How do Granny Flats Help the Housing Crisis?

Recently, Granny Flats have become the new “sexy” topic in Real Estate. Why? Because California (among other states) is facing a severe housing shortage.

Since about 1970, California has been experiencing an extended and increasing housing shortage. California was ranked 49th among the United States in housing units per resident (meaning we don’t have enough). The shortage has been estimated at 3-4 million housing units (20-30% of California's housing stock, 14 million as of 2017). Experts say that California needs to double its current rate of housing production (85,000 units per year) just to keep up with expected population growth and prevent prices from further increasing, and needs to quadruple the current rate of housing production over the next 7 years in order for prices and rents to decline.

The cause is the imbalance between supply and demand; a result of strong economic growth creating hundreds of thousands of new jobs (which increases demand for housing) and the insufficient construction of new housing units to provide enough supply to meet the demand. The imbalance is such that in last half-decade, in the Bay Area, seven times as many jobs were created as housing units, while statewide, for every five new residents only one new housing unit was constructed. This has driven home prices and rents to extremely high levels, such that by 2017, the median price of a home across California was more than 2.5 times the median in the U.S. as a whole, and in California's coastal urban areas, (where the majority of job growth has occurred since the Great Recession), the shortages are even more dramatic. Several factors have together caused severe constraints on the construction of new housing: community involvement in the permitting process allows current residents who oppose new construction (often referred to as NIMBYs) to lobby their city council to deny new development; environmental laws are often abused by local residents and others to block or gain concessions from new development (making it more costly or too expensive to be profitable); greater local tax revenues from hotels, commercial, and retail development vs. residential incentivize cities to permit less residential; density restrictions (eg. single-family zoning) and high land cost conspire to keep land and housing prices high; and construction costs are greater because of high impact fees, and often developments are only approved if union labor is used.

So one way to combat this housing crisis is to use the space that has already been built- your garage! Or maybe it’s your shed, or basement, or attic- whichever you choose, these are great spaces to convert into Granny Flats because the walls are already existing, it’s more than likely that the space is already on the plans with the city, and it’s highly likely that you already have utilities in this space- maybe you are even lucky enough to have electricity, plumbing AND sewer!

So where will you put yours?