Community and Economic Director, Matt Foulkes, the State’s regional needs assessment calls for Fullerton to build a total of 13,000 new housing units in the 8-year cycle beginning in 2021. In a city with about 46,000 existing units (29,000 single-family and 17,000 multifamily units), this represents over a 28% increase.

ADUs aren’t going up nearly fast enough to make a dent in that 13,000-unit need, but applications are on the rise. Prior to 2015, when cities still required replacement of garage parking, Foulkes reports that Fullerton fielded only a handful of applications each year. In 2019, as regulations lightened, applications rose to 35. As of July 2020, Fullerton has surpassed the total for all of 2019. Foulkes predicts that by year’s end, the City might field a total of between 75 to 100 applications.

A Good Personal Investment?

Some ADU builders, like Cliff Ashcroft, are looking to house family, but others are looking to generate income. Until recently, that wasn’t necessarily wise. The City charged $12,000 in parks fees to build, and owners like Cliff Ashcroft, who tried to build ADUs under the old regulations, warned that ADU rentals were unlikely to be profitable.

A few years ago, Ashcroft started building a custom home and he wanted to include space to house his brother-in-law. In the middle of design, some regulations were eased, and Cliff set about making that space a fully permitted ADU. Cliff hadn’t anticipated all the governmental costs of the project, and was shocked when the bill came in. “When you get a second address,” he said, “You are paying double the school fees, the taxes, the parks fees—everything that the city and the county and the state can throw at you. If you’re looking to just get a rental,” Cliff said, “I don’t know that it pencils.”

Cliff built his ADU anyway (pictured below) and feels he did the right thing for his extended family. Others have found the costs too much to handle.

Cliff Ashcroft’s home includes an ADU above the two-car garage. The entry to the ADU is next to the two-car garage beneath the second story, third window from the right.

Take Lesley Mahaffey, who lives near Cal State Fullerton and was looking to convert her fourth bedroom into a rental unit. She figured the unit would appeal to university staff. “I have too much house and backyard,” Mahaffey said. “And it seemed like the thing to do to provide a reasonable-cost house.”

Mahaffey wanted to certify a full ADU so the renters would get their own mailing address and trash service. However, she said, “Fullerton had added a bunch of fees that made it absolutely prohibitive to have it built.”

Mahaffey said she wasn’t alone in facing high costs. An acquaintance of hers had sought to convert a garage to living space and ran into serious expense when the City required that he install a sprinkler system.

But the times, they are a changin’.

This year, cities like Fullerton have responded to State pressure and lowered the costs and barriers to ADU construction. In Fullerton’s new code, for example, ADUs are no longer required to have sprinklers unless the primary home already has them. Such changes prompted Mahaffey’s contractor to recommend she finish converting and certifying her ADU, and she plans to take his advice.

Some think it’s a good time to invest. Commissioner Matt Foulkes puts the total costs for an ADU at around $130,000. That includes $10,000 to $11,000 in government fees for permits, schools, and sanitation, and $120,000 in construction costs. Earning the average of $1,800 per month in rental income, Foulkes estimates that it would take only about 6 years to recoup the $130k.

However, that $130,000 construction estimate can change a lot depending on the type and size of unit, and whom you ask. At the ludicrously cheap end, one finds an ADU booster article in Forbes magazine. It touts a company that 3-D printed a home for $4,000. More realistically, but still on the cheaper side, this reporter knows one owner in Lakewood who completed a stand-alone, 840-square-foot structure for $100,000. However, he was able to do so only because he was friends with the contractor, who discounted the labor. He estimates it would’ve cost $150,000 to $160,000 otherwise.

That’s in line with other estimates of total cost, which take Foulkes’s $130,000 figure and go up from there. For example, Rick Crane of Crane Architectural Group said that total cost from start to finish on a 1-story, separated ADU on flat land typically runs about $200,000, and a second story unit is pricier, about $300,000. Asked whether an ADU could be built for $70,000, Crane Group architect Mark Blumer suggested a junior ADU conversion.

Crane also advises homeowners to expect an approval, design, and construction process lasting one year.

Such an investment would obviously take much longer than 6 years to pay off, and that’s not considering the higher tax rate on the improved property (though that could be offset on sale by a higher sales price for the same reason). Despite these costs, ADUs are “the biggest solution we’ve come up with so far for making housing affordable again,” because homeowners already own the land on which second units are built, and land is typically the biggest cost in construction, according to Crane.

Crane sees ADUs as a private solution for a public housing problem. “We’ve been really bad at having the government build low-income housing,” he said. “It’s astronomical. Then [when you do build] you have a huge concentration of low-income housing.”

On the other hand, Crane thinks ADU construction “puts small units in people’s backyards [where] they have the flexibility of using them.” Crane sees it from a libertarian perspective. “Really, what this was about is taking away laws that cities put into place 50 to 70 years ago that prevented us from having the freedom to use our land.”

Community Impact

Further left on the political spectrum, affordable housing proponents hope that more homeowners are willing to take the financial risk on ADUs to solve what they see as a defining crisis for Fullerton’s low-income and middle-class residents.

Elizabeth Hansburg, of the housing advocacy group People for Housing, puts the problem this way: “When the bulk of your housing stock is the most expensive product to purchase [a single-family home], you, by default, are going to have a housing affordability crisis. Because we have not built on a continuous basis to meet the population growth and housing demand, we have arrested development to the point where all housing is valuable,” Hansburg said. “ADUs have a role to play because they can provide apartment-like homes in a landscape that is suburban in nature and where the existing residents are largely resistant to the construction of apartment buildings.”

This “missing middle housing,” or workforce housing, is for people who are “too rich to be poor but too poor to be rich.” In other words, these homes fit the new majority of people who don’t qualify for subsidized housing but cannot afford a home on their own. ADU renters include “students, retirees, people leaving homes” and provide space for occasions “when a marriage breaks up and one partner needs to move out,” according to Hansburg.

While ADUs are more likely than not to rent at below market rates— Hansburg’s Daily Pilot editorial puts the likelihood at 58% –they’re not necessarily affordable housing. Commissioner Foulkes notes that units in pricier neighborhoods can rent for above market rates, which is part of the appeal for prospective builders. This makes Hansburg suspicious of efforts like State Assemblywoman Cottie Petrie-Norris’s AB-1063 passed in 2019 and which Hansburg says would allow ADUs to count automatically toward a city’s affordable housing allotment, regardless of their actual affordability.

Nonetheless, on balance, because of the size of the units, ADUs do have the chance to promote more socioeconomic diversity in single-family neighborhoods.

According to Hansburg,  they also provide a path to housing Fullerton’s next generation, some of whom are stuck living at home in today’s overpriced market. “We have gotten to the point where we have so many jobs and we have such good opportunity, both in terms of community education, that people want to live here. And if you don’t provide housing for the people, you end up with low-income people living in overcrowded conditions, or gentrification and displacement because people who have more money will always be able to ‘outbid’ low-income folks. The vision of California as a low-density suburban development pattern? That is no longer sufficient to meet the need.”

Hansburg concludes, “Making room for the population, particularly the adult children of people living here now, is a social justice issue.”

Pushback

ADUs are not without their critics, especially given the aggressive push by the state to speed the pace of building.

Some object to ADUs on aesthetic grounds, reluctant to revise the low-density suburban lifestyle in which they’ve come of age.

A more pointed critique can be found in Susan Shelley’s 2019 OC Register editorial “The end of single-family zoning in California.” Shelley paints a dire picture, predicting mass evictions of existing renters in unauthorized units as property owners take advantage of the eased restrictions and refurbish those units for legal standards—not to mention the increased burdens on sewer and water systems, and a flood of Airbnb-style short-term renters.

Making an Airbnb hotel would be illegal under Fullerton’s ordinance, which sets the minimum lease period at 31 days for just such a reason. Planning commissioner Matt Foulkes is also confident that the City can meet whatever sewer and power needs these additional units bring.

However, Foulkes does foresee one major unresolved issue with ADUs—parking.

2015 was the last year in which the law required homeowners to replace parking spaces lost when they converted garages to living space. Admittedly, many homeowners aren’t really eliminating parking by converting garages because they already use them for storage. But there is still the unanswered question of where to house the extra cars that suburban ADU renters bring with them when they move in.

It may be this issue more than any other that prompts homeowners to turn a cold shoulder to their neighbors’ plans to become backyard landlords—especially since, for the next 5 years at least, those renting out ADUs are no longer required to live in the primary residence leaving their onetime neighbors to deal with whatever parking problems result from the additional cars in the neighborhood.

Beyond parking, another source of resistance to ADUs is simple economics—the haves, who have housing already, versus the have-nots. For over a decade, homeowners who have stood pat with single-family homes as the housing crisis worsened have seen their home values, and equity, shoot up, even as Proposition 13 has assured that their property taxes have risen much more slowly. Rents, too, are ratcheting up. But for those living comfortably in single-family neighborhoods, ADUs in their communities seem to offer little more than disruption, congestion, and, as the airspace beyond their lots disappears behind their neighbors’ new 2-story rentals, the prospect of lowered property values. (Unless of course the new development opportunities on their own land make it worth more.)

Conclusion

Hansburg, Foulkes, and other ADU proponents are hoping Fullertonians will find the courage and compassion to focus not on ADUs’ problems, but on the opportunities they offer to house people now, and in the next generation. At the least, supporters hope that homeowners don’t freak out over what they believe is a gentler, but still economically beneficial, method to increase housing density and thus affordability.

Foulkes said, “In Fullerton and other cities in California where we see large developments come in and take out whatever the previous use was, and then construct 2-, 3-, 4-story apartment or condos, it’s very disruptive to single-family neighborhoods—if it were to be located there—because it’s a fundamental change to how the neighborhood looks, how it operates. Whereas ADUs are this little incremental increase that we could do to every single residential property, with very few exceptions, that increase would raise the number of units without ever changing the way the neighborhood looks.”

That makes ADUs an “absolutely critical” piece of the affordable housing puzzle. “ADUs have the potential to add dwelling units to single-family neighborhoods without fundamentally changing the nature of the neighborhood,” Foulkes said.

With current incentives set up to facilitate building, it’s likely in the coming years that people building ADUs will subtly, but fundamentally, change the housing landscape not just in Fullerton, but throughout California.