Potential for Tiny Houses and ADUs

This post is to share my exploration of the potential for Tiny Houses and other Accessory Dwelling Units (ADUs) in the San Francisco Bay Area in particular. Zoning and planning laws, of course, vary according to local views and needs, and some areas are updating their fees and laws to accommodate increased demand and density. To start, this newsletter will look at the larger picture and my intention is to focus on opportunities as we move forward. Your feedback is invited, as there are so many interesting things happening now.

The permitting process takes time and may cost more than the structure you may be interested in building. Fact of Life. As building departments become more aware of smaller structures and the new increased interest in them, they are also becoming more familiar with which units can be more quickly pre-approved as they know what housing products used for back yard structures already meet or exceed building codes. In some areas there is a backlog of applicants waiting for approval. For those familiar w/ Bruce Norris & The Norris group, they did a full day seminar in Fullerton Ca on Sept. 8th on ADU's (Alternative Dwelling Units) and related topics. The seminar is now available through their portal along with a yearly subscription. They are interviewing makers of different housing products and I think their research is very interesting.

Ballpark figures, depending on your area and what you decide to build: (this example is based on a new container home built in San Mateo County in 2018.)

$175,000 for fees & permits, related expenses

$75,000 - $90,000 and up depending on the size of the unit, materials, possibly new landscaping.

You already have the property and the insurance in place but likely need to upgrade insurance. Property tax also needs to be figured in.

Rents $2400-$2700 for a 1 bedroom not at all uncommon.

The estimated rent ratio is pretty close to an old-fashioned 1% and could be higher if the unit were 2 bedrooms.

Part of the reason for high fees in some parts of the bay is if there is flood hazard and soils testing may be needed; also fees are a good source of revenue for local schools, etc.

These numbers are quite variable, of course. There is a guy in Oakland who bought a used shipping container for $2000 and rehabbed it, total cost to him about $15,000 and he rents it out in the industrial part of Oakland for $1000/ month and he has a second one that he rents on AirBnb part time and uses for a conference room part time. They are functional not fancy. He uses a phone ap to run the lighting & video system. He is quite pleased w/ his ROI.