Modal Living: Discussing Barriers to ADU-Friendly Regulation and the Benefits of Having an ADU
Our Chief Operating Officer, Colin Jube explains how Modal is showing up to solve problems and change the game in the modular construction and affordable housing industries. He also goes over how legislation is currently changing in many states to accommodate ADUs and Modal’s current modular home offerings.
Who is Modal?
Modal is on the cutting edge of two of the most exciting and important industries of this generation, modular construction, and affordable housing. Modal is a modular builder of accessory dwelling units. Accessory dwelling units, for those of you who are unaware, are commonly called ADUs. They're detached backyard guest homes.
Breaking Barriers to ADU Regulations and Seeing the Benefit
Demand for these ADU structures in recent years has skyrocketed. Demand for ADUs is twofold. It's coming from both regulatory agencies and consumers. At its core, the demand for ADUs is driven by the affordable housing crisis. State and local governments are increasingly interested in passing friendly ADU legislation as a solution to the affordable housing crisis. For example, in 2017, the state of California effectively mandated that every single-family home in the state be allowed to place an ADU in the backyard.
The reason that state and local governments are so interested in ADUs is that they're one of the few sustainable and unsubsidized forms of affordable housing on the market today. This is due to multi-generational living situations which drive the average rent of an ADU down to 40% below the market. California is certainly not the only state that is looking at this type of legislation. We are seeing a wave of ADU-friendly legislation all over the country from Washington to Oregon, Utah, Nevada, Texas, and on. A wide range of state, city, and county governments all over the country are increasingly seeing ADUs as a real affordable housing solution.
Now, from the homeowner's perspective, an ADU makes sense on multiple levels. It's an efficient use of previously unused backyard space, and typically, ADUs pay for themselves very quickly. Nearly 70% of our customers are renting out their ADUs to generate additional income. Our customers are seeing substantial additional income to the tune of anywhere from $500 to $2,500 a month of additional cash flow after the financing costs of their ADU.
ADUs generally are increasing the value of the property they sit on by two and a half times their cost over a 10-year period. For those of our customers who are not investors, not looking for additional income, we are seeing a really creative and wide variety of uses for these units, anywhere from home offices, to workout studios, to these multi-generational living situations. We've got parents who are allowing college-aged children to live in the backyard at little to no cost. We're seeing aging parents moving in with their family members as an alternative to expensive assisted living facilities.
Regardless of the use, ADUs make sense on a wide range of levels for homeowners. Additionally, we've seen COVID-19 transform the way we work and live. COVID has accelerated work from home trends that were already happening prior to the pandemic and we've seen an improvement in our sales because of those trends.
The Services Modal Provides are Here to Alleviate the Stress of Buying an ADU
Despite the friendly regulatory environment, if you're a homeowner looking to actually place an ADU in your backyard, it is really difficult, costly, and time-consuming to do so. For those of you who have built a custom home, you know exactly what I'm talking about. Navigating this process from city permitting, to hiring, vetting, and managing contractors, architects, and engineers can quickly become a full-time job. Cost and budget overruns can spiral out of control and it can become a real headache for homeowners.
Modal’s solution to this problem is to provide high-quality modular products that deliver budget and timeline transparency and predictability in addition to a full turnkey service where our team manages the entire process from start to finish for our customers.
Modal's products include a standalone office pod 119 sq ft in addition to three dwelling structures. Our studio, one-bedroom, and two-bedroom units include a full kitchen and bath and are built in a factory.
Prior to signing a purchase agreement, our customers go through an extensive feasibility study to determine the cost and timeline and the site's specific conditions in the real 'boots on the ground' points that are needed in order to determine if an ADU is feasible. We do this on the front end so that by the time our customers sign a purchase agreement, they have confidence and know what they're getting into. They know what their project is going to cost and they know how long it's going to take to deliver.
From there, our experienced project management team handles the entire process from permitting all the way through to delivery. Our sales process is designed to reduce friction at every step of the way, and again to make purchasing and obtaining an ADU as easy as possible for our customers.