Accessory dwelling units have become much more popular and mainstream to build in California in the past few years, thanks to several bills from the state legislature that have brought them out of the shadows. One group that hasn’t shared so much in the renaissance, though: low to moderate-income homeowners and often people of color who lack the funds to build ADUs.
Helen Leung, Co-Executive Director of LA Mas, a non-profit design agency based in northeast Los Angeles spoke with ADU Magazine to discuss how her organization is working hard to make ADUs more accessible to the middle and working-class. Following find selected highlights and excerpts from that Question and Answer Session.
The impetus for the shift has been in many ways realizing that it’s really hard to invest deeply at a scale we would really like as an organization that’s meaningful for communities when our work is scattered throughout a community and where we don’t have the ability to commit long-term.
– Helen Leung
ADU Magazine: With LA Mas, what does your organization do primarily?
Helen Leung: We actually just recently adopted a new mission, vision, and values statement. So the last seven years, we’ve been known as a non-profit, urban design organization that has worked throughout the LA region focusing on affordable accessory dwelling units, supporting mom and pop businesses, (and) public realm projects that support pedestrians.
Looking ahead and down the road and in the future, we are a community-based organization that works on neighborhood-led initiatives that are in partnership with working class communities of color. So, you’re catching me during this time as our organization is transitioning but as it relates to ADUs, we spent the last couple of years trying to create a model for helping average homeowners become providers of affordable housing.
ADU: What’s the impetus for the shift?
Leung: The impetus for the shift has been in many ways realizing that it’s really hard to invest deeply at a scale we would really like as an organization that’s meaningful for communities when our work is scattered throughout a community and where we don’t have the ability to commit long-term.
In the past, we’ve worked in the valley to Watts to Wilmington. Even though Watts and Wilmington, one could say (they are both) in the South LA area, they’re two very different communities, miles apart … For us, we’ve done partnerships with community organizations there.
But because we’re not based in those neighborhoods, we don’t have the capacity to continue supporting those businesses that we supported on storefront and small-business programs. For us, rather than being one-inch deep, miles wide, we want to go like a mile deep and be focused in a specific area.
So, our featured area of focus will be in northeast LA (within city limits.) I think we will make exceptions and work beyond northeast LA if we have the ability to be supporting working in partnership with working class communities of color.
ADU: Do you get some disenfranchised communities out that way that your organization will be serving?
Leung: I would say that there are many communities within northeast LA that are working-class communities of color. I grew up in one of those neighborhoods, Frogtown. When I was growing up, it was primarily immigrant, working-class families.
There are still lots of residents that are working class in many of these neighborhoods. And it’s really thinking about as there continues to be investment — which there are, public infrastructure investment, private investment and neighborhoods are changing, there’s transit expansion — how can you make sure that residents that have been there for awhile — and they traditionally have been disenfranchised — are able to shape their communities.
ADU: How prevalent are ADUs in working-class and communities of color? How much are we seeing them these days?
Leung: I would say that they’ve traditionally been forms of housing that have existed. I grew up knowing many people that lived in converted garages. So, they existed as a form of housing. But it wasn’t formally recognized in terms of being permit-able, recognized in terms of building and safety records.
With all the new state policy that has been adopted for the first time, a lot of these unpermitted ADUs have the capacity to be permitted.
But I think that it is a challenge for many of these homeowners to bring them up to code because there are rules in terms of utilities and hookups where you can either hopefully slide under the radar and have no one catch you or spend tens of thousands of dollars getting your permits and re-doing your water and electricity.
I think it’s been a challenge to find homeowners who want to do that who are working-class, low to moderate-income homeowners. Because there’s great risk involved.
Even though … LA is a leader in having the greatest numbers of ADUs permitted the last couple of years across the nation … my assumption is that many of the homeowners who’ve gotten permits, those properties are either bought by an investor and flippers who are seeing the value of that and doing that work. Or they’re middle to high-income homeowners who can pay subcontractors, architects, designers, and builders to do that.
The number of ADUs that are perhaps permitted by working-class homeowners, I suspect that there aren’t that many.
ADU: When your organization is first engaging with a working-class homeowner, does it tend to be more that they’re interested in just converting an existing garage? Or is it more a case that they come to you and are like, ‘Hey, my house, like the garage got converted 20 years ago off the books and now I’d like to get this legitimized.’ Which scenario do you see more?
Leung: It’s hard to say. We’ve received over 200 applications for our backyard homes project which is a program that’s available to homeowners located in the city of LA. What is required is that homeowners have to have some sort of financial capacity to pay for the cost of the ADU.
We’ve also created a financial product for those who may not have enough equity to pull out a line of credit that’s pretty progressive in its terms. But homeowners will have to have the funds for it.
The other element, if people are not interested in participating in this program for its social impact, which is the requirement for a homeowner is that they become a Section 8 landlord for five years…we make it clear if you’re not interested in that five-year commitment, then there are lots of other organizations that can support you. But if you believe in being able to share in your property with others and participate in it as a source of affordable housing, then here are all the things that we offer.
I have to frame all that and then after we filter through everyone’s finances and their property specifics as well as their intentions for participating, we see both. We see folks who have space and they can do a new construction ADU. And then we also see folks with an existing garage curious if it can be adapted.
But there has been no one who’s made it to our final stage who has an existing (converted), accessory dwelling unit that’s been converted and is not permitted. I think we had a few in the very beginning but the cost for that was just too expensive for the homeowner. They were like, ‘I already have a bathroom, I already have a kitchen.’ But it wasn’t actually built to code so to bring it up to code would mean a lot greater investment than a homeowner was looking to put in.
ADU: When did your organization develop the five-year Section 8 commit for ADUs?
Leung: We reached out to our housing authority, the Housing Authority for the City of LA, also known as HACLA. We reached out to them because their program falls into two categories.
They work with developers who develop projects that are almost like 100 percent affordable housing. Then they get, those developers, usually non-profit organizations get vouchers for those units they build. That’s one type of program.
The other type is just individual landlords who have units and they sign up. Accessory dwelling units could qualify and it’s individual landlords who say like, ‘I have a property. Please help it get it certified and I’m happy to rent it to a Section 8 voucher holder.’
I mentioned both of those programs. The first I talked about is the project-based vouchers, which is kind of given to a developer that has many, many units. You can imagine like 20 or 30. The other is given to an individual landlord, just think of it as an average citizen who owns a single or multi-family unit property and one or some of those units are going to be Section 8 rented.
What we realized is that what we wanted to do was get the benefits of a project-based voucher, which is like having HACLA treat us like a developer of a handful of scattered-site, single-family units. We broached them with this idea of, ‘Well, we wanted to see if we could create a source of a program that doesn’t force each individual homeowner we work with to go through the process individually.’ There is a view of it being kind of bureaucratic.
HACLA decided about the model and committed to partnering with us as a non-profit organization to monitor the commitment of all of our participating homeowners for that five-year term.
There’s just like plenty of people, sadly tenants who managed to get a voucher but can’t find a landlord (who will accept it.) So, there is an over-abundance of residents looking for a unit and a lack of landlords willing to accept Section 8 on the property…
For us, the five years came from us interviewing and talking to over 100 homeowners, as we did our (work) to create a program and found that five years was what, on average, homeowners were willing to commit to, just given housing as these days the only form of growing equity. For homeowners who have property, they’re mindful about the future uses of it, for their aging parents, for their returning children, to rent to family.
ADU: What do homeowners get in exchange for the five years? Is it just full financing assistance or your firm’s services?
Leung: The homeowners get a project manager, which is our team, for free and they get accessing to our financing product if they don’t have their own sources of financing. Generally, ADUs are built with people’s individual savings or investors and developers having equity to kind of move it around or a line of credit.
But for some homeowners, it just doesn’t pencil out. You can’t take out a construction loan, it’s too expensive, and it doesn’t recognize the future value of the property once the ADU is complete. So, we created a cash-out refi mortgage product that is a form of a construction loan but recognizing the future value of the property once the ADU is complete as well as the revenue. That is compelling for homeowners who don’t have any source of financing.
We’re also the architects and designers and partnering with another non-profit (of) general contractors. So, in many ways, two non-profits we are design-builders together. It means what we try to do is commit to a price point upfront which usually for an average homeowner doing this on their own, they’re going to get some cost from their architect and then figure out what the additional cost will be when they find their general contractor. And it’s not an all-in price point.
But for some of these homeowners, they want to know, ‘How much is this going to cost me all-in?’ before they make that decision moving forward. So, we offer that as well as really competitive prices. Our construction cost per square foot is below the industry average… Having two non-profits that are leading the design build means we’re not trying to upsell homeowners on things and we try to be as transparent as possible.
We also have foundations that have supported our research and development on plans and costs so it’s much more predictable and lower than the private sector.
ADU: I know that ADUs can be $100,000 to do and I would assume that’s just a massive barrier for communities of color. But it sounds like when your organization is able to do it cheaper. Are you able to say how your pricepoint compares to the industry average?
Leung: Our starting pricepoint for a garage conversion if the foundation is structurally sound as well as the structure itself is $100,000 to convert a standard garage. New construction starts for us at $115,000.
I think it really depends. Because there are ADUs that max out at 1,200 square feet and ours are also stick build. We haven’t seen modular efforts be as competitive. But I think we average around $250 per square foot.
Using per square foot is really hard. A smaller unit, there’s always going to be the baseline $60,000 at least of your utilities and foundations that still need to be paid for no matter how big your ADU is. I would say on average, the ADU building industry will look at our pricepoint and go, ‘Okay, that’s very competitive.’
ADU: How vital has the reining in of development impact fees by the California State Legislature in recent years been for the work you do?
Leung: It makes a big difference. In Los Angeles, there were going to be Quimby fees, which is for an average smaller ADU would have been $6,000. When you’re trying to get your ADU as low as possible, $6,000 makes a difference…
ADU: The work that your organization does, how important is it to you to make ADUs more accessible for working class and communities of color?
Leung: I think that’s why we created the program because we found that the ADUs that are being developed are done by middle to high-income homeowners or flippers and developers. We wanted to create a program that would just lower the barriers to entry and minimize the risk that the homeowner embarks on in some ways as a developer when they try to build their own ADU.
The Section 8 component was one way of not being able to come up with our own monitoring system, but to say that there would be automatically some level of social impact because people who apply for and end up being eligible for Section 8 are most likely working-class communities of color.
And then, when we think about how we created the program, our hope is that because of the combination of being a design builder and having a financial product, we hope that homeowners happen to be working class, communities of color.
But there’s so much requirements financially and property-wise that we found that there were initially so many lower income homeowners that were really excited to participate but even with our financing product, it financially doesn’t make sense. It’s too high of a risk. And unless they had $30,000 of free money, the loan-to-value ratio, the debt-to-income ratio just didn’t work out.
Ultimately with housing as an investment, equity-generator that is still financially a big investment, it makes it hard (for working-class, communities of color.) We hope that the way we designed the program created greater access but it really all depends on like which homeowners are at that financial baseline to move forward.
One big thing we realized is that if we really want to support low to moderate-income homeowners, there has to be more than what we’re currently offering. There should be additional financial subsidy and additional financial support and the county has been exploring that as a model.
The city of Oakland looked at our model and the mayor of Oakland said, ‘We want to do that, and we want to spearhead it and we want to put money to support that. We see it as a racial equity initiative.’ So that’s been really exciting to have other (people) look at our model and go, ‘Okay, how do we adapt it to work for us.’
ADU: For northeast Los Angeles where your organization focuses, if you help ADUs become more popular there, what could you see it doing for the community? What sort of things are you hoping for?
HL: Currently our program… the idea is that rather than have tenants and homeowners be dispersed throughout the city, being able to have homeowners and tenants be concentrated in one geography means some economies of scale, some effective capacity-building, and the ability of homeowners to influence and inspire others to do the same. For tenants right now who are Section 8 voucher holders, to be part of the community.
Down the road, one thing we have heard time and time again is the desire for people to build for their families — for their family members who could have a Section 8 voucher or would be eligible. Right now, federal rules don’t allow Section 8 vouchers to be given to family members.
As we continue to hear from people that are interested in this idea of affordable housing that is in your typical smaller, single multi-family communities, we’re curious about, ‘Well, how can we continue to provide a place of inclusivity as neighborhoods are gentrifying, property values are going up.’
The way that this works is that property values go up. We want to see property values go up. But usually, when property values go up, it has negative implications for working class communities who are … renters that get displaced.
We want to proactively come up with a model and a collective of models that really center the voices of working-class residents whether they’re homeowners or tenants so that there is a place, there is an option to stay in their community, and build equity in their community to be able to share and support their neighbors.
*This interview has been edited for length and clarity.