NELA Real Estate in 2018: Adding a Rental Unit to Your Home Has Never Been Easier

2018 Editions Jeffery Marino May Real Estate

Laws passed in 2016 and 2017 have made it easy to convert garages into apartments, renovate back houses and build new free-standing apartments in one’s backyard. Homeowners seem to love the idea: In the year after the new laws took effect, nearly 2,000 applications were filed in Los Angeles for building permits for “accessory dwelling units” (ADUs), compared with 170 filings in the two years before that, according to the Terner Center for Housing Innovation at UC Berkeley.

One of the biggest boosts to ADUs has come from streamlined permitting. Homeowners no longer need approval from the City Council or Planning Commission to add an ADU. Instead, they can obtain a permit with minimal review by one city planning official. “The plans are reviewed right there on the spot,” said David Chong, president of Blend Design Studio, an architectural firm in Highland Park. “You get approval basically over the counter.”

New parking rules for ADUs are also easy to meet. No additional parking is required if  the unit is attached to the home, as many garage conversions are, or if the property is located within a half mile of public transit or in a historic district. If those conditions are not met, adding an ADU generally requires the addition of one parking space, which does not have to be covered.

Homeowners have been especially drawn to garage conversions. Mr. Chong said that a basic, two-car garage conversion usually ranges from around $30,000 to $50,000, or about half the cost to build a new standalone ADU. All four of Mr. Chong’s current ADU projects are garage conversions.

What is unclear at this point is how homeowners will use the new units. If they rent them out long-term, the increase in the supply of rentals could help to keep rents from rising ever higher. If they use them personally or as short-term, Airbnb-style rentals, there would be little impact on the supply or price of rental units.

“Turnout at our ADU workshops has been huge,” said Elizabeth McDonald, broker/owner of The Rental Girl, a leasing and sales agency in Highland Park. “But we haven’t seen a huge increase of property owners contacting us to rent out their back houses yet.” Still, Ms. McDonald is optimistic that more ADUs will result in more rentals. “We need more rental units,” she said. “This is a commonsense solution.”

Jeffery is a seasoned data journalist and has covered the California real estate market for over a decade.

Jeffery Marino
Jeffery is a seasoned data journalist and has covered the California real estate market for over a decade.