ADUs: How affordable?

Affordability: the whole point of this blog from the start has been that accessory dwelling units (ADUs) and other small structures are a far more affordable type of supportive senior housing than assisted living (around $40-50,000 a year) and independent living facilties (monthlies running from $3-5,000 a month, on top of an entry fee not uncommonly of a quarter-million dollars or more).

But there is no getting around the fact that building an ADU from scratch is not cheap. Recently Portland, Oregon-based ADU guru Kol Peterson reviewed the costs carried by developers in that ADU hotbed of activity and found that, among other things, the absolute minimum, irreducible cost of building a detached ADU was $80,000. More typically, though, detached ADU construction averaged more than $180,000,

Average costs weren’t much different for other ADU types, e.g., $185,000 for a basement ADU, $154,000 for an attached ADU (attached to the family home), $142,000 for a garage conversion, and $217,000 for new construction above a garage.

The cost “fly-in-the-ointment” is the expensive fixed costs of development and construction, including labor and material, excavating and pouring a foundation, and concrete formwork, as well as costs involved in permitting, design costs, and utility connection costs.

Many of these costs in the Portland area are offset by so-called “sweat equity,” with owners contributing their own efforts to the design and build. Going even further in individual initiative, these owners are often required to seek financing from sources other than the typical mortgage and building loans available to single-family home developers.

With or without contributing your “sweat equity,” though, it is important to think through the initial costs you will incur with ADU development. The good news is that the expense is upfront and limited, rather than lasting multiple months and years, as is the case with other supportive senior housing. Over the course of time, the savings stand to be substantial.

Still, the small home approach to the “missing middle” talked of so much these days by senior housing financiers, just waking up to the dichotomy between the high-end projects they’re familiar with and the typical alternative of Medicaid-supported facilities, remains frustrating. The concept is new, and many builders and planners just aren’t comfortable with it yet.

Case in point: a recent article on a “pocket neighborhood” of small structures offered as a downsizing alternative to single-family homes in suburban Northern Virginia cites prices of $750,000-800,000 for the 1,500 square feet—hardly within the realm of affordability. While these costs reflect the high-cost environment of single-family homes in this suburb, still, it is clear that traditional senior housing developers have a long way to go toward comprehending the “missing middle.”

Innovation is needed, and there might be some hope, for example, in Bill Thomas’s Minka house concept using offsite prefabrication that can bring construction costs down considerably (see, “Bill Thomas’s Small Home Approach to Dementia”).

But, for now, do your homework and stay patient in venturing into this field.