TRD Insights: Behind the rise of the Granny flat

In the first study of its kind, researchers from Freddie Mac sought to estimate the total ADU inventory, legal or otherwise, by text mining millions of home and rental listings nationwide.

TRD New York TRD INSIGHTS /
Jul.July 23, 2020 08:30 AM
 Accessory dwelling units, also known as “granny flats” or “in-law suites,” are on the rise nationwide (iStock)

Accessory dwelling units, also known as “granny flats” or “in-law suites,” are on the rise nationwide (iStock)

In-laws may soon be moving out of the house, and into the shed.

Accessory dwelling units, also known as “granny flats” or “in-law suites,” are small dwellings built on the same grounds as existing homes. Legislators have pitched them as a low-cost solution to the national affordable housing shortage, allowing homeowners to earn extra income by renting out their accessory units and giving renters access to cheap housing.

Local and state governments have passed laws designed to streamline the permitting process for ADUs, and that has led to a broader accounting of how many accessory dwelling units have been built around the country. Yet huge numbers of ADUs remain un-permitted and illegal.

In the first study of its kind, researchers from Freddie Mac sought to estimate the total ADU inventory, legal or otherwise, by text mining millions of home and rental listings nationwide. The Freddie Mac analysis found that ADUs have grown significantly over the last decade, with the number of first-time listings of ADUs growing 8.6 annually between 2009 and 2019.

This growth occurred across listings and sales. The share of listings that had ADUs grew from 1.6 percent in 2000 to 6.8 percent in 2019. Similarly, in 2000, the share of homes sold that had ADUs grew from 1.1 percent in 2000 to 4.2 percent in 2019.

Click to enlarge

ADU construction grew the most in the Sunbelt. Half of the 1.4 million ADUs Freddie Mac found were located in sunbelt states of California, Florida, Texas and Georgia. Twenty-three of the top 25 metro areas with the highest number of first-time ADU listings between 2015 and 2018 are located in the South and West regions.

Click to enlarge

Click to enlarge

California leads the way in ADUs, and some part of the state’s towering ADU inventory may have to do with policies specifically designed to promote ADU building. In late 2019, California Gov. Gavin Newsom passed a flurry of bills, effective on January 1, 2020, that make it harder for city planning and departments to restrict homeowners from building ADUs.

In Seattle, the city council passed a separate bill that would ease restrictions on ADU building. The bill stipulated that if a “significant number” of ADUs are being used as vacation rentals, the bill reads, “the City Council intends to impose additional restrictions or a prohibition on short-term rental use in [ADUs].”

Los Angeles’s wide ranging short-term rental law bans the use of ADUs as short-term rental units.

Freddie Mac’s analysis suggests that these cities might be over-legislating. Freddie Mac found that the median number of days between ADU rental listings in Texas, California, Florida, Georgia, and Arizona ranged from 262 to 371 days. Short term listings made up only 7 to 15 percent of all listings.

As the coronavirus pandemic has driven more Americans to work from home, sales of prefabricated accessory dwelling units — often as makeshift home offices — have spiked. One company that manufacturers such prefabbed ADUs called Studio Shed doubled its sales from last year.


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