Accessory apartments — i.e. units over garages, “granny

Accessory apartments — i.e. units over garages, “granny flats,” carriage homes — represent a big question mark in traditional neighborhood developments (TNDs). Often they are permitted to accompany every single detached home, and so could raise density levels and boost the number of rental units in many TNDs. But construction of these units is entirely voluntary on the part of homeowners/buyers, and developers have no idea how many will be built. Generally they are not included in buildout projections. When rented out, accessory units have all the characteristics of a home business — with capital, marketing and management costs for the homeowner. In Harbor Town in Memphis, Tennessee, at least one couple has turned their accessory unit into a bed and breakfast, charging $100 a night (see photo). Many homeowners may be reluctant to take on the risks and responsibilities of managing a rental unit, however. One way to encourage residents to invest in accessory units may be to provide central rental management. In Seaside, where a large percentage of the 300-plus homes have accessory units, these units are rented out year round and generate substantial income for owners. Rental management is provided by the Seaside Cottage Rental Agency, owned by developer Robert Davis. In a nonresort setting, Chattanooga (Tennessee) Neighborhood Enterprise is building new urbanist infill housing with optional accessory apartments. “One incentive that we are considering is to provide a rental management service (for a fee) to the buyers as part of the deal,” says Frank Greene, vice president of development for the organization. “Since we already manage rental property within the organization, this seems natural.” The units will add $25,000 to the cost of the home — but the projected rents of $400 to $450 per month will easily cover the mortgage on that expense, Greene says — even after Neighborhood Enterprise takes its fee. In some cases, accessory units can house a relative, serve as a guest unit or provide home office space.