Home Equity

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Like many Northern Californians, Matt Mitchell has a lot of equity sitting in his Sacramento home. He and his family have decided to put it to good use now rather than later.

Lately, I've been spending a lot of time watching the paint dry. It's been drying on the little house in our backyard that used to be the garage. And the truth is, I'm relieved just to have made it to the paint drying phase.

Over the past two years, as my wife and I have slowly worked to transform our single family home into a two unit — something quite different. There have been many setbacks. It turns out, the stories you hear about permitting hassles, construction costs and impact fees in California are all true. At this point, we're going to have to charge market rent for our casita. And even then we are unlikely to see the cash flow improvement we'd been hoping for, as our eldest heads to college. 

Then again, we're amazingly lucky to be in the position to do this project in the first place.  It's not as if the home equity we're investing has come from wages we earned by the sweat of our brows. Building a sweet casita and renting it out is just a way we have chosen to put the great Northern California home price windfall to good use.

Which raises a question much bigger than a little house: How can home owners, and  as a person who once felt trapped as a renter I'm fully aware that many people feel painfully left out of that category — but still — how can homeowners realize the equity latent in our drywall. Many would never choose to build a place for a stranger to live in like we have. And for others the barriers might be too high, even despite recent state laws that make it tough for cities to zone away granny flats the way they used to. But consider: If even 10 percent of single family homeowners in the Bay Area and Sacramento built a backyard casita, our region could quickly have 210,000 more housing units. 


The possibilities for how people will choose to invest, or spend, or give away or hoard their windfall housing equity are endless.  My point is the choices matter. There's a giant home equity mountain in Northern California. And with some risk tolerance and creativity, a lot of surprising and even socially helpful things might come from spending it down a bit.

With a Perspective, this is Matt Mitchell.

Matt Mitchell is a teacher and writer in Sacramento.