New Home Insights Podcast Episode 65 Transcript | John Burns Real Estate Consulting

Episode 65: Sheri Koones on What We Do with ADUs

 

Transcript

Dean Wehrli:

Welcome everyone to the New Home Insights podcast. I’m your host, Dean Wehrli. Today, we’re going to touch on a growing trend that really in turn touches on other major housing market hot points. We’re going to talk about ADUs, accessory dwelling units. Big, a hot topic, a growing trend. Again, we’re also going to talk a little bit about smaller homes, another trend we’re seeing in the market. These ADUs and small homes are impacting things like sustainability, density, the actual supply. We know we have a gross under supply of homes out there. ADUs can help with that, as well as something we forget they can help with, affordability and attainable pricing. All of these are huge issues right now and to help us talk about that is Sheri Koones. Sheri is an author and a journalist and she’s written 10 books, including her latest book, which specifically, she’s literally written the book on ADUs. I’ll let her talk about that in a second. Sheri first of all, how’s it going? Good afternoon.

Sheri Koones:

Very good. Thank you for having me.

Dean Wehrli:

I’m glad you could make it.

Sheri Koones:

Thank you.

Dean Wehrli:

Your latest book is called, Bigger Than Tiny, Smaller Than Average, and it talks about ADUs and about some smaller houses. Tell us about that a little bit and just give us a little brief bio, I guess, your background and how you came to do this.

Sheri Koones:

Oh well, thank you. I actually started writing about homes in 2000. I was just renovating a house that my husband and I had bought and I didn’t know anything. I had been living in apartments for most of my life. And so I did a great deal of research and I found all of these great books on different things that I needed to know. And when I got finished, I decided I was going to write a book for all of those people that would meet up with a lot of the pitfalls and the problems that I had. I wrote a book called From Sandcastles to Dream Houses and I had been in the fashion industry and I expected to go back to the fashion industry but my children were very little and I got an offer for two more books and so from there it just kept going.

I kept saying, “This is going to be it,” but then I kept getting more offers. And as I progressed through these books, I became more and more interested in prefab construction, energy efficiency and sustainability. And I started writing more about small houses and I’ve continued because there’s so much happening in small houses. There’s such a need. There’s really a huge need by a lot of people, both millennials who are just getting out of school, they’re getting married later, they are having fewer children, they don’t want to do a lot of maintenance. And also for boomers who want to now move into a smaller house. They’re not moving in as much to older age communities. They want to live among everybody else. And maybe if they lived in the city, now they want to live in the country or in suburbia. And they’re looking for something very different but they want small houses. There’s a huge need for that, for smaller construction.

Dean Wehrli:

Awesome. We’ll touch on that in a bit. First though, let’s talk about ADUs, accessory dwelling units. Just let’s start with the broad base. Our listenership here is pretty broad based so not everyone may know about them, understand them. Let’s start at the 30,000 foot level. What is kind of the definition of an ADU?

Sheri Koones:

There actually are a few different definitions. To me, an accessory dwelling unit is excuse me.

Dean Wehrli:

That’s a hard word.

Sheri Koones:

Accessory dwelling units are additional units that are separate from the original house. And so they can be in a basement of a home they can be. And they usually have a separate entrance and they are a separate home with a kitchen and a bathroom. Most people today are using accessory dwelling units to mean a separate unit that’s not attached to the house. And so it can be a garage that’s been converted to a living unit or it can just be one that is being built. There’s kind of a wide definition of ADUs and it can also change around the country. There’s also, I noticed in some of the literature that if there was a unit there from before 1940, then that unit can just be renovated. And in some cases, cities just want those that are already there.

Dean Wehrli:

It could be even a granny flat, that little one story above a garage or something like that.

Sheri Koones:

Right, right.

Dean Wehrli:

What do you think of, I’ve seen sometimes builders use it to mean an attach. Maybe it has a lockout door and it has its own entry but it’s actually attached to the main house. Do you consider that an ADU?

Sheri Koones:

Yes, I do. And actually I’ve seen a lot of houses where there’s a breezeway between the ADU and the house. There’s one roof that goes across but it is separate and it has a separate entrance and they could be called all different things. In-law suites or granny flats or a variety.

Dean Wehrli:

Multi-generational is a popular one.

Sheri Koones:

Multi-generation.

Dean Wehrli:

Now you and I spoke briefly already, so I was surprised by this, but where did ADUs kind of get their start? The history, the origin of ADUs?

Sheri Koones:

Actually I was covering ADUs in an earlier book. In 2009, I think they began to be built in British Columbia because in British Columbia, they have laneways, which are narrow streets, not the main entrance where the cars go into the garage. And so they started to build a lot of laneway houses in where those garages were and they became very popular there. And since 2009, they’ve become even more popular there. And of course, then they have come to the United States but it all kind of sprang up. It was the housing was very, very expensive in British Columbia and I met some people there that they tried to buy a house for a million dollars, a small house and they couldn’t find anything for a million dollars. They ended up building a house on their parents’ property. And they said not only could they build a much nicer house than they might have been able to buy for a million dollars but they also had a built in babysitter and wonderful dinners.

Dean Wehrli:

But there were things like granny flats and there were cabanas and outhouses, that’s not the right word. You know what I mean, long before 2009. It just sort of became codified and we think of it now as ADUs relatively recently, is that correct?

Sheri Koones:

Well, there were always accessory dwelling type units but they were not defined until recently and when states started to allow it. Actually I went through it, I would say there’s a lot of states that are allowing them today more than before but there are still many states, including New Jersey and Connecticut where I live, there’s only one municipality, Fairfield where they’re allowing them. It really depends. And even in California, there are so many different areas and they all have their own ordinances.

Dean Wehrli:

Let’s circle back to that in a minute. I wanted to start with first, just kind of the environment, what are the best neighborhoods or what are the most common neighborhood environments where we’re going to find ADUs?

Sheri Koones:

I think they’re particularly important in areas where there’s a shortage of housing. And so I noticed in Pennsylvania, they’re in Pittsburgh and Philadelphia where there’s probably the largest population. They’re going into areas where there’s a need. And instead of putting up high rise buildings, it’s much more preferable to have an ADU and it’s not as noticeable. And the only issue which will hold back having ADUs is that there’s a shortage of water and electricity needs in that area. They need to make sure that they can cover all of the needs of the people there but they mostly are going into areas and particularly in California, where there’s tremendous homelessness and there’s a huge shortage of housing. I heard statistically someplace, there’s a shortage of four million houses in this country.

Dean Wehrli:

There’s all kind. It goes from one million, I’ve heard seven million, everything in between. There’s no question that ADUs hopefully can be a big part of that. Will they work though in suburbia? Do you ever see them in suburbia? If you think about it, it makes sense. In a way, often things like suburban master plans do provide in some ways, provide that kind of those public areas and public spaces that are in lieu of private spaces and ADUs typically have limited private space. Do you see them working? Or do you ever see them in actual experience in those kind of suburban master plan environments?

Sheri Koones:

I’ve covered a good deal of them in my books and there has never been an issue with neighbors. I think that when you put an ADU with the garages, you’re not imposing on anybody else’s property. In a lot of cases, you can’t even see them. The ones that I’ve seen have all been wonderful and I don’t think that there’s a problem. I think this is a great way to resolve some of the shortage in housing and in a very simple way that’s not going to disrupt the neighborhood.

Dean Wehrli:

It’s funny you said that. Let’s let me ask that now. I was going to ask you in a minute but let’s do it now. Do you see a lot of, you hear the phrase NIMBYism or something like that but do you see a lot of the neighborhood kind of do they worry about congestion? Because in California, we’ll talk about SB 9 in a second in California but there was kind of some antagonism toward that by folks in single family environments thinking, oh, they’re going to make my neighborhood too dense, too congested.

Sheri Koones:

I don’t think that that’s the case. It’s actually adding much less density than if you put up a large apartment house, which is what’s happening in some areas. In a lot of cases, the municipality requires that the ADU be in the same style as the house and only a percentage of the house. They’re not imposing and they really actually look quite nice compared to, as I said, having large structures being put in.

But there’s a lot of resistance. I belong to the League of Women Voters in Connecticut here and they’re having a meeting next week trying to get people to allow them to have ADUs and people have been very resistant and in a place like Greenwich where I live, there’s massive houses with massive land, which would work quite well for people’s adult children or elderly parents or just somebody in the family that might need housing. I don’t understand the resistance. I think it’s a plus plus for everybody having ADUs allowed.

Dean Wehrli:

But you just said it, there is a lot of resistance there and I think we do see a lot of resistance. Their answer would be, “I don’t want to see an ADU or an apartment building in my neighborhood.” That argument doesn’t always work with those folks.

Sheri Koones:

I just read a statistic in California, if things go the way they’re going, by 2026 there will be one in 10 houses will have an ADU.

Dean Wehrli:

Wow. Well, okay. Well that’ll be interesting to see if that happens in real life. I’ll be honest, I’m a little skeptical about that. That I think there’s going to be some practical hurdles to making that happen but certainly we have seen a surge in ADUs here in California since they redid the law. Before we talk about that though, let’s talk about demographics, kind of life stage trends with respect to ADUs. Are they mostly satisfying kind of those singles and couples kind of households, is that where their bread and butter use is?

Sheri Koones:

No, I think there’s a variety of people that are building them. I have one couple actually in Washington, in my current book that they travel a lot and they’re older so they built an ADU so that they could rent out their house and live in the ADU. I have other couples who are living, as I said on their parents’ property. I have one house in a prior book, I wrote a book on downsizing and they have a grandmother who lost her husband and she was moving from grandchild to grandchild without a home. And so one of the grandsons built an ADU for her, a granny flat right on the property so she could live there and she could help with their kids and just be around. It’s really lots of different people that are doing this. Also, it’s a great thing for somebody that’s handicapped so that they could be close to you. Or if you have a caretaker, they could live there. There’s so many reasons to have an ADU and also people are just building them to have an office. Some people they want to.

Dean Wehrli:

Do we see a lot of that? Do we see it used in fact, so in other words, one of the reasons that ADUs are sold or at least argued for is that they’re going to help solve the supply conundrum that we just referred to. But aren’t, they very often also used for things like you said, offices or hobby rooms or the oldest kid or something like that? Is that pretty common?

Sheri Koones:

I have a house in my new book, Bigger Than Tiny, Smaller Than Average and there’s a gal who renovated a house in California and she has the ADU as her office and also when she has guests. It works for both of that. And also they’re building a smaller house and if you have an ADU, you don’t necessarily have to have another extra bedroom. You can have a multipurpose accessory dwelling unit that serves several purposes. I have another family in this particular book in South Carolina, they built an ADU and they use it for homeschooling their kids and then it’s also used as a guest house and their house is rather small for a family of four so they built a smaller house that they have to heat and cool and whatever and the materials to build a smaller house and yet they have this ADU that serves some other purposes.

Dean Wehrli:

Wouldn’t that be the household type that is least likely to be using ADUs? That is to say the family household, you have an example in your book, but is that in real life kind of, I would imagine fairly rare?

Sheri Koones:

No. I think that people are going to build smaller houses today because they don’t want the maintenance. They don’t want the heat and energy required for a larger house. I have seen a lot of ADUs going into family houses where they have some flexibility in terms of, as I said, having a guest house, having a workspace. People want to be able to leave their house and go to work. And an ADU is a perfect solution. It’s less expensive than renting an office. I think there’s lots of people that are just building them that are families, for the extra space.

Dean Wehrli:

You have to really like your family so I don’t think that’d work for us. I’m just kidding family. Wait, they never listen to this podcast so they didn’t hear that anyway. How about as a rental, as a separate rental, do you see? I know a lot of places are going to have some restrictions on that but some places do allow it. Do you see that as a motivator, you could help pay off the mortgage?

Sheri Koones:

Definitely. If they’re allowed to do that and people don’t mind having somebody else live on their property, yes, that’s a good motivator for making extra income. One of the houses I covered a while ago was a guy who was an architect. He bought a house, renovated the house and then built an ADU and he rented the main house and he said he didn’t need a lot of space and so he moved into the smaller space and it was a young couple and they rented out the bigger space. I’ve seen that a bit as well. When municipalities allow people to rent it out, that is a good motivation. I also heard recently at a one of the conferences that there’s a company that will build an ADU in your backyard and they get half of the rent. There’s a bunch of different systems of going. But for the most part, I see people building one for their own needs.

Dean Wehrli:

How familiar are you with, in California here we had a law that took effect I believe just January 1st of this year, 2022, and it’s called SB 9 and it allows for these lot splits. In these single family neighborhoods, they can split their lot into one, two, I think even three more ADUs. Do you see that having an impact? In your experience, do you see that being or is there going to be hurdles to realizing that in actual fact?

Sheri Koones:

In reality, I haven’t seen that at all. I think that if people have a very large property and they put a few structures on it, nobody’s going to see it and it’s not going to be offensive. I think that you would have to have a certain amount of property to be able to put multiple units on it but I do think it would be kind of silly to have a bunch of units on a small property. It would kind of defeat the purpose.

Dean Wehrli:

That’s true. That’s true. Do you see it? I don’t know, in your crystal ball, do you see it taking off? Assuming you have decent sized lots, where you see a lot of single family homes. You mentioned a stat a minute ago. We’ll see a lot of these single family, say they have five or six or 7,000 square foot lots and they pop a couple extra lots onto their single family home, a couple extra, I’m sorry, ADUs on their single family home. Do you see that taking off?

Sheri Koones:

think it’s possible but again, I think you have to weigh, is this going to be offensive to people? And I think the reality is that if you have a very large lot and a lot of the people I know in Greenwich where there’s some very large lots, they have hedges, you can’t even see the house so you’re definitely not going to see the ADUs. I think there’s just wasted space and there’s a need for housing. And so again, I think that this will solve some problems for people that are desperately in need of housing.

Dean Wehrli:

It seems kind of West Coast, doesn’t it? British Columbia, California, Oregon actually has some. You’re in Connecticut, is that fair to characterize it as kind of a West Coast thing?

Sheri Koones:

I think it is. I don’t know that it’s a Midwest thing either. I think it’s mostly on the West Coast.

Dean Wehrli:

What are some of the common restrictions?

Sheri Koones:

But—

Dean Wehrli:

Go ahead.

Sheri Koones:

There is a website that will show you all of the states that allow it, the municipalities and you can actually find out all of the requirements but every area seems to have a requirement. They might say, you could have the ADU can be a percentage of the size of your house. It has to maybe be in the same design as your house. There’s how many ADUs you could have on your property. I think anybody that’s thinking about building an ADU, they need to check with their local municipality. And as I said, on East Coast like in New York, there’s very few places that allow it as in New Jersey and in Connecticut.

Dean Wehrli:

Let’s transition over to kind of smaller houses and we’ve touched on it already but when you say a small house, just in a sense in square footage, what do you mean? How small is small? How small do we get? And how small is the norm in the small house movement?

Sheri Koones:

Well, what I’ve been writing about is houses 2,000 square feet or less and I’ve covered houses that have been as small as 450 and as big as 2,000. But the reason that I titled this book Bigger Than Tiny is because there is a big movement towards tiny houses, which is not something that I write about. I think that there is a good reason for tiny houses, for people that are moving around or they’re building little homeless, tiny villages. And I think that’s really great but I prefer houses that are code compliant because they’re attached to the heating, the water and septic and they’re safer in storm areas and earthquake zones. I only write about code compliant. It’s bigger than tiny and smaller than average. I don’t know exactly what the average number is but I think 2,000 is a little bit smaller. And I think that I have covered a lot of different houses over the years from I’ve been writing about small houses for a long time and if they’re designed well, they work better than a lot of larger houses.

Dean Wehrli:

What are some of those tricks then? You write about that in your book. What are some of the things that folks do to make those smaller houses more livable?

Sheri Koones:

Well, one thing is having multipurpose spaces so that you’re not taking a small area of your house and never using it. I grew up in a house, I just looked it up recently in New York, it was 1,400 square feet and my brother and I were never allowed to go into a living room and the dining room because they were for company. And it was a very small house. Today the houses that I’m covering, the areas are designed to be multipurpose and in a lot of cases, the bedrooms are smaller and the common areas are larger so that people can gather and be very comfortable. It’s very important in a small house to have lots of lighting, that’s a major thing to make the house feel more comfortable and bigger and having great ventilation and having furniture that has storage and that serves multi purposes.

And I think a really important thing is that the house just be designed with a good flow so that there’s open space and there’s private niches, that there’s areas for people to work. I covered a house in this book that was a 1,000 square feet and yet there were two work areas because a lot of people are still working at home or going to school and working at home. There’s a lot of tricks that I go through in the book to show. And the houses in my books are very inspirational because they really show how a small house can feel much bigger and very comfortable, even though it’s small.

Dean Wehrli:

We still see, we walk models. I’m in the new home business and I’m walking models all the time. You still see lots of those traditional compartmentalized living rooms and dining rooms that people use almost never. You could literally take all that square footage and not notice it in a lot of floor plans.

Sheri Koones:

Most of the people today that have a dining room, they’re using it as their main eating area. One of the people in the house works there and it’s used and the living room has a pullout couch and it might have a coffee table that opens up so that you could eat in the living room. The houses that are well designed are very comfortable and they’re not restrictive.

Dean Wehrli:

It’s like a built in TV tray from the olden days.

Sheri Koones:

That’s true.

Dean Wehrli:

And high ceilings too. Isn’t high ceilings a pretty common feature.

Sheri Koones:

High ceilings are, a lot of people like high ceilings. I personally am not a real fan of high ceilings, even though they do make the house feel larger. It’s also a heating and cooling issue. I like a cozier lower ceiling but high ceilings do make a house feel bigger as well as lighter walls and just open, open spaces.

Dean Wehrli:

Sheri, doesn’t the small home trend kind of counter a little bit, the converse trend that has folks wanting a home office more and actually needing bigger homes to accommodate those home offices or even offices if both spouses, let’s say home office, how do you reconcile those two trends I guess?

Sheri Koones:

Well, that might be the case in some areas but what I have seen is that there are a lot of people who are building small houses and just designing little areas into that house so that they can work. One of the issues with building a bigger house is that it’s more expensive to build a larger house. You’re having more expensive heat and electricity and it costs a lot more money. A lot of people are just going for a smaller house. Instead of having a bigger house, they want a more luxurious house. They might put higher end finishes into that house, nicer appliances. And again, a lot of the people that are buying houses today want to do traveling. Eventually, hopefully we can all go back to traveling. They want to travel and they don’t want to be stuck maintaining a large house.

And a lot of, as I said, millennials, they can’t afford to have a large house and they’re paying off massive school loans. And that’s a big part of the population that are buying houses. They’re having fewer children, getting married later, have large loans, they prefer a smaller house. And then a lot of boomers, they had a big house and now they want a smaller house. And even if they’re working at home, they’ll have a work area right in the house where they’re working. I think there are those people that want the larger house but for the most part today, if you live in a city where land is expensive and the house housing market is very tight, a lot of people are very happy to get a small house and make it work.

Dean Wehrli:

You kind of covered my next question, which was the motivation. Folks are looking for smaller houses because they need less space, because it’s more affordable, because they are looking for a lower maintenance, maybe lock and go lifestyle. Do you see folks literally though, actually saying, “Look, I want to lessen my carbon footprint. I want to help with sustainability.” Is that a true motivation for some of them?

Sheri Koones:

I had 26 houses in my new book and every single one of those families, whether it was a young family or retirees, everybody said that they wanted to pay less for energy and they wanted a smaller carbon footprint. Everybody was conscious. And I think if you see the houses, they are all very, very attractive. One of the houses in my book, they had a house built to their and they said it was the same size. It was the same size as their previous house but it felt much more comfortable because it was well designed. And one of the things that everybody’s looking for today is outdoor space. A lot of the houses are built with either one or multiple outdoor spaces, which also makes the house feel larger. That is a real thing. People are much more conscious of the environment.

Dean Wehrli:

So beyond just the you’re heating less aspect of these small houses and ADUs too, but mainly small houses is that how this movement kind of helps with sustainability and helps with environmental factors? Is there something we’re not talking about here that it also is beneficial from that perspective?

Sheri Koones:

I’ve seen a preponderance of metal roofs, which don’t have to be changed every 20 years. They last. Metal roofs are recyclable. I see a lot of just more sustainable materials, recycled materials. This generation in particular, is probably the most environmentally conscious group. Kids today, they’re filling their water bottles. They don’t bring in plastic bottles. They fill the bottles that they have. They turn off lights. They are worried about what the universe is going to look like when they get older. And so they’re way more conscious, especially very bright kids. They’re much more conscious of that. And as I said, I was surprised, even older people, they were very conscious of the environment. They didn’t want to create more of a disaster than has already been done. I think in general, people are conscious of it.

Dean Wehrli:

You do see that a lot but it’s probably too late because of the boomers and the gen Xers. Sorry about that millennials and gen Y. Our bad. Sorry about that. This is a weird question but have you ever seen a quantifiable measure of that? How much your per square foot use or something as a resident, as a person in a home? How do we measure the impact of home size on the individual level? Have you ever seen anything like that?

Sheri Koones:

No, but I think that with every house that I cover, I look for the green features and the energy features. We look into how all of these, all of what we do impacts the universe. And so I think, as I said, all of the people, maybe they’re a unique group of people, but all of the people that I review in my books are all incredibly conscious and they want to build a smaller house. I have one guy who’s a professor at a university and he built a 450 square foot house. He said, “I just don’t want a lot of stuff and if I have a bigger house,” and he had lots of land to build a larger house, he just chose not to. One of the other things that’s very important that I didn’t mention is when you have a small house, you need a lot of storage because you don’t want stuff laying around and so you need to be very creative about having storage and particularly if the house is very small.

Dean Wehrli:

For sure. For sure. The skeptic in me though, I’m just, we’ll see how, I guess how it plays out. The skeptic in me says that a lot of the motivation for house size decrease and it has been decreasing since about 2015 on average, is because this is at the same time that prices are going up and up. And to some extent, I think the motivation is you quote unquote settle for a smaller house because the pricing is more attainable. It’ll be interest to see in the far off future when prices are going down, if people really are still choosing to buy smaller houses.

Sheri Koones:

Well, I’m an optimist. And years ago I had a hybrid car and I didn’t have a place to plug in an electric car but if I did, I would’ve gotten one then and I predicted that electric cars would become more popular. And I’ve had this discussion with people that are not so sure. I don’t know if everybody’s going to want electric cars but we can see there’s more charging stations. There’s more people putting charging stations in their house. And more of the companies are building not only electric cars but electric trucks. It is the wave of the future. Things take a long time to catch up. It’s something new but I predict that’s only going to get to be a bigger thing. And I also think that as the housing market keeps getting tighter and tighter, people are not going to be settling. They’re going to be very happy to have a small house. Be able to have a house and be able to have a well-designed house that really works for them.

Dean Wehrli:

Well, I’m still waiting for the hovercraft that I was promised in film strips in elementary school, in the 1970s. We haven’t got there yet and I’m kind of angry about that. Let’s end with this, Sheri. This is a hard question but that’s okay. What do you see the impact of small houses and ADUs, the biggest impact? Do you think it is with respect to sustainability or affordability or just pure supply?

Sheri Koones:

I think it’s all of the above. I think the affordability is a big thing but I also think people will be happier in smaller and smaller houses. I think that a lot of people have moved out of New York. It’s one of the few places where there’s a decrease in a population and so people are moving out of the city and a lot of those people lived in tiny little apartments. My daughter just rented an apartment, it’s a bread box. You turn around and you’re at the other side of the apartment and paying a lot of money. Those people will buy a house and it will be 2,000 square feet or 1,200 or 1,400 square feet and it will feel very comfortable and with outdoor space compared to that small space that they settled for in the city. I think affordability, availability and comfort is going to be a big motivating factor in the future.

And I think I can see, this is my third book on small houses and I’m seeing that they’re becoming more and more popular and there’s a great deal of interest. I do talks in various places and I get a lot of people showing up. They are very interested in this topic. I think it’s becoming a hotter topic, honestly.

Dean Wehrli:

And if more hurdles are taken out of the way, then I think the ADU factor can help solve or partly solve that supply issue as well.

Sheri Koones:

I agree with you. I think both the small house and the ADU they’re here and they’re going to grow and whether the communities like it or the builders like it, it is something that is the future. And actually some of the builders and architects have told me, they have gotten many more calls for smaller houses than ever before. It’s going to be here so it’s just a matter of time.

Dean Wehrli:

Awesome. Well Sheri, thank you for coming on and joining us on the podcast. We appreciate that.

Sheri Koones:

Well, thank you for having me. My pleasure.

Dean Wehrli:

Thanks again for listening everyone. This is Dean Wehrli with the New Home Insights podcast and we will see you in a couple of weeks.


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