Australia’s ‘Granny Flats’ Provide U.S. Investors an Alternative


Australians are replacing old-style custom houses with modern residential units known as granny flats that celebrate the individuality of urban homeowners.

Sydneys Classic Granny Flats builder group is credited for the new concept and the construction of the first granny flats in Perth.

Its philosophy is quite simple: More people will be interested in owning an apartment if they can co-design so it is manufactured according to their specific esthetic and cost requirements. More individual investors also would be interested in single-rental financing and ownership.

In Austin and elsewhere around the U.S. granny flats are frequently called Accessory Dwelling Units, ADUs, or even garage apartments, says Michael Gatto,executive director of the Austin Community Design and Development Center, a Texas-based company that constructs and finances such housing units.

ADUs are a great way to increase the supply of housing in urban areas without disrupting the existing neighborhood fabric, since they may be developed in the backyards of existing single-family properties.

His organization is collaborating with the University of Texas Center for Sustainable Development and the Guadalupe Neighborhood Development Corp. to implement the Alley Flat Initiative.

The initiative offers a new sustainable, green affordable housing alternative for Austin residents, he says. Austin’s extensive network of “Alley Flats” provides small, detached residential units planted on underutilized alleyways.

Three units have been built to demonstrate how sustainable housing can support growing communities by being affordable and adaptable, and fully compliant with the Austin Energy Green Building Program SMART, according to Gatto.

The long-term objective of the Alley Flat Initiative is to create an adaptive and self-perpetuating delivery system for sustainable and affordable housing in Austin that align efficient designs with innovative methods of financingand home ownership.

Data show the property tax increase associated with the development of an Alley Flat is more than offset by the rent it generates, even at the most affordable rates, he says.

At least in Austin interest for Alley Flats is growing. ACDDC also has partnered with a local entrepreneur to create a similar program called YardHomes Austin that offers development assistance to property owners who do not have the cash to build an ADU.

In this case, Gatto says, YardHomes Austin will lease a portion of the land in their backyard to build a rental ADU for a term of 35 to 40 years, after which the unit is returned to the owner. In the meantime the property owner will receive ground rent and a property-tax pass through.

This option is best suited for homeowners who are land rich, but cash poor, many of whom, reside in neighborhoods experiencing high rates of displacement due to Austins rapid growth.

Currently ADU development is under way in Boulder, Colo., Seattle and Santa Cruz, Calif., and in Vancouver and elsewhere in Canada where they are called laneway houses, while more people in Los Angeles, Houston and Denver are showing interest in ADUs, according to Gatto.

The issue with this type of housing development is principally one of zoning, says David Smith, CEO of the Boston-based Affordable Housing Institute and chairman of Recap Real Estate Advisors. Its what I call the tyranny of the white-picket-fence zoning.

Recent legal developments in Australia are interesting because they changed national zoning law to facilitate construction, he adds.

New legislation passed by Australian legislators in August 2013 expanded the potential demand by allowing owners to rent granny apartments, amending an earlier law that did not allow owners to rent out to non-family members to generate income to pay the mortgage or for other personal purposes.

Granny flats in Perth represent a housing revolution that is changing the outlook of dwellings in Australia, according to company executives and local media reports. Trends may keep changing but the designing of these residential units is the distinctive kind that will be evergreen.

These integrated apartments are custom designed by a team of expert architects that offer modern layouts and stylish interiors and exteriors. The construction team uses quality raw materials, such as robust bases, tensile walls, wooden flooring and solar panels provided by vendors operating in Australia.

For example, Australian Garden Apartments, another Sydney-based builder with 25 years of market experience, offers flexible architectural designs for custom made flats that under Australias Granny Flat planning policy can be approved and ready to build in as little as 10 days.

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