California’s ongoing housing crisis continues to draw a great deal of attention and focus from a variety of quarters. Governor Newsom has made addressing this situation a significant piece of his 2019-20 budget.
Recently, a Southern California startup company has come up with a novel approach to dealing with this situation, by attempting to transform certain garages into living spaces en masse. Steven Dietz, a former venture capitalist who co-founded Upfront Ventures, has now moved into the role of entrepreneur as the CEO of United Dwelling, a business dedicated to turning a significant portion of the approximately 250,000 detached two-car garages located within Los Angeles County, a vestige of California’s postwar car culture, into ADUs.
United Dwelling’s business model is to bring efficiencies and economies of scale to the work of making rental ADUs out of garages. By leveraging Dietz’s access to capital, the company can mobilize the cash needed to fund the leasing of underutilized garages and the construction costs of building ADUs out of them on a large scale; then, by leasing out these units on behalf of the homeowners, the company can generate sufficient revenues to make a profit as well as provide homeowners with a stream of income about as large as they would have enjoyed had they taken on the conversion projects themselves.
To market these rental ADUs to low-income households, United Dwelling plans to build them in areas within a half mile of public transportation or ride-share pickup locations, which would also reduce parking demand, given that ADUs don’t require parking under state law. To further advance the goal of making these new ADUs affordable to those who are homeless or at risk of becoming homeless based on their economic situation, United Dwelling will also rent these units out at below-market rates and will accept Section 8 housing vouchers.
In order to make its approach attractive to homeowners, United Dwelling will share about $6,000 of the annual rental income with them, which should more than offset the homeowners’ anticipated increase in annual property taxes of about $400. To further sweeten the pot, United Dwelling will handle property management and maintenance of these units. By the end of 2019, Dietz is hopeful that he will be on a pace to start twenty conversions a week. “That’d be a thousand a year, which is a drop in a bucket compared to the six hundred thousand the city needs,” he said. It will be interesting to see what United Dwelling will be able to accomplish by year’s end.
Leave a Reply