Experts say 'granny flats' could alleviate housing shortages

Economists specializing in the housing industry say that so-called "granny flats" could go a long way towards alleviating the shortage of affordable housing. As such, they're calling on more municipalities to ease restrictions that prevent such dwellings being added to existing homes.

Granny flats are defined as accessory dwelling units that are generally separate, cottage-like buildings but could also be a converted basement or garage. They form an extra, separate living area and are often used to house older family members such as aging parents. However, many city and state governments have zoning laws that prevent these extra living quarters from being added into single-family homes.

Things are slowly changing however as more authorities come to recognize the benefits of granny flats for alleviating housing shortage problems. Leading the way is California, which added three new zoning laws in 2017 that allow for expanded development of granny flats. California has since seen a 63 percent increase in the number of building permits for these units—more than any other state, according to ATTOM Data Solutions, a real estate data firm. Hawaii saw the next largest increase at 31 percent, followed by Tennessee at 25 percent and Washington at 22 percent.

“At a time when many housing markets are experiencing severe supply constraints and housing affordability is under stress nationwide, accessory dwelling unit legalization represents a low-profile free-market solution that requires little from government actors beyond getting out of the way,” noted Jonathan Coppage, a visiting senior fellow at R Street Institute, a think tank, in a 2017 report.

With granny flats, homeowners can also generate an extra income by offering the units as rentals. Unfortunately though, many parts of the U.S. are holding back granny flat development due to zoning restrictions that don't allow for these units. Tricky building permit application processes are another factor in holding up their development, experts say.

Some of the reasons why many states are holding back include concerns that these dwellings could reduce the available parking spaces in neighborhoods, leading to more traffic congestion.