Should we build an ADU?

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Question of the week: Should we build an ADU?

Answer: Maybe.

Accessory Dwelling Units add value to a property, how much depends on multiple factors so it may take a while for your increase in property value to catch-up to your costs of building an ADU.

Over the past several years Sacramento has been fairly aggressive in removing local zoning regulations and ordinances that restrict the building of Accessory Dwelling Units, and reducing the costs to build them, as a way to ease the housing shortage in the state.

Towards the end of last year, the Legislature passed, and the Governor signed, into law clarification of prior laws and some new regulations preventing local housing and building agencies from have more restrictive building regulations than those from the state.

To over simplify the matter, if you can fit a unit on your property, you can build it.

In addition to prior regulations that:

  • Raised height regulations (depending on how close to public transit or current structures on property 16- to 18-feet)
  • Speed up the process (all agencies reviewing ADU plans must respond within 60 days of plan submission)
  • Reduce setbacks (if ADU less than 800 square feet there is no front setback requirement to prevent building the ADU)
  • Removes restrictions on permitting existing unpermitted units (if had unpermitted unit in a garage to be permitted it no longer is required to meet current building standards unless there is health and safety concern)
  • Reduce costs (for example, fire sprinklers are no longer required for main dwellings as part of ADU permitting process)

Laws that went into effect on January 1st go further in easing the building of ADUs:

  • Further reduces costs for converting illegal units (checklist of “substandard conditions” that must be repaired or upgraded to receive permit, prohibits agencies charging penalties, impact fees, or connections fees as long as new utilities connections are not required)
  • Increases the maximum number of ADUs (to eight as long as the number of ADUs do not exceed the number of existing units on multi-family lot and meet setback and height requirements)
  • Eliminates off-street parking in some cases (ADUs on multi-family properties can build ADU units on existing uncovered parking areas and be required to have replacement off-street parking)
  • Takes power away from the California Coastal Commission (CCC must provide clear guidance on amending local costal program to streamline approval process for ADUs)

Additional benefits for property owners with ADUs as enacted by the state:

  • Forbids owner-occupancy requirements for ADUs (gated community and other neighborhoods with CC&Rs, HOAs, etc cannot prohibit property owner from renting the ADU)
  • Local agencies must have pre-approved ADU plan scheme(s) (architect can submit plans for ADU to be pre-approved so can be used for future ADU construction without going through plan review and approval process)

Perhaps the most advantageous law in regards to property values is requiring local agencies to allow ADUs to be sold separately from the lot’s primary dwelling if certain conditions are met.

Rental unit, guest quarters, she-shed or man-cave, office space, work shop or craft space, are all possible applications for an ADU. Consider a two-story unit within the 16-foot height limit with living quarters below and office space above with separate entrance, as just one possibility.

Another option is constructing an ADU for full-time in home care  using conventional financing, then refinancing with a reverse mortgage to eliminate housing payments that can go towards paying for the in-home care for aging adults.

The are countless options for how ADUs can be used.

Should you build one?

Maybe?

To discuss financing and other options for constructing an ADU on your property give me a call!

To schedule an initial meeting by phone or Zoom, click here for my calendar, please feel free to forward to a friend or family member!

Have a question? Ask me!

It was okay. That describes the overall reaction to the Commerce Department’s Consumer Price Index data for February. Prices were up 0.2% for the month, year-over-year they increased 2.8%, a smaller hike compared to January’s 3.0%. Core prices (energy and food removed from the data) were also up 0.2% monthly, year over year the core rate in February, 3.1%, was also lower than January’s 3.3% reading. Inflation was a bit lower than expected for the month, but not enough to excite markets. The okay news puts the consensus in the markets that the Federal Reserve will not lower its benchmark interest rate at its meeting next week.

The future may not as okay, as seen by the University of Michigan’s monthly consumer sentiment survey, which hit a twenty-nine-month low in February. Concerns and uncertainty due to President Trump’s tariffs raising prices for consumers, many who are already slowing their spending, has them less positive about their economic future. Retailers from the Dollar Store to department stores to grocery stores are consistent in stating they are seeing lower income consumers spending less, including on necessities; as well upper income consumers are lowering their spending and tending to lower tier items for what they are buying. Combine the surveys and sentiments from those who provide consumer goods and services and rough winds appear to be forming for the economy.

Rates for Friday March 14, 2025: Rates continue to benefit from investors reducing stock holdings and purchasing fixed rate investments, such as mortgages as investors are more worried about inflation from the tariffs impact on the overall economy slowing than rates rising to combat inflation . The conforming rate is flat from last Friday.

FIXED RATE MORTGAGES AT COST OF 1.25 POINTS LOCKED FOR 45 DAYS FOR PURCHASE TRANSACTIONS:

30-year conforming                             6.375%        Flat

30-year high-balance conforming        6.625%        Up 0.125%

Please note that these are base rates and adjustments may be added for condominiums, refinances, credit scores, loan to value, no impound account and period rate is locked. Rates are based on 20% down with 740 FICO score for purchase mortgages.

Great weather for ducks and geese this past week, not so great for those walking dogs in the morning who miss time their strolls in the morning after looking at the radar for when the rain will hit.

I’m sure we do not have the only dog who will not go outside to take care of business when it is raining but will run to his closet where his leash and other walk accessories are kept so he can go for a walk in the rain.

Stay dry and drive safe.