Convert Your Garage Into Extra Cash With An ADU

Convert Your Garage Into Extra Cash With An ADU

In an effort to address California’s severe housing shortages, lawmakers passed two bills in October 2017, designed to encourage the creation of Accessory Dwelling Units (ADU’s), commonly referred to as “granny flats”. The new laws, which went into effect January 1, 2018, should make it easier for homeowners to convert garages and “back houses” into income producing units by standardizing zoning regulations, reducing parking requirements, and modifying utility fees.

ADU’s can provide owners with additional monthly cash flow and ultimately raise home values. Below are a few things you should know about state’s new laws related to ADUs:

  • Individual city jurisdictions have the ability to define their own ADU guidelines.
  • Los Angeles currently defaulting to the state guidelines, but is reviewing specific policy changes that it may make in the future.
  • ADU must include a bathroom and kitchen, separate from the primary dwelling unit.
  • One ADU is allowed per primary residence.
  • The maximum allowable square footage for an ADU in Los Angeles is 1200 SF.
  • ADU and primary residence will have two separate addresses. Therefore, a separate Certificate of Occupancy is required.
  • Currently the ordinance does not require separate sewer lines from the primary residence.

Zoning:

  • Only applies to lots zoned as single-family residence (SFR), not multi-family (R-2).
  • Permitting is done “by right”, except in historic preservation zones (HPOZs), which can require commitee approval.
  • Only one ADU is allowed per lot.
  • No set-backs are required for existing garages.
  • Historic Preservation Zones (HPOZ) may require special committee approval.

Insurance:

  • Homeowners can add extra insurance coverage to cover the ADU through a variety of packages, including adding 10% or 25% extended replacement costs.
  • Homeowners should contact an agent prior to construction, as traditional FIRE insurance does not cover construction.

Parking Requirements:

  • If within ½ mile of transit station, or bus stop, owner does not need to add additional parking.
  • If more than ½ mile from transit station or bus stop, tandem parking is considered sufficient.
  • There is no requirement for covered parking is required.

Appraisal:

  • Depending on the area, adding an ADU can add between 5-15% to the value of the home.
  • Consult with a certified appraiser to determine the exact change in value.

As with any major home project, homeowners should do plenty of research as to whether an ADU is right for them.  In addition to insurance agents and appraisers, those considering ADUs should contact lenders, contractors, and tax specialists to gain a better idea on the potential financial costs and benefits.

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