All Forum Posts by: Whitney Hill

Be sure to get educated on ALL the costs that will go into your ADU so you will be able to accurately assess if the investment makes sense for your scenario. Some costs might not be immediately obvious (and are often omitted from scope) but can significantly impact your budget, and should be assessed before you even begin a full set of construction documents to make sure the project will pencil. Here are some examples of hidden costs:

-Sewer & Water: The location and distance of utilities can greatly affect costs. Also, you may have an undersized sewer or water line for the total new number of fixture counts you will have, especially with multiple units. A utility mapping study will locate & size all existing lines.
-Separate Electric Panel: Regulations require a separate electric meter for each ADU. Also watch out for overhead lines in the path of the ADU that may need to be relocated... while relocation is not expensive, SDGE workorders take for-ev-er, so you have to plan way ahead.
-Solar Requirements: Depending on your climate zone and ADU size, you will have to add solar on detached new construction.
-Survey and Soils Report: Depending on your lot and local requirements, a building survey and soils report might be required. Some require stormwater management.
-Slope: If your property isn't flat, grading work or raised foundations can be necessary and costly.
-Sprinklers: If the main home has sprinklers, the ADU will need them.
-Fire rating: If you are within 6' of a property line or in a very high fire zone, you will have to fire rate the ADU and that costs more as well. Close to main home? You will have to fire rate it, too.

And there are dozens more items to check for so you know what your true scope & all-in cost will be.

Keep in mind that ADU regulations are constantly changing at state and local levels. Cities are shoring up their enforcement in areas like utility upgrades and solar. What was the case 2 years ago for your neighbor may not be the case for you.

You will also see different interpretations of the same code based on the plan checker or inspector you get. And just because something slips through permitting, it doesn't mean an inspector won't catch it later and require it for occupancy (e.g. a survey requirement).

It's important to be prepared and also to know when to push back.

Renofi offers an excellent fixed rate second position loan based on ARV. No refinancing of your existing loan is required and terms are up to 20 years, plus there are no "draws" like a construction loan.

I would use the bulletin interpretation... when you get conflicting info from the City (e.g. verbally in a developer conference), request the written code reference (we often mention "for our clients" so we can point to it). When that's not possible, get the employee's name and title so you can later reference it. I've had city employees call me back to reverse interpretation on occasion... they have 20-30% vacancies in their dept right now and lots of ppl are new and this stuff is constantly changing and they sometimes miss the mark on the first try.

It's pretty clear in bulletin the bonus ADUs must adhere to FAR:

"Within TPAs, the number of additional ADUs does not have a specific limit. In all instances, the number of bonus ADUs would be physically limited by FAR, lot coverage, and height requirements. This means that, aside from setbacks, the ultimate building mass allowed would be no different than what a single dwelling unit or multi-family structure could build on the lot, depending on whether the ADU is located in a single-family or multi-family zone."

To share some numbers on how many projects are being submitted with multiple units... see below data on the permit applications for City of San Diego, which is a combo of public data + our analysis on text fields describing the projects (to extract things like unit counts... it's directional, not perfect data). Note the status options:

"In Review" = submitted and in plan check
"Active" = permit granted and construction underway
"Inactive" = project paused
"Final" = certificate of occupancy obtained / construction complete

Observations:

-Significant uptick in applications with multiple units, with a handful of projects with 5+ ADUs
-Virtually none of these projects have been approved ("Active") or completed ("Final") yet, with just 1 project with 6 units active. There are 30+ double ADU projects active though
-Not visible in this data set, but City of San Diego is massively backed up on ADU permits. We're seeing the average time the city holds the plans (not counting our revision time) at nearly 5 months, compared with under 3 months in Oceanside, Carlsbad and Vista. They are missing 25-30% of their staff, and consequently, are throttling applications with a "pre-screen" process that takes 30 business days at present... that's before plan check even starts.

Bottom line: not many have actually executed on this strategy yet, so if you are going for it, have realistic expectations on overall timeline. Also, as I'm sure you know, build costs have gone up roughly 30% in past 18-24 months. On the bright side, the moderate income levels required to qualify for the bonus program are quite high (I'm not allowed to link here, but google "Guide to the Affordability Bonus ADU Program in San Diego" to find all the info)

Be sure to consider the pros and cons of working with different kinds of ADU providers.

An ADU consultant company like Maxable will give you recommendations on other firms to complete your project with. They make money by selling feasibility reports and taking a percentage cut on contracts that ADU builders ultimately build.

An ADU management company like ADU Geeks will oversee the whole project but outsource all of the work, they do not hold a general contractor license. But they stay involved for the entire project as the main point person.

A true ADU design build contractor that has everything in house. Their own employees handle your design, permitting, and general contracting on the build out.

The type and size of project you are looking at will really affect which provider will be a good fit for you. Also, know that it is likely to run into snafus with inspections because ADUs are still new and each jurisdiction interprets things differently, sometimes in conflict with state law. It's not uncommon for us to push back on requirements that turn out not to hold water but would have cost the client tens of thousands of dollars (right of way work is a big one).

To comment on trends in construction costs... they are unlikely to go down, but hopefully will flatten. Material increases have been unprecedented (up 23% from Jan 2021 in California), but perhaps worse now is that continued labor shortages are not showing signs of improving. Fewer people are going into the trades and that is a huge constraint (not just the material costs you no doubt heard about, e.g. the lumber shenanigans). Our subcontractors are still coming to us regularly with labor cost increases.

However... some contractors are feeling the pinch of jobs cancelled due to financing and you may be able to find some one-off situations where they are looking to fill up their pipeline at a bit of a discount. Like @Chen Zhou mentions, some may be looking for work going into slower fall/winter months. Not sure if you have plans and permits yet though, allow 5-7 months for that process.

Regarding new ADU laws passed in September (e.g. SB 897, AB2221)... nothing big there that should change your design for the most part. Changes were mostly related to closing ambiguities in what the cities must do when reviewing plans, with a few tweaks to height limits (cities must allow 18', but the state law does not explicitly state they must allow 2 story ADUs and it's very tough to get an actual two story in under 18' anyway).

Good luck with the decision!

Quick overview of CalHFA:

-Up to $40K, but about $2K taken out for mgmt of program, and also this is considered taxable income

-Can be applied to soft costs and pre-development, e.g. plans, permits, survey, soils report, possibly trenching

-Must be owner occupied, household income limits apply, see here

-Program prefers to pay vendors directly, so try to work with a team that is willing to provide invoices for you to submit to program

-Apply here

The program is quite new and there are a lot of kinks being worked out, but we have several clients who have had their escrow accounts funded so far.

@Account Closed  I know, folks are disappointed on that front, but it's just such a different type of project and we're not set up to effectively manage addition / conversions. Happy to send a referral for an architect if helpful.

Make sure to get an all-in quote, including revisions and managing the permitting process with the city. Also, keep in mind that about 90 to 94% of your costs on the ADU are going to be for the build, not the design. Which means it's super important to take a draft version of your plans out for a bid to make sure your draftsman is not missing anything that will end up being expensive. For example, if you're going to rent this out, make sure you can get standard size tub inserts, the window sizes are standard and available, no overly complex foundation, make sure he's using trusses, etc. Etc. All of those things will mean major cost savings in the build.