Wednesday, April 24, 2024

I remain a YIMBY skeptic -- granny flat edition

[For those who came in late, here's a checklist for (most) of our YIMBY/NIMBY thread.]

One of the main points in our voice-in-the-wilderness housing thread was that, with many of the YIMBY movement's highly touted solutions, the sign was almost certainly right but the promised magnitude was very probably high. 

With that in mind, check out this report from Erin Baldassari reporting for Marketplace.

Since 2018, a number of U.S. cities and states have changed their laws to allow more housing in most single-family neighborhoods. Among them are Minneapolis; Austin, Texas; and Oregon and Washington states. All now allow two or more homes on lots that used to just house one.

In California, a similar law, SB 9, was hailed as a way to spur housing construction in a state that has a dire shortage of it — but it was also decried as a threat to the character of suburban neighborhoods. 

In the roughly two years since the law’s been in effect, it hasn’t really done either of those things. But that may soon change. For homeowners with space to spare, a few new companies have emerged with an offer: cash for your backyard. 


But, despite a major housing shortage across the state, the law hasn’t produced much in the way of new supply. 

“These types of projects are really costly and complicated for a homeowner to take on,” said Ben Bear, CEO of BuildCasa, the company that bought the Tremaines’ lot. “They’re basically asking the homeowner to be a developer.”

Bear wants to make it easier for homeowners to benefit from the law without having to do all the work themselves. “Homeowners can get anywhere from $50 to $400,000 in cash while keeping their existing home and mortgage,” he said. 

Bear said his clients make, on average, just over $100,000. 

In exchange, they get a closer neighbor and smaller backyard, and potentially lose up to 10% of their existing property’s value. That’s according to Bear and another company that does these deals.


That’s what these companies are banking on: that they can entice more homeowners to sell their backyards. And hopefully make a dent in California’s housing crisis.

There's an unspoken caveat we should probably say out loud, people who have a suitable yard and decide to go for the deal and to whom offers are made, get, on average, just over $100,000. That amount suggests to me that the supply of suitable lots and willing sellers isn't that big.

Houses on small lots are ruled out. Houses in less desirable neighborhoods may not bring in enough money to justify the trouble. Owners of more expensive homes may decide that the potential hit in resale value isn't worth it. Many homeowners moved to the city specifically for the backyard. People with small children or large pets tend to make heavy use of the space, and even those who don't do much with it usually like having it back there.

Obviously, the more housing, the better, but I've always been skeptical of the potential of granny flats to be more than a trivial part of the solution.


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