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New Bay Area housing trend: Living in the backyard

Marisa Kendall, The Mercury News on

Published in Home and Consumer News

SAN JOSE, Calif. -- The walls weren't even up yet on the granny flat Limei Huang is building in her San Jose backyard when people started lining up to rent the space.

The first offer came from the worker who laid the unit's foundation. After his day's work, he called Huang up and asked: When it's finished, can I move in? Not long after, Huang brought in a painter. While he was giving her an estimate, he asked the same question. She had to tell him to get in line.

"I haven't put it on the market," said Huang, "and already people are looking for it."

Huang is part of a growing group of Bay Area homeowners taking advantage of changing laws and an intense demand for housing by building small dwellings known as granny flats or in-law units in their backyards, converted basements or garages.

Cities around the Bay Area report a dramatic uptick in the number of people applying to build the units, with applications over the past year increasing by more than 1,000 percent in some places. Experts predict interest will grow even more this year as legislators and local cities continue to propose new, granny flat-friendly policies, possibly bringing some relief to the housing shortage that has driven the price of renting or buying a home through the roof.

"This is going to be a major piece of the solution to our housing crisis in the next decade," said Matt Regan, senior vice president of public policy for the Bay Area Council.

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The number of building permit applications San Jose received for in-law units, officially called accessory dwelling units, increased five-fold between 2015 and last year -- jumping from 28 to 166 -- according to a recent report from UC Berkeley's Terner Center for Housing Innovation. In Oakland, the number of applications submitted during that time grew from 33 to 247. And in San Francisco they spiked from 41 to 593 -- an increase of nearly 1,340 percent.

Adding a few hundred in-law units here and there won't fix the region's chronic housing shortage. But as support grows from state lawmakers, city leaders and the private sector, experts expect the Bay Area soon will have a sizable supply of these small houses. After Senate Bill 1069 became law last January, slashing the price for building an in-law unit by as much as $60,000 for some homeowners, the legislature this session will consider another bill that goes even further to remove hurdles from building the units. Meanwhile, cities from Oakland to San Jose have loosened their own restrictions.

All those changes have led to a booming business for Steve Vallejos of Valley Home Development, a Fairfield-based developer who specializes in in-law units. A year ago, his company was fielding one or two granny flat requests per month. One week into January, Vallejos already had five requests and expects the company probably will end the month with 11 or 12.

"The growth has been pretty dramatic," Vallejos said.

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