City Beat Morgan Hill: Shifting Economic Forces Create Housing Opportunity: Accessory Dwelling Unit May Be a Good Option

Interest rates and supply dominate any housing market, and both forces are shifting fiercely for the foreseeable future. As mortgage interest rates creep upward, not everyone in the housing market can find a reasonable option, and some homeowners need to squeeze more value from their homes to make ends meet. The pressure that this scenario creates is intense, yet ADUs may offer some relief.

What is an ADU?

ADU stands for Accessory Dwelling Unit. You may have heard them called a secondary dwelling unit, a generation unit, a granny unit, or an in-law unit. No matter the name, they are quickly becoming viable—and valuable —options for residents looking to expand their home size to accommodate multiple generations or earn additional income as a rental space.

Building an accessory dwelling unit may sound farfetched, but the long-term economic benefits are too numerous to dismiss ADUs as a possibility.

For a structure to be considered an ADU, it must provide independent living facilities for one or more people and must include an area for living, sleeping, cooking and eating. The ADU must be located on the same parcel as the primary dwelling unit. A resident may build two ADUs per parcel, which may be one detached or attached and one junior ADU.

Types of ADUs

• Junior ADU is entirely contained within the main residential unit, with a separate entrance, no more than 500 sq. ft., and is required to include an efficient kitchen but can share a bathroom with the main home.

• Attached ADU is attached to the primary residence.

• Detached ADU is separated from the primary residence.

• Converted Existing Space can be something like an attached garage or accessory structure.

Considerations to keep in mind when planning for an ADU include what are the setbacks from property lines required for a chosen type of ADU, maximum size available for the final location, parking requirements for attached and detached ADUs, and impact fees–fees that offset the financial impact of new development on public infrastructure–that may be applicable.

Path to Completion

The City’s Development Services team has outlined a path to understand the process and the latest Muni Code requirements on its ADU Resources webpage to help turn your idea into a reality. Plus, there are generous grants available, such as $40,000 from the CA Housing Finance Agency. These ADU grants provide funding towards pre-development and non-reoccurring closing costs associated with the construction of the ADU, such as site prep, architectural designs, permits, soil tests, impact fees, property survey, and energy reports. These grants may be available to most Santa Clara County residents whose income does not exceed $300,000 annually.

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