Financing Ancillary Apartments: Challenges and Solutions

Ancillary Apartments
September 8, 2015

Low- and middle-income renters in urban and suburban regions of California face a more severe lack of affordable housing than their counterparts almost anywhere else in the United States. As a result, a large underground housing economy has arisen in certain areas. It takes a variety of forms (sometimes referred to as Accessory Dwelling Units, or ADUs) in residential neighborhoods, including garages converted to living spaces, single-family houses partitioned into multiple units without permits, and recreational vehicles parked in driveways serving as quasi-permanent dwellings. As an example, from 1981 to 2000, an estimated 55% of the housing units added in ten cities in Los Angeles County were attributable to the underground housing market, i.e., were unpermitted.

While the underground housing economy can be viewed as a solution to a seemingly intractable problem, it imposes nmajor impacts of concern to local communities and to the California state government. These include environmental stresses; life-safety and health risks from construction that does not comply with building codes; a strain on infrastructure and public facilities; insecure tenure for both homeowners and renters; and political invisibility for tenants who live in fear of their homes being discovered.

The newest IGS Research Brief, "Financing Ancillary Apartments on Residential Properties: Challenges and Solutions," looks at the blocked market for financing small apartments on residential properties, and what the California can do about it

Jake Wegmann is an assistant professor in the community and regional planning program at the School of Architecture at the University of Texas at Austin. He received his doctorate from UC Berkeley in 2014, studying under Professor Karen Chapple, an affiliated faculty member at IGS. Prior to entering academia, Wegmann worked in housing development, both forprofit and nonprofit, in Denver and San Francisco.