Los Angeles County is becoming the epicenter of a booming trend in Accessory Dwelling Unit (ADU) construction. Amid a worsening housing shortage and skyrocketing rents across Southern California, demand is exploding for homeowners to convert existing structures or build new ADUs for immediate rental income or future leasing opportunities.

According to the Los Angeles Times and California Department of Housing and Community Development statistics from August 13, California’s housing inventory grew by 0.84% last year, reaching 125,000 units, with ADUs accounting for one-fifth of this increase. The number of ADU construction permits issued in LA County has risen dramatically: 2018: 12,788 permits
2019: 19,311 permits
2020: 22,810 permits
2021: 32,045 permits
2022: 41,136 permits
2023: 45,732 permits

In just five years, the number of permits has surged 3.5 times. LA County stands out with a higher per capita ADU permit rate compared to other California counties, issuing an average of 22 permits per 1,000 homes between 2018 and 2023.The San Fernando area, in particular, has emerged as a new hub for ADU construction in LA County, setting a trend in California’s housing landscape. Over the past five years, San Fernando issued 70 ADU permits per 1,000 homes—more than triple the county average. Other top-performing areas include Rosemead, Temple City, Sierra Madre, and parts of the City of Los Angeles.

ADUs encompass not only new constructions on separate lots but also conversions of existing structures like garages or additions to homes. In San Fernando, two-thirds of ADU permits were for conversions or expansions. Low- and middle-income homeowners often pursue ADUs for rental income, while higher-income owners use them to create additional living space for family members.

The ADU boom in California is driven by the potential for homeowners to generate rental income and increase property values, while tenants benefit from expanded housing options. This alignment of supply and demand fuels the trend. Although some ADUs remain vacant or are used for family housing, limiting their immediate impact on the housing shortage, they are still recognized for alleviating the scarcity of available properties to some extent. Between 2018 and 2023, the top 20 cities with the most ADU additions saw their housing inventory grow by an average of 1.8%, compared to just 0.5% for the bottom 20 cities.

Economic viability also supports the ADU surge. Construction costs typically range from $225,000 to $300,000 for a 750-square-foot unit, with budget models costing $120,000 to $180,000. Monthly rental income averages between $1,700 and $4,000.Regulatory changes have further fueled the trend. As of this year, the owner-occupancy requirement (AB 976) was eliminated statewide, allowing greater flexibility for investment-driven construction. Legislation like SB 1211 permits up to eight detached ADUs on multifamily lots. Exemptions from the California Environmental Quality Act (CEQA) have streamlined processes and timelines, and SB 1164 provides property tax exemptions for up to 15 years post-construction. In Northern California, cities like Berkeley in Alameda County are implementing amnesty programs to legalize unpermitted ADUs.

An industry expert noted, “ADUs provide homeowners with stable rental income while contributing to easing the local housing shortage. With regulatory relaxations and supportive policies aligning, more homeowners are choosing ADUs as a practical solution.”

By Reporter Hong-yong Park