The Genius of Granny Flats
Why San Diego should liberalize the granny flat ordinances
“If the city did just a couple things—liberalize the granny flat ordinances to allow them in most places, and allow slightly higher densities, they could take a giant chunk out of the housing deficit,” says Gary London, president of The London Group Realty Advisors. “The granny flat would be an incredible boost. It’s a relatively simple and unobtrusive fix. But the pushback is that adding them causes more parking and congestion on the streets. It’s such a minimum add that I think it’d be a small pill to swallow to accommodate the need.
“By the way, I’m sitting in a granny flat right now. But I use it as a gym, home office, and entertainment area.” London’s is a 900-square-foot space above his three-car garage in Point Loma, with stairs to his “skybox,” which includes a fire pit and a 250-degree view of the ocean. The city wouldn’t permit him to rent the space out—however, neither do they check up on what people do with their property after receiving their permit. “Most people would cheat.”
Granny flat renters tend to be very old or very young, and owners can use the revenue to supplement their mortgage. “It’s smaller and cheaper and appeals to people who have downsized, and it’s a great affordability solution for young families living in the home in front,” he says. “But the city isn’t there yet.”
The beauty of it is, your costs are generally fixed while your rental rates go up over time.
In late January, Councilmember Scott Sherman, the new chair of the Smart Growth and Land Use Committee, held a housing summit and proposed a more liberal policy. “Easing the current restrictions on granny flats provides a great opportunity to increase housing supply,” Sherman says. “With more families taking care of aging parents, and young adults staying longer in the household, granny flats can help provide the answer to help keep the family together.”
When the city does get on board, owners should do their research and crunch the numbers in each scenario.
Being a landlord for a full home is much more difficult. “You’re still going to have annual expenses: property tax, maintenance costs, possibly hiring a property manager and paying them 8 to 10 percent, and any type of association fees,” says Ryan Hughes, the owner of Bull Oak Capital, a financial planning firm in Little Italy.
Hang on to your home and build a granny flat if you can afford it and secure the permits. “The beauty of it is, your costs are generally fixed while your rental rates go up over time.” He cautions, though, to make sure you know what the rental market looks like. Start with Zillow or Redfin and figure out the average rental price in that neighborhood. Also, think about where you’re renting—are there renters? “Places like Chula Vista are good because a lot of military service members are looking to rent there.”