Are Accessory Dwelling Units a Partial Solution to Silicon Valley’s Housing Crisis?

By Ken DeLeon, Esq

There are no easy solutions to the Bay Area housing shortage that has caused our high home prices and long commutes. Facing pressure from both state regulators demanding more housing construction and due to requests from its 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 do 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 the potential to build an ADU. For those rarified parcels large enough to build an ADU, what was allowed was usually very small and was subject to a lot of regulations. The restrictiveness of past regulations and the ease of new rules be is evident by comparing the older regulations that Los Altos had versus the more liberal regulations that the City Council recently approved.

  Past Regulations Revised Regulations
Lot size required to be eligible for an ADU 15,000 Sq. Ft. No Minimum Lot Size
Size Allowed for the ADU 800 Sq. Ft. 1,200 Sq. Ft.
Does the Owner Need to Live on the property? Yes No Longer Necessary
How Many Parking Spaces are Required for the ADU? 2 1 or 0 (if within ½ mile of public transit)

Other Silicon Valley cities have also loosened their restrictions on building ADUs, with the greatest changes being the elimination or reduction of the minimum lot size. As another example, last year Palo Alto 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 four per year to 25 recently, and another 29 ADU permits reviewed recently (per Palo Alto Weekly August 24, 2018). To further encourage constructing 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 housing in our land-constrained peninsula, ADUs seem the most effective and least intrusive way to add local housing stock. While too early to tell, I project that cities that are more liberal with the construction of ADUs will see greater construction and even appreciation as buyers will appreciate the option of a secondary dwelling on their property. While many owners are using these dwellings as rentals to our local tech community, they 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.