Could Tiny 430-Square-Foot 'Granny Flats' Be The Key To Easing Housing Market Inventory Crisis? Some Experts Think So

Granny flats, also known as accessory dwelling units (ADUs), have emerged as a potential solution to alleviate the U.S. housing shortage. 

The small, self-contained living units are typically located on the same property as a main residential structure and provide an additional dwelling space. The name "granny flats" originated from their historical use as homes for elderly family members, particularly grandmothers, who wanted to stay close to their loved ones while still enjoying a degree of independence. But they're not just for the elderly anymore. 

The U.S. housing crisis is a pressing issue, with a shortage of affordable homes affecting various aspects of Americans' lives and livelihoods. One significant factor contributing to the crisis has been the limited availability of homes, which has prevented housing prices from experiencing significant declines despite Federal Reserve interest rate hikes that resulted in soaring mortgage costs.

The scarcity of affordable housing has far-reaching implications. For many individuals and families, it means being unable to access the first rung on the ladder to building wealth through homeownership. The threat of homelessness looms for those who struggle to secure stable housing. The housing shortage not only affects individuals but also has a broader impact on the overall economy.

Don’t Miss:

• Until 2016 it was illegal for retail investors to invest in high-growth startups. Thanks to changes in federal law, this Kevin O’Leary-Backed Startup Lets You Become a Venture Capitalist With $100
•  Don’t just buy from your favorite brands, own them so you own the upside. Learn how Retail Investors Are Taking Stakes In Their Favorite Startups To Own The Upside

ADUs provide an opportunity to increase housing density without significantly altering the visual character of neighborhoods. They offer a viable option to meet affordability targets while maintaining the aesthetic appeal of communities.

They come in various sizes, typically ranging from 430 to 690 square feet, depending on the design and layout. They are designed to provide essential amenities, including a kitchen, bathroom, storage and built-in appliances, ensuring a comfortable living experience in a compact space.

They can accommodate a wide range of needs and can evolve alongside a person's changing circumstances throughout their lives.

ADUs can serve as spaces for enabling independent living for elderly or disabled people, providing temporary housing for college graduates, offering a dedicated and productive home office for remote work and generating income through short-term rentals.

Platforms like Jurny, an artificial intelligence (AI)-powered property management solution, streamline the operational aspects of managing short-term rentals, making it easier for homeowners to capitalize on their income potential. With backing from prominent venture capital firms such as Mucker Capital, Okapi Venture Capital, VITALIZE Venture Capital, Singularity Capital and SaaS Venture Capital, Jurny has secured over $13 million in funding.

The pricing of these tiny dwellings makes them an attractive alternative for many individuals and families. When compared to the soaring median home prices in certain areas, such as Orange County, California, where the median listing price reached $1.2 million or San Bernardino, California, with a median sold home price of $488,000, ADUs offer a more affordable option.

To stay updated with top startup news & investments, sign up for Benzinga's Startup Investing & Equity Crowdfunding Newsletter

Recognizing the potential of ADUs, California implemented legislation to facilitate their construction. Homeowners now have the freedom to build up to two-story units and enjoy greater flexibility in determining the location of the ADU on their property. Additionally, garages can be converted into modular homes, expanding the range of possibilities for ADU construction.

By embracing ADUs, California aims to tackle its housing deficit, which stood at approximately 1 million homes in February 2022. According to Cottage, an ADU building company in San Francisco, the state could have created 50% more homes if all ADU permits submitted in 2022 had been approved and built. This demonstrates the potential impact ADUs can have in closing the housing gap and providing much-needed housing options for individuals and families.

While California stands at the forefront of embracing ADUs, other cities, including Seattle, Austin, Texas, and Philadelphia, have also experienced a rise in ADU construction. State-level initiatives have simplified the process of obtaining building permits for these small homes, encouraging homeowners to explore ADUs as a means to address the housing shortage.

See more on startup investing from Benzinga:

• There are more pounds of plastic in the ocean than pounds of fish. That’s why retail investors have invested over $4 million in This Startup That Invented Programmable, Drinkable Plastic That Dissolves In Water In 60 Hours
•  Gamers are selling their old gaming items for millions. Learn why everyday gamers and investors are claiming a stake in their side hustle and how they invested over $1.2 million in this startup.