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larrywww

Senior Member
Registered: 08/29/06
Posts: 1,613
Reply with quote  #1 

 

 

Most investors know that when they buy a house, especially in California, they are primarily paying for the land.  It would seem
to make sense that it would be more cost effective if you can
build another house on the same lot and rent it out to someone else.  Still,

most local zoning regulations have long prohibited building 2 houses
on the same land, unless it is zoned for such.  However, what most
homeowners don't know is that the federal government announced a policy that encouraged the building of a separate structure
in order to permit more affordable housing.

As I recall, this "Granny flat" regulation (when I last researched it---and this wasn't within the last couple years) permitted one to build
another structure approximately 30% of the square footage as the
existing house. 

What has happened, however, is that many local
cities have fought this idea with burdensome regulations.
Actually, my own view has been that it is far easier to add
on to the existing structure rather than add a separate structure.
This is precisely because most upscale cities are going to make it unreasonably difficult to accomplish this aim. 

My question: Has anyone tried to to construct a granny flat?  Was it worth trouble?  Is it better to make an addition rather than a granny flat?  Of course, even where you have the legal right to do this----is this a good idea?  Will it increase the market value more than an addition?  Even if it does, some belive that granny flats will somehow destroy the integrity  of the neighborhood---diluting the % of homeowners and unduly increasing the % of transient renters. 

It is true that zoning has sought to make certain neighborhoods exclusive
in this manner.  Thus, San Marino (in LA County) and Southlake (in TX)
don't permit apartments, condos (Sole exception: there is 1 condo complex in San Marino) etc----only SFRs---in a clear effort to discourage renters from living in the community.  (I don't believe either has very many hotels either.)

FYI: What follows is a USA Today article on granny flats---and
how they tend to be more popular in California due to the scarcity of
the land.



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'GRANNY FLATS' FINDING HOME IN A TIGHT MARKET

 
"Granny flats" and "in-law-suites," small apartments in garages, basements and backyard cottages, are making a comeback in areas where housing is expensive and land to build it on is scarce.

Cities and states from California to Massachusetts are rewriting zoning laws to let homeowners build second housing units on single-family lots. Proponents say legalizing small apartments in residential neighborhoods is a fast and cheap way to create rental housing that students, workers and the elderly can afford.

But many homeowners are not happy about the prospect of renters living next door. "None of us want our neighborhoods destroyed," says Karen Klinger, a real estate broker in Arden Park, Calif., near Sacramento. "There should be some restrictions so that our neighborhoods don't turn into multifamily neighborhoods."

Relaxing zoning codes

California is leading the pack with a new law that effectively forces cities to relax zoning codes and make it easier to get building permits for such rental units. Cities can't ban granny flats, and homeowners no longer have to face angry neighbors at public hearings.

"What has really caused a resurgence is the combination of the affordable housing crisis and increasing concerns over sprawl," says Cathy Creswell, deputy director of the California Department of Housing and Community Development.

California, which is adding about 500,000 residents a year, is in the thick of a housing shortage. Housing prices there are among the highest in the nation. But many communities continue to resist developments such as apartments and townhouses, preferring single-family homes.

Housing in many parts of California and elsewhere has become so expensive that employers can't attract workers and retain college graduates. The elderly often can't afford to live near children and grandchildren. Some cities are building housing for teachers and police officers, who often can't afford to live where they serve.

Officially known as accessory dwelling units, granny flats are attached to the main house or a separate building on the same lot. They were a tradition before the 1950s, when many extended families lived together. Aging parents lived in the small units, which were quickly dubbed granny flats or in-law suites. In wealthy neighborhoods, owners often set up separate living quarters for chauffeurs and maids.

This housing style faded when homeowners flocked to the suburbs to escape crowding. Cities clamped down on apartments in single-family neighborhoods. Many banned them outright.

Now, there's a revival.

"It's a viable and important source of affordable housing that even a wealthy community can benefit from," says Deborah Howe, professor of urban studies and planning at Portland (Ore.) State University. The movement is gaining momentum in:

?The Boston area, where the median sale price of an existing single-family home rose well above $400,000 this year. Despite losing 200,000 people and gaining 30,000 housing units since 1950, Boston has a severe housing shortage.

"Families and households are taking up far more space than they used to," says Paul Grogan of the Boston Foundation, a community group. In 1950, an average of 3.37 people lived in each household in Boston, he says. It has dropped to 2.31.

?Cary, N.C., a fast-growing city outside Raleigh. Cary five years ago began allowing "utility dwelling units" in single-family homes. As of this year, homeowners can build an apartment next to their homes, but only in the downtown area.

"We don't have restrictions as to who lives there as long as it meets the standards," says Ricky Barker, the city's associate planning director. "It benefits the homeowners and our vision of getting more people in the downtown area."

?Washington state, where cities that have more than 20,000 people must allow second living units in any neighborhood. In Seattle, a local housing coalition launched an initiative to educate communities about the benefits of granny flats.

?Chicago, where the Metropolitan Planning Council is pushing the city to allow apartments in coach houses. Originally designed for horses, carriages and drivers, many were turned into garages and small apartments. The city banned new apartments in coach houses in the 1950s.

But support for granny flats isn't universal. The League of California Cities is fighting the new state law that makes it harder to block such units. "We object to the (state's) intrusion into local land-use decisions," says Jessica Mullan, policy analyst for the group. "You have a neighborhood that's zoned for single-family homes, and you're basically changing the character of that community without any input from the community."

Sandi Monda, 58, of Torrance, Calif., says "granny flat" is a misnomer. Supporters of the practice, she says, "use it to get sympathy. The homes we're living in are selling for anywhere between $500,000 to $700,000. If a homeowner chooses to put a granny flat on their property, I can assure you it's not going to be affordable."

Santa Cruz, Calif., is offering incentives to homeowners who build second units and charge rents that a person making 80% of the median monthly income in the town could afford. That means rent of about $1,200 a month for a two-person household. For homeowners building such units, permit fees of up to $6,000 are waived. The city, which has some of California's highest housing prices, posts seven architectural blueprints for granny flats on its Web site. Permits tripled from 10 in 2002 to 30 in 2003.

Building a 'sonny flat'

Tori Milburn of Santa Cruz is spending more than $30,000 to convert her garage into a "sonny flat." Her three-bedroom home is getting too small for her bookkeeping business and two teenage sons. She uses the garage for storage now. Soon, it will be a 400-square-foot studio apartment for Kyle, 17. "When my son moves away, I would have a unit that I could rent out to supplement my income," says Milburn, 41 and divorced. Going price: $800 to $1,200 a month.

San Jose, Calif., Councilman Chuck Reed sees great benefits. More units generate more property tax revenue because of higher assessments on homes with apartments. Such units also save local governments the $100,000 average cost of building one affordable housing unit.

"If we can build a thousand of those things, that would save us $100 million in government subsidies," Reed says.

larrywww

Senior Member
Registered: 08/29/06
Posts: 1,613
Reply with quote  #2 
As a supplement to the above post, I found the following indication that
the City of San Diego has barred granny flats.  Since I haven't researched the issue, I'm not sure how this stands vis a vis the original HUD regulations.

Onion: Planning Policies: Granny Flats Ordinance

Judges' comments: This Onion goes to the City of San Diego for not allowing "Granny Flats." Granny Flats are accessory residential units built behind existing homes. The images you¡¯re looking at show some creative possibilities if these units were permitted by the city. Such a zoning allowance, which is permitted in many other California cities, would support the city¡¯s stated goal of sensitively adding density to older communities. The city seems to prefer approving new mid-rise mega-block developments that require existing blocks to be bulldozed. This is a huge missed opportunity and a creative way of addressing San Diego¡¯s housing needs.

TexasTom

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Senior Member
Registered: 07/25/06
Posts: 318
Reply with quote  #3 
If you are going to do a granny flat, attach it to the main house possibly upstairs in the rear.  Its much easier to sneak it through the city that way.  DONT call it a granny flat, just put a seperate entrance on it from the back yard.  If you are in the coastal area you'll have huge difficulties getting a proper LEGALLY RENTABLE flat approved by the city if you are zoned R1.  Houses in most areas along the coast sell for 300/s.f. minimum.  You can add on to your structure for 100-150 s.f.  This is whats called "forced appreciation" or "added value" cause you are building for less per s.f. than you'll sell for on the retail market.  A typical "granny flat" in any good coastal community will rent for 800.00/mo.  If its 600 square feet then it will cost about 90k to build.  You'll almost be at a break even point but it wont be a big cash flow situation. The investment should pay off when it comes time to sell though.



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biophase

Senior Member
Registered: 06/24/06
Posts: 335
Reply with quote  #4 

I was going to do this same thing here in Scottsdale.  My plan was to make it attached to the main building with a hallway which had two exterior doors on each side.  The short hallway would be made of large arched openable windows or pocket type sliding glass doors that could be totally opened making it essentially an outdoor walkway with just a roof and no walls.  This would give the feel of a separate structure but its still attached.


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NewbieSue

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Registered: 12/06/06
Posts: 63
Reply with quote  #5 
We had a granny flat, and I learnt the hard way that it's not worth messing with. Granny flats are considered "utility structure" on an appraisal, and they are given a flat value of $15,000 to 25,000 regardless of the size, marble countertops, and golden toilets that you might have in there. They are not appraised as $$ per sq.foot at all, and they are not included in the overall size of the main house. I verified it with three appraisers because I didn't believe the first guy, turned out it was the case with all three of them. So, there, is it worth it?


larrywww

Senior Member
Registered: 08/29/06
Posts: 1,613
Reply with quote  #6 

TexasTom and Biophase: I think your approach is definitely the majority view I have heard---no question about it.   Most developers do not want to incur the wrath of cities by doing something as disfavored as putting up granny flats.  The cities have become ingenious in heaping on requirements for these type of projects. 

And as you and Biophase point out, you can do the practical equivalent without really breaking a sweat.  I think both of your approaches are clever and offer practical wisdom in terms of evading bureaucratic red tape. 

I might want a little different approach in California where the land is so scarce.  There would be some economy if the 2 structures had some common walls, even if this means living a little closer to your renters than some would like.  But the problem with this approach is that these common walls can't really have windows (on either side, really) if you want privacy.
And houses that don't have windows on an entire side are going to seem
a little claustrophobic, not to mention too dark perhaps.  So it's a complicated question to my mind.  

What I would tend to prefer in California is a large lot where you have a side driveway so that you can actually have the tenant drive past a gate and have a back entrance and park in the back.  This will arguably lessen complaints from neighbors since you aren't competing for street parking and the tenants don't live within sight of the street, but face away from it.  Although I must say that it is hard to find lots in California with this much space.
     

But in my opinion many of these restrictions are arguably illegal, at least in California.  The California legislature passed a law on July 1, 2003 to cut through the red tape in terms of permitting granny flats.  AB 1866 (Wright).
The following URL discusses the new law and how cities have in most cases have sidestepped its requirements.   http://www.sandiegoissues.com/Grannyflats.htm


Thanks so much for the excellent feedback.  But I guess what I also wanted to find out is whether any brave developers actually have tried to develop granny flats.  According to the article (cited above), there are few developers who want to get the cities mad by going against the grain on this.  And this is true even though what the cities are doing is arguably defying the California legislature.    My guess, however, is that I'm going to find very few developers who have risked incurring the wrath of a city and actually developed granny flats.  Better to be subtle, do it on the sly, with an attached structure per the suggestions of TexasTom and Biophase.





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