As our cities get more and more crowded, more and more buildings are popping up to house an influx of newcomers, but it just doesn’t seem to be enough. Many cities have come up with an abundant of “creative” ideas to increase their housing densities to pack more people into less space in a sardine-like fashion. One seemingly golden front runner was the idea of building a DADU (Detached Accessory Dwelling Unit), or rather, a second small DETACHED structure on a single residential lot. I get a LOT of phone calls from eager homeowners in love with the idea of more habitable space (and possibly rental income) from this golden ticket of an opportunity. Before you get all excited about your man cave, art studio, rental, storage space, etc., I need to fill you in on a caveat that may unfortunately dash your dreams before you start.
Typically, when my clients get ready to build, they might pull a little money from savings, a home equity line of credit, their mattress, etc. Many times, however, the bulk of the funding is from a construction loan. Hold on to your hats… Unfortunately, most banks are currently unwilling to fund DADUs. (Did you feel that huge punch to your gut?) Even if you have a good income, good credit, hell- even if you have an uncle who is a banker… It is still unlikely you will be able to get a loan at most banks for a DADU. There has recently been some rumbling at a few local credit unions about making changes, but you will have to do some homework and call around to know for sure. Here's the thing: While cities like Seattle could benefit greatly from the many benefits of allowing DADUs, they are currently only a regional phenomenon, so there is little national data that can be used to determine their resale values. You see, bank rules are generally created on a national level, not on a local level, so banks are very reluctant to assign DADUs with anything more than a nominal value. When trying to get a construction loan, banks use a projected appraisal amount of the finished structure to determine the loan amount. Being that they view the value of your DADU as being on par with your child’s doll house, they just aren’t going to fork over the cash. As a result, unless you have a mattress full of money, enough equity in your current home to cover the cost of construction, or a magic wand, you may have to re-think how to get that art studio you are dreaming about.
Even though we architects are professional bearers of bad news, I won’t just dump this on you without also sharing an alternate way of getting the spaces you need. If you simply take those same desired spaces and ATTACH them to your house, then you can change that fun acronym from DADU to ADU (you guessed it…. Accessory Dwelling Unit) and get your man cave. (I personally think it should more suitably be called AADU (Attached Accessory Dwelling Unit), but that doesn't roll off your tongue with quite the same ring to it.) Banks just look at ADUs as regular additions or remodels for which you can typically get funding. Chat with your favorite local architect to find out how you can get the spaces you need.
There is one other bit of info you should know. SPARC (The Small Practice and Residential Committee) is currently working with some local lenders and the Seattle City Council to come up with a feasible way to get homeowners what they need to make their DADU dreams come true. I am a member of SPARC, so stay tuned. I will bring you updates as they become available.