California multifamily building owners have embraced accessory dwelling units (ADUs)

Changes in state law have made accessory dwelling units the fastest-growing sector of California’s housing market, and multifamily owners have embraced the trend.

National REITs like Avalon Bay Communities and local investor-operators have completed many ADU projects, are pleased with the results, and plan to keep building more. Multifamily owners have turned carports, greenways, storage spaces, and laundry rooms into entry-level apartments, sometimes in less than a year from conception to completion.

The ability to build more ADUs faster is thanks to new laws that remove barriers to construction and prefabricated off-site construction methods that enable faster timelines. AvalonBay has added about 50 ADUs into some of its California communities. 

The average 425 sf studios and junior one-bedrooms units fetch between $4 and $8 per sf in rent. On average, the units have been rented out within 30 days, and there have been minimal concerns from existing tenants.