The Eco-Friendly ADU: Housing’s Game Changer?

Accessory dwelling units have been touted for providing affordable housing solutions while also helping to alleviate inventory shortages. But their contributions to sustainability haven’t gotten as much attention. That may soon change.

An ADU is an additional housing unit built onto an existing property, whether as a standalone structure or an attachment to, say, a converted garage. ADUs typically average around 400 square feet but could be larger. About 100,000 ADUs are being built every year, according to a 2021 analysis by Porch.com, a home improvement website. Properties with an ADU are in demand: In the largest metros, homes with ADUs are priced an average 35% higher than homes without one, the study shows.

As multigenerational households grows, ADUs are expected to continue to increase in demand. Eighteen percent of buyers between the ages of 41 to 65, many of whom fall within the Generation X age segment, purchased a multigenerational home during the past year, according to the National Association of REALTORS®’ 2022 Home Buyers and Sellers Generational Trends Report. Further, homeowners may consider ADUs for rental opportunities and a possible income stream.

One company thrusting the eco-friendly side of ADUs into the spotlight is Spacial. The San Francisco-based company teams with a modular manufacturing firm to create customizable, energy efficient ADUs. Spacial CEO and national ADU expert Cory Halbardier recently caught up with REALTOR® Magazine to address the widening connection between ADUs and sustainability.

Q: How do ADUs achieve sustainability?

A: ADUs create something called “urban infill,” meaning they create more housing in neighborhoods with single-family homes instead of sprawling further away from jobs. This sprawling means that people would need to drive further to work each day, putting more pollutants into the air. ADUs, in themselves, are an eco-friendly response to the need for more housing without changing the character of neighborhoods like three-story multifamily housing would do. Spacial, in particular, has designed an ADU that is environmentally-friendly both in its construction—with the use of mass timber instead of concrete and steel—and in its ultra-low energy usage. Spacial ADUs meet most elements of Passive Home’s design standards and include energy-efficient appliances, LED lights, dual pane windows, and a solar photovoltaic rooftop system.

Are the ADUs all built off-site? What is the construction process like? What are the price ranges of a Spacial ADU, and are financing options available?

We partner with our sister company, Guerdon Modular Buildings, a leader in modular manufacturing, which builds all units off-site in a factory, and then they are driven to the final destination. Studio units start at $139,000, while the one-bedroom model starts at $157,000.

The Spacial ADU is built on an assembly line like the majority of all other products we purchase, such as smartphones, cars and TVs. It costs less to build than doing it onsite, and it’s built faster—in 11 days—and to a higher standard because it also needs to be built strong enough to transport.

Many folks finance ADUs as they would with any home upgrade. This means they will use cash-out refinances, HELOCs, second mortgages, renovation loans or cash on hand.

One of the hurdles often cited with creating ADUs is municipal zoning regulations or HOA rules. Do those remain challenges, or are more areas starting to welcome this housing option?

The challenge is all dependent on the area. In some places, like California and Oregon, the state has loosened restrictions on all cities and counties in the state, which keeps local municipalities or HOAs from blocking them. Changes in law like the ones we are seeing in these two states and others that are beginning to adopt them have paved the way for the ADU boom we’re seeing in California and starting to see throughout the U.S.

What is influencing the hike in demand for ADUs?

The pandemic not only created a new way to work but also caused more people to consider investing more into their home. Across the board, we’ve learned that people value flexibility, and ADUs provide that flexibility. ADUs aren’t just used as additional office space. In fact, about 50% of people installing ADUs are looking to create a passive stream of income in their backyard. The second largest group installing ADUs are those who are installing for family members. Whether for mom and dad to keep them out of a retirement home or for adult kids to help them get on their feet, ADUs are becoming the option many families choose. Others use it to “age in place,” where they move out of the main home and into the ADU, then rent the ADU and live off the rental income. Others may do it for themselves as extra space for an office, art studio or guest room.

Why do you expect ADUs to grow in popularity as a viable housing solution in the future?

As folks learn all the different ways they can use an ADU and how it provides incredible flexibility, the market will only continue to grow. One year, the home can be used as a rental, and four years later, older parents or in-laws can move in. In another five years, adult children can move in. Then a few years later, it can become an office. ADUs are one of the most flexible spaces someone can have in their home.