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This company is building backyard homes at no cost to Los Angeles homeowners

March 10, 2020

Davita and Martin McCauley were starting to think about how, in the years to come, they would care for her mother as she aged.


The McCauleys own a classic World War II-era Southern California home: a peach-hued stucco bungalow in Gramercy Park, with a grassy lawn in the front and a detached garage in the back.


They were toying with the idea of eventually moving her into their three-bedroom house, and adding a second story to make more space, when they were introduced at church to a mutual friend working for a new company called United Dwelling.


At no cost to homeowners, the company builds “granny flats” in the backyards of single-family homes, finds a tenant to rent them out to, and splits the lease revenue with the homeowner for up to 25 years, at which point the homeowner owns the unit outright.


“Garage conversions were a new concept for us,” says Martin McCauley. “But it made sense when you think about the amount of people who have garages, and if we got all of that junk out of our garage, we’d actually have about five things we actually need.” 


In other words: It was a waste of valuable space.


As lawmakers look for palatable ways to accommodate density on the single-family zoned properties that dominate the region, they have loosened up regulations making it easier to for homeowners to convert their garages or build little detached backyard structures, known as accessory dwelling units. 


It’s working. In the last two years, the number of ADU applications submitted the Los Angeles Department of City Planning totaled 11,045.


But ADUs can be expensive to build, about $120,000 on average, builders say, which makes United Dwelling an appealing option for homeowners who don’t have the savings, equity, or appetite to take on more debt. But they do need to be willing to host a stranger on their property.


Money was a factor for the McCauleys, but they were also interested in doing their part to chip away at the housing crisis they had been hearing so much about.


At first, the fact that United Dwelling promised no upfront costs seemed too good to be true. Their suspicions were eased by representatives who were upfront about how the company turns a profit: by keeping about 75 percent of the lease revenue. It plans to rent out units from $1,495 to $1,995 per month. At the lower range, a homeowner would pocket about $400 monthly. 


Three weeks after their first meeting, the McCauleys signed a 25-year agreement with United Dwelling, and construction got underway last month. 


“There’s no prepayment penalty. We can pay off the balance at any time if we want to take full ownership of it and rent it out ourselves,” says Davita McCauley. “It also solves the question of where my mom will go.” 


To keep costs down, United Dwelling offers one design with no options for customization and is building in “flights” of four of five; each property is located within about a half-mile radius.


The 352-square-foot units are so small that if they were built one at a time—or far apart from each other—a full day’s worth of labor would be spent on a job that might only take an hour or two, says founder and CEO Steven Dietz.


United Dwelling has two four-unit flights underway now, including one that encompasses the McCauley residence, and has 60 more units in the pipeline. It’s targeting Gramercy Park, Morningside Park, and other South Los Angeles area neighborhoods near Expo Line stations, with sales reps going door-to-door in those communities.


The biggest hang-up for homeowners so far? “They’ve never heard of anything like this, and it sounds strange,” says Dietz. “It sounds as weird as getting into a stranger’s car and having them drive you somewhere.”



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