Hottest trend in real estate: tiny add-on homes for in-laws or millennials

The hottest trend in real estate these days is carving out some space for your in-laws, the Wall Street Journal says.

And it has the potential to lift your home value as much as 60 percent.

Known informally as "in-law suites" or "granny flats" and formally as "accessory dwelling units" (ADUs), these little homes, usually somewhere between 300 and 800 square feet, are going up in backyards across the country. The multigenerational living trend has been picking up steam through the Great Recession, both as millennials return to their parents' homes and as boomers (and their parents) age.

To skirt zoning rules, in-law units often lack stoves. Click photo for a slideshow.
To skirt zoning rules, in-law units often lack stoves. Click photo for a slideshow.

The main obstacle is zoning. Cities generally restrict the number of residences that can exist on a property. But often there are ways around that, if the structure is short enough, and/or if it's small enough in proportion to the property. In such cases, it's viewed not as a residence but as more of an outbuilding, skirting neighborhood restrictions.

Strangely -- and perhaps highlighting the dated way many of these zoning laws regulate residences -- the stove is frequently the dividing line over whether or not a structure is considered a home or not. So some developers add in small kitchenettes, but not stoves, simply because of zoning.

Kevin Casey, the CEO of New Avenue Homes, has been helping homeowners build these backyard cottages for about five years using his project planning software. "It's not a cultural shift; it's a reversion to the norm," he says. "If you go to Europe or Asia, this is what it's like. This is the way families have been living for centuries."

Despite the benefits, there are many design and regulatory issues to contend with, says Seattle-based architect Ross Chapin, who designs what he calls "right-sized homes" as well as these cottages.


"We've got communities that are stuck in the 1970s with a family-sized house and flanking garage being the only product out there," he says. "But I think more and more local jurisdictions are looking forward and trying to respond to the reality of life and the diversity of households and trying to find ways to meet those demands that does not add to sprawl."

An ADU is a massive renovation and addition, with perhaps 600 square feet of additional living space, so it isn't cheap. And the cost varies widely by geography; what costs $100,000 in upstate New York can cost $250,000 in the Bay Area of San Francisco, Casey says.

But that doesn't mean they're not worth it financially. In an analysis of real-estate listings, Zillow found that homes with these ADUs were priced 60 percent higher than those without them, according to the Wall Street Journal.

"I like to say that you're increasing the value of your home, not necessarily in the dollars you're going to sell your house for, but the value your home can deliver for the 50 years you're in it," Casey says. "If five people are getting value out of your home, not one or two, then it's at least twice as valuable."

Click here or on the image below for a slideshow of in-law suites:

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