Backyard cottages and in-law apartments breathe new life into existing homes.

It’s a new life that lets multi-generational families live together, seniors age in place, and owners on fixed incomes stay in their homes. Tucked into or alongside existing houses, these small homes—collectively termed accessory dwelling units (ADUs)—can meet evolving household needs and help families of all kinds find greater housing security. And by converting empty yards, basements, and attics into valuable living space, ADUs save modest, older houses from replacement by supersized McMansions.

Washington has a chance to let thousands of homeowners across the state breathe this new life into their homes. Last week, both houses of the state legislature advanced a bill that has the potential to be the most pro-ADU reform ever passed by a US state.

As lawmakers brush off the notion that re-legalizing small cottages is a dangerous new idea—rather than a return to the perfectly normal wisdom of our grandparents—let’s try to count the ways ADUs help hold families and communities together.

ADUs generate rental income, helping homeowners make ends meet

Rental income from an ADU can provide a relief valve for homeowners struggling to pay the bills. Throughout Cascadia, homeowners most burdened by housing costs include seniors, low-income families, and households of color. Almost one in three senior homeowners, and nearly 40 percent of Black homeowners, in Oregon and Washington spend over 30 percent of their income on housing.

Most owners put their ADUs on the long-term rental market, grossing an average of $15,600 per year. Twelve percent opt to use them as short-term rentals, mainly through AirBnB and VRBO. Airbnb estimates that short-term rentals bring in an average of about $11,000 per year in Portland and Seattle, though that figure may underestimate the income-potential of ADUs because the average includes low-rent shared rooms.

The flexibility to switch between long- and short-term rental gives owners additional financial security that helps defray the risk of investing in ADU construction. For example, an owner with a routine need to temporarily accommodate relatives can still earn income at other times by filling in the gaps with short-term rentals. Taking way that flexibility by banning short-term rentals in ADUs inhibits owners from building them—especially owners with limited financial resources.

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  • Loan payments, operating costs, repairs, maintenance, insurance, and taxes can take a big chunk out of rental income, perhaps as much as 50 to 75 percent. What’s left over for the owner depends, of course, on the specifics of the ADU in question. Most ADU owners can expect to net perhaps $3,000 to $8,000 per year.

    ADUs give seniors options to age in place

    Seniors increasingly report a desire to age in place—an aspiration jeopardized by housing expenses. Many seniors live on fixed incomes, and rising costs such as property taxes can push their budgets beyond the breaking point. Rental income from an ADU can mitigate that squeeze. Nearly 60 percent of senior AirBnB hosts report that the supplemental income from AirBnB allowed them to stay in their homes, including 13 percent who say it helped them avoid foreclosure.

    ADUs also give aging owners the option to downsize out of their house while continuing to live on the same lot, in the same neighborhood. Owners who no longer need all the space in their house but don’t want roommates either can move into an ADU that provides them a private space, while it frees up the main house to generate rental income—usually much more rent than the ADU would have brought in.

    What’s more, for seniors with health issues, ADUs can provide a home that’s physically accessible and private yet just steps away from support in the main house—whether that’s a relative or a professional caregiver. ADUs can even be custom-designed with on-site medical equipment. MEDCottage, in North Carolina, rents backyard cottages with wheelchair accessible showers and toilets, rail systems, and padded floors, for as little as $750 a month.

    ADUs accommodate extended families

    Some families want a backyard cottage or in-law apartment not as an income source, but as a means to live together. Nearly one in five US residents lives in multi-generational households. Such households might consist of grandparents who enjoy being around grandchildren, adult children starting out in a first job who haven’t yet established financial independence, or non-related housemates combining resources. Participants in a 2018 survey of Seattle low-income households said their top reason for wanting a backyard cottage was to house family and friends at risk of being priced out of their homes. ADUs not only offer members of these unconventional households better housing security, but also the combination of privacy and proximity.

    The caregivers for seniors aging in place, as discussed in the previous section, are often sons or daughters wanting to keep parents nearby but also give them their privacy. Likewise, ADUs can be a good option for people who have relatives with physical or developmental disabilities and who want to provide them with a supportive home right next door. Marc Cote of Parkview Services, a nonprofit that provides housing for low-income people with intellectual or developmental disabilities, says that backyard cottages provide the perfect balance of accessibility and privacy for many of their clients, but that local restrictions often prevent his organization from building them.

    ADUs ward off the McMansion wrecking ball

    Some people worry that the opportunity to create ADUs could accelerate the demolition of older, relatively affordable houses to make way for expensive new homes. However, a City of Seattle study found the opposite: liberalizing ADU rules would reduce teardowns. Here’s why: when owners can add ADUs, it gives them a way to create new value on their properties without having to sacrifice the value of an existing house by tearing it down. Further, the Seattle study found that teardowns would also be less likely in low-priced neighborhoods with a high risk of displacement. When cities make it easier to build ADUs, it’s a win-win: fewer modest homes demolished, and more ADU homes that offer a cheaper alternative to detached houses.

    ADUs alleviate displacement

    Lastly, ADUs can reduce displacement and help stabilize communities for the basic reason that they provide more homes. Every added ADU home makes room for another family, and that takes pressure off the rest of a city’s housing stock, helping to ease prices and rents across the board. In growing cities with a shortage of homes, rising rents are by far the main cause of people losing their homes. What’s more, ADUs never cause physical displacement—homes lost to demolition—because they are added to existing houses. In fact, as noted in the previous section, ADUs can actually help reduce teardowns.

    Accessory dwellings: the little homes that could

    ADUs could help seniors age in their community. They could let families live intergenerationally. They could provide stability and security for homeowners. And they could curtail citywide displacement while reducing house teardowns. All told, ADUs could strengthen communities  grappling with a housing crisis in cities large and small.

    The key to turning “could” into “can” is getting rid of misguided local restrictions on ADUs that stymie their construction. Washington lawmakers have a chance to do just that by adopting statewide reform that would make it easier for homeowners to build ADUs.