Backyard rental homes can ease housing shortages

by Zain Jaffer

Like the rest of the US, the state of California has their own housing shortage challenges. There are many reasons for this national housing shortage, although some reasons include the pause in construction during the pandemic, the high mortgage interest rates that dissuade both buyers and sellers from signing on to buy or sell a house, and others.

One of the reasons that California lawmakers have targeted is how to encourage more housing in exclusive enclaves of large single detached homes. In recent years, states like California have legalized the construction of small backyard houses that can be rented out, but whose footprints are small enough to have a proper aesthetic. Prior to this, zoning laws in the state did not allow for these small dwellings. California has also set aside an incentive payment for homeowners who are willing to subdivide their property to allow the construction of these Accessory Dwelling Units (ADUs) [].

Many Boomers who are retiring or are retired either inherited houses from their parents who returned after World War II, or bought houses during the 70s when houses and lots were relatively cheaper and larger. Thus it is not uncommon to see large single detached houses and lots in the suburbs of highly urbanized major cities.

Highly affluent homeowners do not want to part with their large lots, but for retirees with cashflow problems, it works as a win-win situation. They get to receive a state incentive, get rental income from these ADUs, and help the state partially offset the still growing housing shortage.

These ADUs could have a small footprint of as small as 150 square feet. These ADUs can either be built in a large front yard, or a large backyard. For backyard units, it is important that these dwellings have right of way access.

Companies like have gotten into the act. You can now order these easy to assemble ADUs for as low as $10,000 for a 13 x 20 square foot house [].

However homeowners with larger sized lots might want to opt for properly constructed houses that will command a higher rent and better aesthetics with the rest of their property. Some ADU plans that contractors can use are available for sale on the web if they prefer not to engage an architect to design them one from scratch [].

With the housing shortage growing yearly, these types of creative solutions to free up land for housing are most welcome, and complement the normal means of trying to achieve affordable housing for all.