top of page
  • Writer's pictureRealFacts Editorial Team

Accessory Dwelling Units Outpace Single-Family Homes in San Diego

Granny Flat in San Diego

The landscape of housing construction in San Diego County is undergoing a significant transformation, revealing a burgeoning trend that could reshape investment strategies. In 2023, building permits for accessory dwelling units (ADUs), also known as Granny Flats, outpaced those for traditional single-family homes. This shift marks a pivotal moment for real estate investors looking to capitalize on emerging opportunities in the housing market.

Record-Breaking Permit Issuance

Last year, San Diego County experienced a housing construction boom with nearly 12,000 building permits issued—a 21% increase over 2022, according to the San Diego Union-Tribune. This surge represents the largest building spree in the county in 17 years. Notably, the lion's share of these permits, totaling 9,100, was for multifamily buildings, including apartments, condos, and townhouses. However, the most striking development is the rise of ADUs.

Accessory Dwelling Units Surpassing Single-Family Homes

The Construction Industry Research Board's recent data reveals that 1,348 accessory dwelling units were constructed across San Diego County in 2023, compared to 1,225 single-family homes. This trend underscores the growing popularity of ADUs as a solution to increase housing density in single-family neighborhoods. ADUs offer a flexible, cost-effective way to address the region's housing shortage, making them an attractive option for homeowners and investors alike.

Legislative Support and Market Potential

The rising trend of ADUs is further bolstered by supportive legislation. For instance, San Jose has embraced a new state law, AB 1033, which allows homeowners to sell ADUs as separate condominiums from the primary house on the property. This ordinance, effective July 18, enables a new market for these smaller, denser units, facilitating the creation of thousands of new affordable homes. California homeowners added nearly 23,000 ADUs to their properties in 2023, the highest number ever recorded in a single year in the state.

Investment Opportunities

1. Increased Rental Income: ADUs provide an additional revenue stream as rental properties. Their smaller size and lower construction costs make them an affordable option for tenants, ensuring high demand.

2. Property Value Enhancement: Adding an ADU to a property can significantly boost its overall value. As these units become more popular, properties with ADUs may command higher prices.

3. Affordable Housing Development: Investing in ADUs aligns with the state's push to create more affordable housing. Investors can leverage this demand to develop properties that cater to a broader market segment.

4. Flexibility and Scalability: ADUs offer flexibility for both homeowners and investors. They can be used to house family members, serve as rental units, or be sold separately, providing multiple investment strategies.

Strategic Considerations

- Market Research: Understand the specific regulations and market conditions in different cities and counties. Each locality may have unique rules and opportunities related to ADU construction and sales.

- Partnerships: Collaborate with local builders and contractors who specialize in ADU construction to streamline the development process and ensure compliance with local building codes.

- Financing Options: Explore financing options tailored for ADU construction. Many lenders now offer loans specifically designed to support the development of these units.

- Long-Term Planning: Consider the long-term potential of ADUs as part of a diversified real estate portfolio. The demand for affordable housing is likely to remain strong, making ADUs a sustainable investment choice.


bottom of page