In a previous post, we discussed how City of L.A. was making a dramatic appearance on the national ADU scene in the first quarter of 2017.
Between 2003-2016, an average of one hundred permitted ADUs had been developed each year in L.A.. While 100 ADUs a year is something, it's certainly not a lot of housing for a city with a population of nearly four million people, and 1.4 million housing units.
But, 2017 has entirely changed the landscape for ADUs in California at large. And, L.A. has done something that no one expected.
Drum roll......
I'm amazed to report that the City of L.A. is going to take the mantle as the U.S City with the most ADU production in 2017.
Congratulations to all the Angeleños who permitted ADUs this year. For 2017, the ADU development award goes to Los Angeles.
It's bittersweet to announce this update, as I've taken great pride in Portland's national leadership on ADU development. On that note, I proclaim that Portland and L.A. (and any other major U.S. cities) have a friendly competition for ADU development numbers in 2018.
In all seriousness, it's wonderful that other cities are finally getting into the ADU fray. Honestly, it's been a lonely playing field up to this point. Portland, OR; Austin, TX; and Seattle, WA were the only other major US cities with substantial numbers of recently permitted ADUs up till 2016.
2017 was year that changed all of this with bold statewide ADU legislation, SB 1069 and AB 2299. Indeed, Californian cities such as L.A, Oakland, and Santa Barbara are likely going to be the next new big players on the national ADU scene over the next couple years. This dramatic turn is largely due to some courageous and strategic political actions to remove regulatory barriers at the state level.
Provided that the City of L.A. does not take it upon themselves to encumber the new, relaxed state ADU laws with local code barriers, it's quite likely the L.A. will continue to be a national focal point of ADU activity and experimentation.
I caught up with one burgeoning ADU entrepreneur, Jason Neville of Building Blocks to learn more about his observations of the local ADU market. Here's our Q+A in full:
Kol- Give us an update on the ADU permit numbers. In the last post about ADUs in L.A, it was evident that there was a spike in permit numbers in the first quarter of 2017.
Jason- Permits have risen sharply since State Law took effect on January 1st of this year, which reduced setbacks and eliminated parking requirements for ADUs. As of June 30, 2017, my research shows 537 permits for ADU-- fully 7% of all permitted units in Los Angeles. We are on track to permit over 1,000 ADUs this year-- a tenfold annual increase and almost as many as all permits prior to January 1, 2017 combined.
Kol- Using the public record data of permits issued, what was the process of determining how many ADUs were permitted?
Jason- Unfortunately tracking is more complicated than it needs to be, because the City of Los Angeles doesn’t track ADUs as a product type. My data is based on a search of keywords within publicly available data on the city’s open data portal (https://data.lacity.org/A-Prosperous-City/Building-and-Safety-Permit-Information/yv23-pmwf).
Kol- Break down the numbers a bit more for us. What % were for detached new construction? What % were for garage conversions? Any other observations of the types of permits that you can point out?
Jason- Although most people think of ‘backyard homes’ when they think of ADUs-- only 12% of 2017 permits were for detached new construction ADUs. The rest were conversions and additions-- primarily garages. It appears that many of these garage conversions are ‘legalizations’ of existing unpermitted units and are not ‘net new’ units.
Kol- What type of buzz are you hearing about ADUs? Who seems to be talking about ADUs the most at this point? Builders, realtors, policy makers?
Jason- There is certainly buzz here in Los Angeles-- and California generally. My friends in Berkeley are getting mailers from lenders looking for finance ADU construction; my friends in LA are getting mailers from contractors to convert garages; and at the permitting counter you can overhear many conversations about ADUs.
There’s also some helpful innovations coming from the public sector, particularly the Mayor’s Office. UCLA CityLAB and the City of L.A. published a ‘how to’ guide for homeowners seeking to build ADUs; and the Mayor’s Office convened local design nonprofit La-Más to design an ADU for a homeowner, financed by CDFI Genesis LA and constructed by Habitat for Humanity.
The project is helping demonstrate to policymakers and residents how ADUs can fit within the context of our great neighborhoods.
Along with Housing Trust Silicon Valley in San Jose, Genesis LA was awarded this month a $3.5M grant from JP Morgan Chase to create a revolving loan fund to financing restricted-income ADUs.
This is truly a maturing market in terms of capital access, regulatory reforms, and general awareness among homeowners. What’s missing are ADU development companies that can scale this ‘cottage industry’ into a full-fledged market.
Kol- Take a wild guess at this one. What % of L.A. homeowners would have a clue what “ADU” means at this point?
Jason- I was just talking with my marketing and sales manager about this today-- we will be doing some market research that should help answer this. I would guess that about 10-20% of single family homeowners have heard of ADUs at this point.
Kol- Now, tell us a little bit about your first ADU permitting process. What unexpected challenges did you face getting through the formal permitting process for the first time?
Jason- We helped a homeowner in South LA permit an ADU on their property, to replace a damaged garage. The permit was fairly straightforward-- per state law they must be approved ministerially-- although here in L.A. up to 12 different departments have to review the plans. For example, we realized that the site was in a specific plan area that required an extra level of review and added nearly $1,000 in fees.
We are also in design phase on a site we control, and are working with young, talented architects who will help elevate the quality of design typically seen in Los Angeles.
Kol- What did the total administrative and utility fees come out to for this project?
Jason- There were about 25 separate fees that totaled about $7,200 for this project. The largest was a fee for the school district (about $2,500).
Kol- What else would you like to share?
Jason- One of the stats that jumped out at me is that 78% of permits were pulled by homeowners not contractors. And even the most active contractors have only permitted one or two. So 95% of the units are being delivered one-off-- suggesting that this market is being constrained by an inability of the private sector to truly scale delivery.
Our company Building Blocks is addressing that issue by building pre-designed, pre-costed units sold at a fixed price to homeowners. We provide value to homeowners by delivering a quality product with no surprises-- and help scale up ADU production citywide to address the worsening housing crisis.
Although our buildings are small, we still see them as ‘pieces of the city’ that need thoughtful stewardship to help make our neighborhoods even better.
Jason Neville
Director of Strategy & Development, Building Blocks
jason@buildingblocks.house