‘Grannie Units’ Are All the Rage As Multigenerational Households Grow

Guesthouses, grannie units, casitas, in-law suites or—the less fun, but formalized—accessory dwelling units (ADUs) are all terms used to describe a second, often smaller, home on the same property as the main house. And homes that have ADUs are a hot ticket in today’s vigorous housing market.

Data shows that ADU homes have been selling faster, with higher price tags, year-over-year, while outpacing national sales trends during the coronavirus pandemic.

In January, before the pandemic took hold in the United States, homes with ADUs were selling 1.8% (two days) faster than the same time the year prior. Fast-forward to November, and the pace spiked to 26% (22 days) faster than the same time last year. This trend zipped past the national rate, where homes were selling 18% faster year-over-year in November, according to data from Realtor.com.

ADU home prices also outperformed the rest of the country in November, with a median listing price of $567,000, up 14.5% year-over-year, outpacing the overall price growth rate, which was 12.7%.

The price per square foot of ADU homes rose to $183 in November, up 16% year-over-year, compared to 15% growth in price per square foot nationally.

EcoSmart Builders, an ADU development company based in Southern California, is on track to triple its sales from the same time last year while processing between 100 and 150 ADU proposals each month, says Freddie Zamani, the company’s CEO and president.

Cheap interest rates are making ADU builds more affordable, but the primary reason is that families want to keep elderly parents and school-aged children closer to home because of Covid-19—with privacy,” Zamani says.

Covid-19 Might Be Adding to Demand

In 1980, 12% of Americans lived in a multigenerational household, meaning three or more generations of family living under one roof. By 2016, that number grew to 20%, according to data from the Pew Research Center.

As of this summer, 52% of young adults were living with parents, up from 47% in February. Additionally, nursing homes have seen their admission numbers drop from 80% occupancy in January 2020 to 70% in November.

“Occupancy has been at record lows throughout the pandemic due to fewer new admissions, largely because of less hospital elective care and surgery,” according to a statement by the American Health Care Association/National Center for Assisted Living (AHCA/NCAL).

Nursing home residents also make up a disproportionate percentage of Covid-19 deaths in the U.S. The Centers for Medicare & Medicaid Services says more than 76,500 nursing home residents have died to date as a result of Covid-19 complications.

As nursing homes are among the hardest hit by the coronavirus, some aging adults are choosing to live with their adult children.

Carolina Gerdts, executive vice president for RelatedISG International Realty in South Florida, says that homes with ADUs sell quickly, in part because of adults who take their parents out of senior facilities due to Covid risk and are now caring for them at home. The ADU provides privacy while also giving families peace of mind.

But health is not the only impetus for grandparents moving in; some are helping working families during this time of remote learning and amplified childcare needs as Covid-19 continues to cut an uncertain path.

“We’re also seeing a jump in multigenerational living situations because of children being home from school during the pandemic,” Gerdts says. “Both parents may have full-time jobs, and so we’ve seen grandparents move in with their adult children in order to care for their grandchildren during the day.”

What Real Estate Agents and Housing Experts Are Saying

Real estate and housing experts from New York to Los Angeles echoed the same message: Multigenerational households are on the rise, and many of these families are in search of more space.

The pandemic has helped boost the trend, as families worry about health, safety and affordability.

As younger adults face job loss in the hospitality and travel industries, they’re leaving expensive cities and moving back home for the time being, says Kuba Jewgieniew, CEO at Realty ONE Group in San Juan Capistrano, California.

“The uncertainty caused by the Covid pandemic has changed everything, and while real estate is still booming, it’s certainly changed the way we use and envision our homes,” Jewgieniew says.

Multigenerational households are also growing in wealthy East Coast communities, like Westchester County outside of New York City, says Scott Durkin, president and chief operating officer of Douglas Elliman in New York.

Since the pandemic, more adults are bunking up in larger safe-haven homes outside of big cities. Second-home markets or vacation destinations, like the Hamptons, are now becoming full-time residences. This is part of the desire for more space, Durkin says.

“New construction that accommodates multigen living situations are selling quickly. Even if families aren’t planning to live together in a multigenerational household right now, they are thinking about the future,” Durkin says. “While we haven’t seen price increases in markets like northern Westchester, where there are a lot of these larger multigenerational households, the time on the market is certainly shorter than a year ago.”

Cities Looking for Ways to Meet the Demand

In expensive housing markets with limited inventory, local governments are changing zoning laws and encouraging people to build ADUs.

In 2019, Seattle eliminated parking quotas for residential housing and the need for homeowners to live onsite, which were two major hurdles for ADU construction.

In September, Pasadena, a city located about 12 miles north of downtown Los Angeles, created a program that would help homeowners finance the construction of ADUs on their property, called the Pasadena Second Unit ADU Program.

Demand for multigenerational housing has grown in Los Angeles since the pandemic, as well, as people are moving in with extended family, says Yawar Charlie, director of the estate division at Aaron Kirman Group in Los Angeles.

“Now, when people are looking to purchase new homes, they may insist on including the needs of extended family in their home search. Meaning, they may need that extra bedroom, in-law suite or extra parking space,” Charlie says.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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