SD Tiny Houses - Game Changer?

Question

The SD Housing panel has approved them:https://www.sandiegouniontribune.com/communities/san-diego/story/2019-10-10/san-diego-housing-panel-oks-movable-tiny-houses-as-new-low-cost-optionNot sure how much of the article I can copy/paste here, but let me know if it is allowed.

The full City Council needs to approve the code change in early 2020, and the Union Tribune says they are expected to do so.

They will not be allowed to be rented for less than 30 days, need to be connected to city water, power etc, and there is apparently a long list of other requirements. But it sounds like even with the changes to make ADU's easier/cheaper, they weren't being built fast enough.

So what is going on here? Is San Diego trying to act fast before the state jumps in to force more affordable housing as they have done with other cities? I can't imagine anyone will want to live next door to a house with one or two of these in the backyard; but also I can't imagine a lot of people won't jump on this since it seems so much cheaper, quicker, and easier than granny flats.

If this is passed and investor/landlords start to do this, does it scale to the point of affecting rents, and thus property values eventually. It just seems to me the building/municipal/financial issues with ADU's have really limited their construction, but this could be different.

Whitney Hill · Answer

Hi! Just hopping in to add that you are allowed one tiny home OR a detached ADU, plus a Junior ADU. Not permissible to have a tiny home + ADU... the tiny home counts as the ADU:

"Only one companion unit [=ADU] or movable tiny house, and one junior unit are permitted on premises. Guest quarters and non-habitable structures shall be permitted in addition to the companion unit or movable tiny house, and junior unit."

Guest quarters = Living quarters attached to a primary dwelling unit without interior access or within a detached accessory building, which are for the sole use of persons employed on the premises or for temporary use by guests of the occupants of premises.

Full regulation... page 14 has the part I mentioned on only one ADU or tiny home: https://www.tinyhomeindustryassociation.org/wp-content/uploads/2020/07/San-Diego-Draft-.pdf

Frank Jiang · Answer

At the end of the day, this sort of asset is equivalent to an RV or the actual structure of a mobile home, especially with the ordinance requiring utility hookups.  The value of the structure itself likely has nowhere to go but down.  From a commercial standpoint, I would guess that we would see smart players trying to create the equivalent of a mobile home park: charging for the lot and passing on the risk of the structure itself to the homeowner.

Dan H. · Answer

>With tiny houses renting for an estimated $900 per month, Tetlow said, a property owner would recover their initial investment in about eight years. After that, the rent from the tiny house could help cover their mortgage payment or other expenses.

Remark is Clueless to the expenses of rentals.  where is vacancy, cap ex/maintenance, prop tax, insurance, misc?  The 50% rule would reflect $450/month of expenses other than principle and interest.  If purchased for all cash then 15.75 years to recover the initial investment.  I expect better returns than this.

The question is how will the structure hold its value?   Will it hold value closer to a house or closer to a mobile home?   At this point I would rather place a larger, traditional ADU than what amounts to a mobile home for $85k even if the rent to cost ratio is better with the tiny  homes on wheels.

Justin R. · Answer

God bless the people who want to live in housing of this type, and good for land owners if they put them on their property and it works out financially well for them.  It's a totally different product type, though, and I don't see it impacting the larger rental market.

I welcome this as a resident, concerned world citizen, landlord, and business person ... but I won't be getting involved in it.

Emily Di · Answer

Here's some info I shared with a small group of landlord friends.

Ok. Here is what I was able to find out:- 1 per premises, AND you can also have an ADU and companion unit on the same premises.

- Must be registered with DMV - taxed as personal prop trailer or RV- They have to be behind the house (and you need enough space to roll them on so that's a factor. Placement min 5 ft from lot line and 10 ft from another structure- Must connect to water, sewer and electric (nat gas not permitted)- Must remain moveable.. have to keep wheels on (but of course can cover with decking, etc)

- Questions: is pad needed? (in case you need truly intend more temporary ie use during a build of something else), What about utilities - panel upgrades for SDGE since now you're running stove, possibly dryer, water heater and heat all on electric? How are permits working for hookups?

So here are a couple of presentations and what I think is the most recent ordinance language:https://onbase.sandiego.gov/OnBaseAgendaOnline/Documents/ViewDocument/O-2020-114_Strikeout.PDF.pdf?meetingId=3914&documentType=Agenda&itemId=190672&publishId=400122&isSection=falsehttps://onbase.sandiego.gov/OnBaseAgendaOnline/Documents/ViewDocument/Item%20335-%20Movable%20Tiny%20Houses%20presentation%20City%20Council%207.21.2020.pdf?meetingId=3914&documentType=Agenda&itemId=190672&publishId=400129&isSection=falsehttps://onbase.sandiego.gov/OnBaseAgendaOnline/Documents/ViewDocument/Tiny%20Homes%20Association%20Presentation%20to%20San%20Diego%20Homeless%20Committee.pdf.pdf?meetingId=3914&documentType=Agenda&itemId=190672&publishId=400126&isSection=false

Bobby S. · Answer

@Emily Di I would like to connect with you regarding this topic.

Emily Di · Answer

I am excited about this ordinance. We need more types of housing in this city. Not everyone needs a 3/2 and not everyone wants to have roommates. With good design you can fit a considerable amount into 300 sq ftMy first job was in manufactured housing finance and I've been mesmerized by this type of housing ever since. With the financing we provided, people would roll a "double-wide" onto the lot and if it was permanently attached to the foundation then it was considered real estate. I understand the concern for long term appreciation or loss of value/investment, and I wonder if there is a similarly easy way to one day detach the home from the trailer and attach to a permanent foundation as ADU, etc... For lots that have the space and access, there is a lot of flexibility in bringing in something quickly to earn income or provide for family members.

My long-term goal is to move to micro-units and workforce housing. If you're interested in that let me know and perhaps we can brainstorm.

Barbie Steele · Answer

I look at adding a tiny home as a stepping stone for certain investors, particularly in the beginning phases. They allow you to add a unit much cheaper than an ADU (there is a manufacturer in TN who sells simple, quality THOWs for $25K, or you can pick up used ones for slightly more from private owners desperate to sell to someone with cash), enabling you to make money immediately instead of waiting for construction. House hack or rent out the two units until such time you raise enough capital to build the ADU. For the particularly cash strapped simply renting out the lot as a previous poster mentioned is another way to get some income. THOWs (when purchased from a dealer) are made of much better materials than mobile homes or RVs. They also take up less space than mobiles or Park Models, being 8 1/2 feet wide versus mobile homes which are 12 feet. This should matter to investors regarding the 4 foot setback portion of the ADU law.

Account Closed · Answer

I find this surprising but I'm not really sure how to feel about it as being good or bad. From the descriptions in the article it sounds like they're talking about "Park Model Trailers" which are specific things and follow RV building codes. They're limited to a max of 400 sf. and can include lofts, unlike HUD units which specifically bar lofts for some reason. I priced a custom park model out for a client about a year and a half ago. 400 sf. This quote is directly from the manufacturer:

Typically, a standard Park Model with a double loft will run between $35K & $45K.  However, with special windows, special exterior siding and upgraded cabinets, countertops and flooring they could run well into the $50Ks or even the $60Ks.

Anyone else building 400sf for $150/sf.in San Diego right now? It'll be a little more with the utility connections and other site work.

I just picked up the domain prefabgrannyflats.com Probably about time I did something with it...

Dan H. · Answer

The way mobile homes hold value, I am unconvinced that these will maintain their value.  I know a guy who buys mobile homes regularly for a few thousand dollars, rehabs them, and re-sells them with seller financing.  Old mobile homes are not worth much even rehabbed.  The seller financing is where much of the profit is derived

If you had a mobile home in the back of your lot, how much value do you think a 15 year old or older mobile home would add?  My view is not much.  I would rather have a traditional ADU build that I have better understanding of how it will be valued as it ages.

DCR does not determine value on small unit counts.  If it did, my market would not be selling for their high values.

SD Tiny Houses - Game Changer?

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