The Housing Coming to Your Backyard

Pull up to any intersection in Los Angeles, and you will see a column of illegally posted signs forming a kind of capitalist totem pole. Most advertise services catering to the darker side of life: “Cheap Divorce!” “Fix Your Credit!” “Liquidation Sale!” Even the now-ubiquitous “Sell Your House Fast” calls to mind desperate families collapsing under the weight of a mortgage. Yet over the past couple of years, a more hopeful sign has joined the mix: “Free ADU Consultation.”

The abbreviation needs no explanation in California, where accessory dwelling units have graduated from wonky planning jargon to popular parlance. Variously known as granny flats, mother-in-law units, or casitas, ADUs are small, additional rental units that share a lot with another structure—typically a single-family home.

ADUs can now be found in backyards across the Golden State, providing homeowners with a new source of income and renters with new housing options. Something like 60,000 ADUs have been permitted since 2016, the year they were legalized. It’s a startling figure, but it’s only the beginning. As more states legalize them in response to the ever-deepening housing crisis, ADUs could soon be coming to a backyard near you. This hyperlocal building boom might just spell the end of the American suburb as we know it—in the best possible way.

Despite their reputation as a novel solution to the nationwide housing shortage, ADUs were common before the rise of zoning. Take a walk around your local pre-zoning residential neighborhood, and you’ll see what I mean: In places such as Brooklyn, many brownstones were built with a basement accessory unit that could be rented out. On sleepy inner suburban alleys across the Midwest, small apartments still regularly sit atop garages. My grandmother grew up in a unit carved out of the second floor of an aging mansion in Old Louisville. (Historic-preservation rules would make it tricky to subdivide that same mansion today.)

These extra little homes made homeownership more attainable and cities more accessible to people of little means. Homeowners could collect rent that could in turn be used to pay down a mortgage, while renters gained access to shelter in a neighborhood that they might otherwise not have been able to afford.

Like most states, California went all in on zoning in the 20th century, prohibiting the construction of apartments—including ADUs—in most residential neighborhoods. Indeed, the first single-family zoning district in the United States was adopted in Berkeley in 1916, specifically and explicitly to segregate the suburb. Following the Supreme Court’s seal of approval in Euclid v. Ambler in 1926—a decision that infamously derided apartments as “mere parasites”—single-family zoning districts spread nationwide, producing the homogeneous and segregated suburban landscape we have today.

Such prohibitions play no small role in the California housing crisis. By one estimate, the state faces a shortfall of nearly 1 million units. Until recently, apartments were technically illegal to build in 75 to 94 percent of residential areas in cities such as Los Angeles and San Jose. Worse yet, in numerous California suburbs and smaller towns—including many in the heart of Silicon Valley—apartments were completely prohibited. That is, until the state legalized ADUs.

For nearly four decades beginning in 1982, across five separate bills, state policymakers in Sacramento nudged local governments to adopt workable ordinances to allow backyard and basement apartments of their own accord. Yet at the local level, NIMBY politics prevailed. Local planners eagerly exploited loopholes in the state bills, setting standards that made ADU production practically infeasible. Not surprisingly, few were built.

That changed in 2016 with the passage of S.B. 1069 and A.B. 2299. Where previous attempts at legalization retained the deference to local control typical of U.S. planning, these bills set clear, statewide standards for how local governments could and could not regulate ADUs. Unworkable design standards and onerous parking mandates were out. Prompt and affordable permitting processes were in. And a funny thing happened: It worked. Almost as soon as the new laws went into effect, ADU-permit applications skyrocketed across the state.

Unsurprisingly, those suburbs most committed to exclusion continued to find ways to subvert the law. In a kind of reform whack-a-mole, seven more bills were needed to address creative new forms of exclusion. Setbacks were rightsized, owner-occupancy mandates were dropped, and the state’s housing authority was granted the power to call out misbehaving towns. The work continues: Just this year, Governor Gavin Newsom signed yet another bill streamlining state ADU laws.

The pro-housing forces are winning. Building a home in your backyard in California has never been easier. And sure enough, the market has responded.

The number of ADUs permitted increased by 1,421 percent from 2016 to 2021. Other than 2020—a year racked by the COVID-19 pandemic—ADU permitting has increased by 42 to 76 percent every year since 2016, and this permitting growth is unlikely to slow down anytime soon. As of last year, ADUs constituted roughly one in seven homes permitted in California.

Graph of the number of additional dwelling units in California growing from 2012-2021.

In cities such as Los Angeles—where home prices are high and the city’s large lots are well suited to host ADUs—the boom has been even more pronounced. The number of ADU permits issued in L.A. jumped from 80 in 2016 to 5,064 in 2021—a startling 6,230 percent increase. One in every four homes built last year in the city was an ADU.

Graph of the number of additional dwelling units in Los Angeles growing from 2012-2021.

The ADU building boom has even penetrated many of California’s most exclusionary suburbs. Consider those jurisdictions with the highest median household incomes and home prices, most in and around the Bay Area: Few—if any—apartments were built in most of the suburbs sampled below over the past 40 years. Nine didn’t permit a single ADU in 2016. Yet five years later, permits have grown exponentially, such that ADUs now constitute most of the housing being built in these suburbs.

Chart of additional dwelling units permitted in 2016 vs. 2021.

According to a survey conducted by researchers at the Terner Center for Housing Innovation at UC Berkeley, these new ADUs are overwhelmingly used for housing—only 8 percent are used as short-term rentals. Better yet, data collected by the state’s housing authority suggest that most of the new ADUs built in the exclusive suburbs surveyed above qualify as affordable to households earning 80 percent or less than the area median income. The Southern California Association of Governments puts that figure at about 66 percent. In short, merely legalizing ADUs triggered a boom in affordable housing at no cost to the taxpayer.

As a test case for the growing YIMBY (“Yes in My Backyard”) movement—a diverse band of activists committed to removing barriers to housing—ADUs are almost too perfect. Besides the fact that many of them go in literal backyards, the success of their legalization reveals the extent to which we’ve locked our cities in a straitjacket—and the benefits of unshackling them. As soon as we granted homeowners the right to add an extra home on their lot, they eagerly lined up to do so, making neighborhoods across California ever-so-slightly more affordable and integrated.

Backyard cottages and basement apartments alone won’t solve the California housing shortage. But help is on the way. In 2019, YIMBYs and coalition partners passed S.B. 9, allowing duplexes and fourplexes statewide. Last week, Governor Newsom signed A.B. 2011 into law, allowing mixed-income multifamily homes to be built in commercial zones statewide. By one estimate, the bill could legalize up to 2.4 million homes on sites currently hosting dilapidated strip malls and half-empty offices.

Legalization of the humble ADU seems like a pilot study for a fundamental rethink of the way our largest state plans itself. After a century of cities stagnating under myopic local control, a more liberalizing oversight is in order. If there’s a future for the American suburb on the other side of this housing crisis, it will have to be a denser, more diverse place.

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