How ADUs can help address affordable housing crisis

As our population continues to expand and individuals live longer, affordable housing options are increasingly strained. The federal government stopped building new affordable housing a long time ago, and people are now living with family members, renting or, in the worst cases, on the streets. Home prices are rising faster than wages in two-thirds of housing markets, according to the 2020 Rental Affordability Report by ATTOM, a real estate and property data company.

The federal government considers housing affordable when a resident spends less than 30% of their gross income on housing. The result is that a full-time worker who is making minimum wage is not able to afford a very modest, two-bedroom apartment. Low income and now middle income residents are struggling to find anything affordable.

It is apparent that with more demand and less supply, we need help with new zoning laws, lending, construction laws and assistance at local building and safety departments. We need to expand smaller home options like accessory dwelling units. Currently, ADU home design is impacted by local zoning laws, because properties must be zoned to allow two homes on one lot. 

In Colorado, we are making strides for ADU housing, but some municipalities have made it difficult to build an affordable product due to their building code restrictions. For example, the size of the product is limited, it must be attached to a foundation, setbacks considerations have to be included, additional fees may be charged for utility hook-ups and more. Many of the individuals I have spoken to are completely overwhelmed with their current responsibilities and now have to learn additional ones for the ADU product.

The ADU is a great option because it allows homeowners to rent out the space behind their existing home, which in turn provides an affordable rental option for a tenant. Many modular factories are now designing an ADU product to serve this growing market. For example, Grand Rapids, Michigan-based Urbaneer created a 399 square foot space that feels much larger.

Modular offsite construction can help alleviate the shortage of affordable homes if we can acquire government assistance financing, rezoning and re-allocated land use. In modular construction, 100% of the financing must be paid prior to the homes leaving the factory. Many lenders and investors are hesitant to invest even 60% of their capital up front, then wait several months on a building permit to start the project. The long wait for permits (which ranges from five months to 12 months in some areas) impacts builders’ and investors’ schedules, and increases the cost for materials. Delays also impact homebuyers waiting to get into their new home.

At a federal and state level, this crisis is growing, and we need new solutions and firm municipal programs in place. Modular construction is only one piece of this puzzle. There are many other factors that contribute to a streamlined process for more homes at affordable prices.   

Audree Grubesic is owner of Modular Sure Site, a general contractor on modular homes, and president of Connect Home Builders, a licensed modular home builder. She can be reached at [email protected].