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A new California housing law may offer an opportunity for 'sharp-minded entrepreneurs' to make money

California is experiencing a major housing shortage, but backyard rental units could provide a solution.

There's now a huge market in California for affordable, pre-fabricated backyard homes. Pictured: CityLAB-UCLA and Kevin Daly Architects designed this environmentally friendly ADU prototype called the Backyard BI(h)OME.

America is in the throes of "the new housing crisis."

New-home construction is lagging behind demand and home prices are surging in many of the nation's most desirable locales, pricing out first-time buyers.

In California, the nation's most populous state, the effects of the crisis are especially dire. Rents are crazy-high — up to $4,170 for the median rental in San Francisco — homeownership is at a record low, and overcrowding is more than twice the national rate.

But California has come up with a possible solution to its affordable housing shortage.

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A new state law, authored by California Sen. Bob Wieckowski, enables homeowners to build rental units on their property, whether through garage conversions, as a home attachment, or as a new, standalone structure. These types of residences are formally known as Accessory Dwelling Units (ADUs) and colloquially as "granny flats."

Previous versions of California's ADU law were marred by costly barriers, like exorbitant water and gas hookup fees, often put in place by local governments. Because of strict city regulations in Los Angeles, only 644 ADUs had been approved there between 2003 and 2016 (there are estimated to be about 50,000 unpermitted units across the city).

"I see a huge latent market now that we've removed the roadblocks, removed a big dam ... now it's a matter of homeowners rushing in behind and starting to build these," Matt Regan, senior vice president of housing policy at the Bay Area Council

The research team at CityLAB at UCLA believes ADUs are a logical next step in the evolution of modern cities.

Cuff says ADUs are part of a "postsuburban city," in which homeowners can benefit from cash flow from renters or space for nannies, caretakers, and aging parents. Her research suggests they're feasible for 5% to 10% of the 500,000 single-family lots in Los Angeles under the new law, enough to make a dent in Mayor Eric Garcetti's goal for 100,000 new housing units by 2021.

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