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Rise of the ADUs

The year 2020 may go down as the time when Californians began a Gold Rush of creating apartment units or home offices from a spare room or converted garage, and the coronavirus crisis can be called the accelerant. New laws that went into effect at the beginning of the year greatly loosened regulations on building apartments or small homes on existing home lots. Then beginning with the March lockdown of businesses and shelter-at-home mandates, there has been a surge of people looking to build or renovate spaces for home office or residential rental income purposes. And with the devastating economic crash that came with the virus crisis, it appears that Californians are increasingly relying on such accessory dwelling units, commonly called ADUs, to boost their income — whether they are taking on boarders or carving out a quiet space to work from home. Among the companies benefiting from the new January 2020 laws are GreatBuildz of Encino and EZPlans of Woodland Hills. Ray and Lesley Joelson of EZPlans, an architectural services firm, have seen a bump in ADU creation that has emerged in the last three years. “So many calls to our company are for those services,” Lesley Joelson told the Business Journal. Founders Paul Dashevsky and Jon Grishpul’s GreatBuildz enterprise connects homeowners with reliable general contractors. Dashevsky said that this year, 10 percent of GreatBuildz’ clientele are looking to create a home office or music studios, another 30 percent to house a relative, and 60 percent to convert a space into rental property. “This boom is happening because laws changed,” Dashevsky told the Business Journal. “Before Jan. 1 in L.A., it was hard to build. Now the state said, ‘Go wild. We’re trying to help our housing crisis.’” Thanks to the COVID crisis, “People are home all the time,” said Dashevsky. “They’re constantly at home and constantly looking at their space.” Dashevsky and Grishpul, his nephew, launched their concept last year and were primarily hooking people up with service providers for kitchen redux jobs. They profit from commissions per project from the vetted general contractors whom they connect property owners with. Since January, they have seen their enterprise expand virtually overnight. With the challenges to making an ADU greatly reduced and parking setbacks eliminated, homeowners are converting or building space. “The most common is a house in the Valley with a detached garage,” Dashevsky said. “They take that 400 square-foot space and turn it into a studio apartment. And if you don’t have a garage, you can pop one up — up to 1,200 square feet, one or two stories. It’s essentially a second home on your property.” Even Dashevsky has been surprised by his COVID-period business. He anticipated an economic dip but “that wasn’t the case,” he said. “We were getting requests for remodels and ADUs.” Encouraging new laws Known colloquially as “granny flats,” accessory dwelling units have benefited from the state of California’s rush to address a growing homeless problem. Even though California had begun to relax rules and regulations about creating ADUs in 2017, Gov. Gavin Newsom removed many more obstacles for Californians interested in building or renovating existing properties as ADUs thanks to some new laws which began going into effect on Jan. 1. Among the new directives: Californians are now permitted to create two ADUs on a single-family zoned property, one full accessory dwelling unit and one junior accessory dwelling unit (JADU). A JADU is defined as an ADU with a 500-square-foot maximum that is created by converting part of an existing residence, such as a spare bedroom or an attached garage. Beginning this year, homeowners could also build a detached ADU spanning 800 square feet and 16 feet tall without any local discretionary approvals. ADUs created by conversions were also granted automatic approval. Many of the stringent requirements regarding parking and setbacks have also been minimized, and ADUs can also be added to multifamily dwellings, either in spaces such as carports and storage rooms, or, in the absence of such spare spaces, two ground-up detached ADUs can be built. Facilitating ADU building is the mandate that California cities approve or deny ADU projects within 60 days of receipt of application. (Prior to 2020, the window of time edged 120 days). An unscientific perusal of permit requests with Los Angeles County Planning shows a surge of ADU requests since the 2020 laws have been enacted. In the applications for January, the shorthand “ADU” pops up 79 times. By March, when the pandemic outbreak and shutdown orders began to brutalize the economy, the number continued to spike —to 166 in June and 211 in July, suggesting that homeowners are increasingly commercializing their spare spaces as either an office to accommodate a work-from-home situation or for residential rental revenue. Real-time ADUs GreatBuildz’ clients have also included a professional musician planning on building a music studio at his principal residence on L.A.’s Eastside; a college professor in Pasadena seeking to create a home office space; and a pair of residents from San Fernando and Conejo valleys. Nick Antonian of Sherman Oaks recently turned his car garage into an apartment unit for rental income. Antonian told the Business Journal that he was having problems finding a reliable general contractor. “One guy quoted me $30,000 and another quoted me $110,000,” Antonian said. “I didn’t trust both of them.” Thanks to GreatBuildz, he was paired with a general contractor who came out to his residence. It went so well, “I almost hired him on the spot,” Antonian said. Thanks to the new laws, the process went smoothly once Antonian received a referral for a plans drafter. “I didn’t need an architect or engineer,” Antonian said. “They get me through L.A. City and Mulholland plan check for $3,500 through the process and then I paid the permit fee of $800. Once I had that in hand, then I said, ‘Do this.’” Everything took eight weeks. The garage conversion unfolded during the COVID time. “They had to do masks and social distancing (on the 495-square-foot project),” Antonian said. Modifications made to the converted garage included the installation of a bathroom, plumbing, electrical work, gas line, vaulted ceiling, hardwood floors, recess lights, laundry closet with stackable waster and dryer, flatscreen TV with a gigabyte of fiber optics wiring for internet, and the creation of a side storage space. Completed April 30, the new unit saw Antonian’s tenant move in May 1. “They started on time and ended a week late but that’s okay, they stayed within the budget,” Antonian said. “For me, it turned this unused necessary space into an income producing situation over time and increased the value of my single-family home,” continued Antonian, a father of three. Lauren Greer, of Thousand Oaks, also turned to GreatBuildz when she sought to create a rental unit at a house she owns in Encino, where she is renting out both the main house and a converted recreation room in back which needed to have a kitchen and a bathroom added on. “It was always my plan to rent the back house,” said Greer, who started building her project last November. While the launch of her project predates the new laws, having gone from filing a permit in May 2019 and getting a September 2019 approval to a Dec. 1, 2019 rental start, she will benefit from the new laws. She added that GreatBuildz helped her throughout the process. “I had no idea what I was doing,” Greer said. “Paul walked me through the whole thing.” GreatBuildz assisted Greer to navigate the city agencies with drafts of letters seeking the proper permit and getting permission from the power company because of an easement at her property with powerlines. The company also connected her with her general contractor, who came through with an electrician and plumber. Like Greer, Los Feliz’s D.J. Paul, a consultant who manages a small real estate portfolio, found GreatBuildz online. “He put me in touch with people I would otherwise not cross paths with,” said Paul. Paul told the Business Journal that the usage of his ADU project — building “a tiny house on top of the working garage” — has yet to be determined. His under-400-square-foot bachelor studio may either serve as a residential rental unit, an office for himself or his therapist fiancé or a caretaker room. As for why now, Paul said it has everything to do with the new laws. “I wanted to do this 10 years ago,” Paul said, but with the setback requirements attached to his 1935 house, it proved prohibitive. Now zoning just became more amenable.” And should the day come when Paul vacates the home, he believes this ADU will become a deal-sweetener. “Every dollar that we spend on this should be worth $1.50 for resale,” Paul said.

Michael Aushenker
Michael Aushenker
A graduate of Cornell University, Michael covers commercial real estate for the San Fernando Valley Business Journal. Prior to the Business Journal, Michael covered the community and entertainment beats as a staff writer for various newspapers, including the Jewish Journal of Greater Los Angeles, The Palisadian-Post, The Argonaut and Acorn Newspapers. He has also freelanced for the Santa Barbara Independent, VC Reporter, Malibu Times and Los Feliz Ledger.
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