Could We Boost Housing Construction by Permitting ADUs Under the HUD Code?
To boost housing construction, some jurisdictions have adopted a new strategy: allowing the construction of Accessory Dwelling Units, or ADUs. ADUs, sometimes called “granny flats,” are small, secondary housing units built on the lots of existing single family homes – things like garage lofts, basement apartments, and small backyard cottages.
ADUs aren’t a silver bullet, but allowing them can unlock a non-trivial amount of housing construction. In 2016 California passed laws requiring jurisdictions to allow ADUs, which resulted in nearly 50,000 new housing units being built in five years.
But ADUs are expensive to build. Though generally cheaper than a new single family home because of their small size, they still often cost several hundred thousand dollars to build. A 2017 study of ADU construction in Portland, Seattle, and Vancouver found that an ADU cost $156,000 on average, or $250 per square foot (for comparison, the average cost per square foot of a new west coast single family home in 2017 was $186). This article found similar results for ADUs built in Portland between 2016 and 2019. Most ADUs are built by the owner of the lot, and financing a purchase of that size is difficult for most homeowners. The 2017 study found that most homeowners either paid cash, or had to borrow against the value of their existing home to get it built, and that paying for the ADU was by far the biggest challenge of building.
If you could reduce the cost of building an ADU, more of them would be built. One potential strategy to reduce cost is to simply use a different building code. ADUs will typically be built under whatever code governs residential construction in the jurisdiction in question. Generally, this means some flavor of the International Building Code or the International Residential Code. But what if instead ADUs were prefabricated, and built under the HUD code for manufactured homes?
As we’ve discussed before, manufactured homes, also known as trailers or mobile homes, aren’t built to the requirements of local building codes. They’re built to a national standard, the Manufactured Home Construction and Safety Standards, which is administered by HUD (and is often called the HUD code). The HUD code’s definition of a manufactured home could very easily apply to an ADU.
Manufactured home means a structure, transportable in one or more sections, which in the traveling mode is 8 body feet or more in width or 40 body feet or more in length or which when erected on-site is 320 or more square feet, and which is built on a permanent chassis and designed to be used as a dwelling with or without a permanent foundation when connected to the required utilities, and includes the plumbing, heating, air-conditioning, and electrical systems contained in the structure.
As long as it is transportable on a permanent chassis, and at least 320 square feet, an ADU (potentially) qualifies as a manufactured home, and could thus be built to the requirements of the HUD code.
There’s a lot to like about building ADUs to HUD-code standards. The HUD code is simpler, less burdensome, and less prescriptive than the IRC/IBC – the HUD code is about 119 pages long, whereas recent versions of the IRC are about 1000 pages.1 Minimum requirements for things like bedroom size, ceiling height, and hallway width are lower. Moreover, the HUD code contains allowances for “Alternative Construction” methods that could make it easier to deploy innovative building technology (the IRC and IBC contain similar “escape hatches,” but I suspect the HUD code might be easier to take advantage of). And the HUD code is a national code: once you’ve met its requirements, theoretically your prefabricated unit can be built anywhere in the US, instead of needing to adapt it for local jurisdictions (in practice this isn’t quite true due to things like different jurisdictional aesthetic requirements, climate requirements, and wind forces, but it still allows much more standardization than using conventional codes).
But most importantly, HUD-code homes are typically much cheaper on a per-square foot basis than conventionally built homes. In 2022, the median cost-per-square foot of a new single family home in the US was $158, compared to around $80 for a new, single-section HUD-code home. ADUs, by contrast, are often much more expensive than typical single family construction on a per-square-foot basis. The previously mentioned studies found an average cost of $258 per square foot and $305 per square foot.
The high costs of ADUs seem to be in part due to spreading the fixed costs of construction over a small number of square feet. But manufactured homes seem to be able to get around this and build small homes cheaply. In fact, manufactured homes get cheaper as they get smaller, because they eliminate the complexity that comes from having multiple sections that must be attached together. The average cost per square foot of larger, double-wide manufactured homes is about 20% higher than a single-section manufactured home. ADUs, which are typically less than 1000 square feet, are essentially perfectly sized to be built cheaply under HUD code standards.
This suggests that by building ADUs under the HUD code, we could dramatically reduce their cost, and many more of them would be built.
HUD-code homes are often prevented from being built in residential areas via various zoning restrictions. But since ADUs already require zoning changes to allow them, it seems like it would be relatively straightforward to add some “and they can be built to HUD code standards” language to whatever laws passed to allow them.
I didn’t come up with this idea, but it was very compelling when I first heard it. And it's so compelling, in fact, that it's already happening. California (which is home to around 30% of the US’s ADUs) allows HUD-code homes by right on any residential lot, and several California ADU manufacturers build ADUs under the HUD code, touting the benefits of lower labor costs and faster installation.
Unfortunately, the cost savings I expected don’t really seem to have materialized. The average cost per square foot of California Backyard Homes’ HUD-code ADUs is about $185 per square foot, a number I suspect does not include things like site work and installation. Villa Homes HUD-code ADUs are also around $180 per square foot on average for the base model, which more than doubles once you include installation and site work. This manufacturer gives an example of $322 per square foot for a HUD-code ADU they built, and Crest Backyard Homes are also over $300 per square foot on average, though both these prices include site work and installation. These costs are about 50% more than the median cost-per-square-foot of a new West-Coast home in 2022, and more than 4 times the average cost-per-square-foot for a new single-section manufactured home in California in 2022.2
Why aren’t HUD-code ADUs as cheap as HUD-code manufactured homes?
The price difference is probably partially due to differences in site work costs. Multiple HUD-code ADU builders seem to have site work as around 50% of the total costs of an ADU. Most manufactured homes are placed on temporary foundations, and are titled as personal property, rather than real estate. To get one titled as real estate, you must (among other things) build it on a permanent foundation, which adds cost. It's also possible there’s a variation of the “building renovation” cost issue going on: doing work on an existing site is often a fundamentally expensive proposition. Access is limited, your work must adapt to already-existing elements that may not have been well documented, etc. Still, I find this 50% site work costs confusingly high.
Another component may be using nicer materials and finishes. Villa Homes, for instance, lists the many ways that it exceeds the minimum requirements of the HUD code. People who build ADUs will generally be high-income (since they have a yard large enough to fit a second house, and the money/financing to build it), and they’ll want things like more expensive finishes. Site work costs probably tie into this as well, as ADUs have fancier, more expensive landscaping than a conventional manufactured home would.
And part of it is due to scale effects. While normal manufactured homes get cheaper the smaller they get, this apparently stops being true once you’re within the confines of what can be shipped as a single section, about 1000 square feet. Below that, cost per square foot rises as the unit gets smaller. When looking at the prices of individual HUD-code ADUs, there’s a fairly linear relationship between cost per square foot and size.
Building ADUs under the HUD code still seems like a good idea to me – for jurisdictions changing their zoning to allow ADUs, there’s no real reason not to do it. But I’m not optimistic that it would dramatically reduce the costs to build them. Reducing the financial burden of building an ADU will thus require other strategies.
Depending on your perspective, this lower stringency might be a drawback. Energy efficiency requirements, for instance, are much less strict in the HUD code than the current version of the IRC/IBC.
The census of construction unfortunately does not go more granular than region for single family home construction costs.
Very interesting article.
One fact that I did not notice is that the price per square foot for houses includes land costs. In places like California the cost of land is the dominant cost in buying a house. If ADUs are more expensive per square foot even with basically free land, that is extraordinary. I never would have guessed it.
That is a very serious problem for ADUs, even if they adopt the HUD standard.
Sure, that is ONE way to relax land use restrictions and outdated building codes, but let's not overlook others. Just let developers build what increases land values.