Many Washingtonians may be in for a surprise on the real estate front when new laws take effect county by county that will greatly expand the use of accessory dwelling units – or ADUs – on parcels of land once exclusive to single-family homes.
When Gov. Jay Inslee signed House Bill 1337 into law this spring, he put into action changes that should have wide-reaching consequences for home density, affordability and supply. Even our climate should benefit.
Also known as granny flats, carriage houses or mother-in-laws, ADUs come in many shapes and sizes – either attached to an existing home, detached but on the same property, or converted from a garage or basement flat. They include at least a bathroom, kitchen, sleeping area and separate entrance from the main house. (I published a detailed overview on the topic in 2021.)
The combination of extremely high home prices and regulatory reform have turned this corner of the country into an ADU laboratory of sorts, with plenty of “formulas” being developed today to “grow” more desperately needed homes.
The state must add 55,000 homes – or 17,000 in King County alone – per year over the next two decades to meet growing demand, according to Department of Commerce projections published in early 2023. More than half must be affordable to low-income residents, and new homes are needed at all income levels, the projections said. (For context, 43K homes were added in the state in 2021.)
The new Washington ADU law approaches the housing crisis by reducing regulatory barriers for homeowners building affordable housing in their backyards. HB 1337, once fully enacted, informs cities across the state that they must allow two ADUs per residential lot. The ADUs may be attached, detached or a combination of both, or they may be conversions of existing structures.
The new law also says ADUs may not require the owner to occupy the property and may not prohibit the independent sale of the units. The dwellings must be at least 1,000 sq. ft. – if owners want them that large – and meet minimal rules regarding setbacks, height and other aspects of the structure. Off-street parking will be determined by local municipalities and based on distance to public transit.
Cities and counties are not required to authorize the construction of an ADU where development is currently restricted under rules related to the proximity of an on-site sewage system, critical environmental areas or other unsuitable physical characteristics of a property like where there are landslide risks. They can also restrict the use of ADUs for short-term rentals – although policing that may be difficult.
In addition, cities and counties cannot impose design requirements for accessory dwellings that are more restrictive than the primary residence. Local government can tweak policy where appropriate but by passing its laws, the state is seeking to provide more consistency across each municipality.
The benefits of ADUs are immeasurable:
- Adds to the diversity of housing options
- Provides a housing type that blends in well with existing single-family homes
- Caters to the state’s changing demographics, including more seniors and smaller households
- Provides housing that is often more affordable than traditional homes
- Adds housing units without adding land
- Corrects historic economic and racial exclusion by opening up single-family neighborhoods to more diverse housing and household types
On the climate front, city ADUs can help to decrease driving distances for some people or convert a drive into a walk. Their compact footprint means lower utility bills and the dwellings are typically constructed of the most modern materials that insulate rooms airtight.
The multigenerational backyard-living promise of ADUs has long been tantalizing with the demographics of an aging population. Transforming a garage into a living space or building a backyard ADU allows aging family members to stay close to their adult children and grandchildren. They can help each other out financially, emotionally and practically while each maintains their independence and privacy.
With the number of Americans over the age of 65 expected to more than double from 40M today to 81M by 2040, it is paramount that policymakers, home builders and financing entities work to maintain and create housing options that meet the needs of older adults and facilitate aging in place.
The new ADU law applies to all cities in Washington that plan under the Growth Management Act. As early as 2025, within the incorporated boundary of those cities (sometimes known as urban growth areas), municipalities must adhere to the new rules and have their policies in place.
Existing Homeowners’ Associations with established covenants restricting ADUs would remain in effect even after a local government allows the new dwellings. An association’s private rules supersede state and local laws.
Why a two-year delay in the creation of the new law? It will take several months for local governments to weigh individual issues on this topic and create administrative support to help provide homeowners with the correct information and guidance. Municipalities are currently revising their land-use plans – most with 2024 deadlines – and will now include updated ADU rules.
For example, where lots are smaller than the minimum allowed by the zone, cities may choose to allow only one ADU, especially attached, where the unit can fit within the existing footprint. Currently, cities such as Enumclaw, Kenmore and Renton have relaxed rules on the number of ADUs on a lot, while Bellevue has yet to allow detached ADUs – until the new law comes into play. (Snohomish County has also made significant reforms to ADU laws.)
Seattle has been at the forefront of this type of housing since at least 2005 when 60 ADUs were permitted. Since then, the city has helped streamline the process by offering a handful of pre-approved home styles. In 2022, there were 988 permitted ADUs in Seattle, with the greatest concentrations in the Magnolia and Loyal Heights neighborhoods of the city. The median size of a detached ADU in the city was 735 sq. ft. and 750 sq. ft. for a traditional ADU.
A growing number of ADUs are being permitted as condominiums and sold separately. It only takes two homes to qualify as a condo, including a large home with an ADU in the backyard with its own tax parcel and boundary. The smaller dwellings are not necessarily cheap, with a median unit selling for $732,000 in a limited sample analyzed for the City of Seattle and released in March 2023.
The median cost to construct a traditional ADU was $100,000 and the building of a detached ADU runs about $230,000, according to a survey of Seattle ADU owners. Others have quoted the typical price to add an ADU at about $250 a sq. ft. and includes the design, labor, materials and permits.
Prefabricated detached ADUs can provide a degree of cost savings, which may make them more affordable for property owners. Because materials and manufacturing are centralized at an off-site facility, prefabricated units require less construction time than traditional homes and can be built year-round.
A Seattle home with an ADU is priced only 2% above those without a second dwelling, according to Porch.com. Information compiled from the Northwest Multiple Listing Service for the 12 months ending in September 2023 shows about 2% of all King County sales include an ADU.
Mortgage lenders are adding ADUs to their financing options. Backed by Freddie Mac and other government entities, homeowners can now use potential rental income from an ADU to qualify for a mortgage on a primary residence. This means potentially using a smaller down payment, less cash to close or helping to support a lower debt-to-income ratio. In addition, CHOICERenovation Mortgages is an option for existing homeowners to pay off the addition or renovation of an ADU.
Dozens of companies are in the ADU business. Many offer a comprehensive package that handles the building permits, design and construction of a dwelling. Samara, for example, is among the new solutions companies on the scene; it handles all aspects of building a prefab ADU, including providing financing partners. It joins an increasingly crowded market for building ADUs that include Cotta.ge, DADU Homes, Dwell, microhouse, MyKabin, NEST Design Build, Rent a Backyard and S.A.G.E. Designs NW. (I do not have first-hand knowledge about their business practices or customer success and only supply these names as some industry favorites.)
Accessory dwelling units will not single-handedly alleviate the housing shortage facing our region but the cost to rezone thousands of acres of single-family housing is minimal and a significant step in the right direction. We applaud the new state law and cannot wait for the changes to take effect.