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Abodu: A Fast, Scalable Way to Start Fixing The West Coast’s Housing Shortage

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For the past six years, a pet hobby — actually, an obsession — of mine has been America’s housing shortage. Since the 2008 financial crisis, new housing starts have never fully recovered to the historical norms of the previous forty years.

There are myriad reasons for this — experienced mid-career construction talent left the industry permanently and a slow recovery dampened incomes among the next generation of homebuyers. But one other standout factor has been how land-use and zoning regulations have made it illegal in many cases to build more housing in suburbs in jobs-rich metros.

That is starting to change, albeit in ways that meet the political and aesthetic tastes of residential communities and match the needs of the ever evolving American family unit.

The most popular way to thread the needle on more density has been by opening the door to accessory dwelling units. Also known as granny flats, casitas or backyard units, accessory dwelling units, or ADUs, are a way for homeowners to add a new unit to their background (typically, to either to house family members like aging parents or kids returning home, or to make additional income through rental revenue). This is a big deal because American families are changing. A record 64 million Americans lived in multigenerational households prior to the COVID-19 pandemic and since the start of social distancing, a majority of young Americans now live with their parents for the first time since the Great Depression.

In the beginning of this year, a new law called AB 68 now requires that California cities must now ministerially approve new ADU applications. That removes the unpredictability of a discretionary process and makes it much clearer and faster to build new secondary units.

Other states are also moving in the same direction. The Oregon legislature voted to effectively end single-family zoning last year and Washington also considered a similar bill this year. Both sides of the California legislature also voted to pass a duplex bill that would have affected up to 6 million lots across the state. Zillow found that if 17 of the U.S.’s top metro areas allowed 10 percent of their single-family lots to add a second unit of housing, that would produce 3.3 million additional new homes.

After looking at the ADU space for several years, I met John Geary and Eric McInerney of Abodu. I’ve seen many other ADU companies over the past five or six years. In the early days, the regulatory environment hadn’t changed sufficiently enough to make any one successful. Then, once laws for accessory dwelling units shifted, many teams I saw in this space had little to no actual construction experience. They had never delivered a project before or were unfamiliar with myriad laws, regulations and Department of Building Inspection requirements around trenching electrical or plumbing to new standalone units.

In contrast, Abodu has actually delivered many units across Northern California and they do so quickly and predictably. The company has factory relationships that enable them to reliably construct new homes, rain or shine, and designs that can get same-day permitting approval in jurisdictions across California.

There are real customers and real families with real testimonials that you can watch here. They can get the process down to weeks (compared to months) from contract signing to installation, which is a timeline that’s unheard of for new permanent housing units in California.

Their execution, speed and reliability have made them an important lifeline for customers amid this public health and economic crisis. Families have used them to quickly set up units to house children unexpectedly returning home from college or to take elderly parents out of risky congregate settings like nursing homes. Housing older relatives this way is both more affordable and comfortable; assisted living in Northern California starts at $4,000 a month, whereas financing an Abodu unit with a home equity line of credit or HELOC can be $1,200 a month.

We’re excited to back a company that has such a meaningful mission in helping families stay housed in high-quality spaces together.

Garry Tan interviews John, Eric, and I about our investment in Abodu