There are no easy solutions to the Bay Area housing shortage, which has resulted in high home prices and long commutes. Facing pressure from both state regulators demanding more housing construction and requests from citizens, several Silicon Valley cities have eased the restrictions on building an accessory dwelling unit (“ADU”). This article details how these regulations have loosened and also posits that those cities who more easily allow owners to build ADUs will see greater home appreciation going forward. 

ADUs were once amazingly rare and required an exceptionally large lot to even have a chance at approval. For those rarified parcels large enough to build an ADU, what was allowed was usually very small and was subject to many regulations. The restrictiveness of past regulations and the ease of new rules is evident by comparing the older regulations that Los Altos had versus the more liberal regulations that the City Council recently approved.
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Other Silicon Valley cities have also loosened their restrictions on building ADUs, with the greatest change being the elimination or reduction of the minimum lot size. As another example, Palo Alto recently eliminated the “minimum lot size” requirement for allowing an ADU. With this change, the number of permits issued by Palo Alto for ADUs went from just 4 per year to 25, and another 29 ADU permits reviewed recently (see, Palo Alto Weekly, August 24, 2018). To further encourage construction for even more ADUs, the city council is exploring reducing or even eliminating the steep permitting fees that the city charges for ADU structures. Given that these fees can approach $10,000, waiving or eliminating these fees would further spur additional ADU construction. 

Given the strong and pent-up demand for more housing in our land-constrained peninsula, ADUs seem to be one of the most effective and least intrusive ways to add local housing stock. While it is still too early to tell, I project that cities that are more amenable with the construction of ADUs will see more construction and even greater appreciation as buyers will want the option of having a secondary dwelling on their property. While many owners are using these dwellings as rentals for our local tech community, they also provide more space for visiting family, guests, or an au pair - choices that are very appealing to today’s buyers. While many new construction ideas face a backlash, I view the ease of regulations for building an ADU a positive for Silicon Valley housing and an easy way to address our chronic housing shortage.