Former Stockton mayor invests in ‘backyard housing’ start-up

Abodu, which provides prefabricated Accessory Dwelling Units (ADUs), or ‘backyard housing’, has raised US$20 million in a Series A funding round.

ADUs, which are small dwellings built on the same grounds as a single family house, can be used as guest cottages, extra living space for families or home offices but they’re increasingly being used as rental housing in the US due to the affordability crisis facing many cities and policy shifts to streamline the ADU process.

The funding round was led by Norwest Venture Partners. Previous backer Initialized Capital also took part alongside individual investors including Michael Tubbs, the former mayor of Stockton, CA as well as Glenn Kelman, CEO, Redfin, and Kyle Tibbits, Paradox Capital.

Policy

Abodu’s units cost from US$199,000 to US$259,000 and three customisable options are available. The company says it can deliver in as little as a month in cities like San Jose and LA through pre-approval programmes and in around 12 weeks elsewhere.

John Geary, Co-founder and CEO at Abodu, says that since 2019, the company has “put dozens and dozens of new ADUs in the ground across California” and will soon begin operations in Washington.

“Our goal is to deliver 1,000+ new units of housing annually,” he said. The company also aims to simplify the process by handling permitting, installation and warranties for customers.

States such as California and Oregon have passed state-wide legislation making ADUs easier to build and rent out. Elsewhere, ADU policies are adopted in a more piecemeal way at the local level and in some places ADUs are prohibited.

“On the whole, though, policies allowing backyard ADUs are seeing a lot of momentum across America,” Geary said. “Especially in small to medium size cities that have housing challenges and suburban-style development patterns.”

According to Geary, around a third of Abodu’s ADUs are rented out as affordable options, with another third being used for multi-generational families.

“Especially coming out of Covid, we see the rental use case growing significantly,” he said.

Toolbox

Tubbs, who was mayor of Stockton until the end of 2020, said Abodu is tackling two of California’s most consequential issues: the statewide housing shortage, and its impacts on racial and economic segregation.

He commented: “By making it fast and accessible for normal homeowners to build high-quality backyard housing units, Abodu’s success will mean integrating options for both renters and homeowners in the same neighbourhoods, while supporting small landlords and property owners in building equity in their homes. Abodu’s success would be a win-win that strengthens communities.”

Tubbs made a name for himself by launching the Stockton Economic Empowerment Demonstration (SEED) guaranteed income pilot and going on to launch the Mayors for a Guaranteed Income (MGI) initiative which has spurred a growing number of programmes across the US. He is now an advisor to California governor Gavin Newsom, and California lawmakers last week passed the US’s first state-backed guaranteed income plan.

Some argue that ADUs are a gimmick rather than a meaningful way to increase affordable housing at scale but Tubbs said: “Affordability doesn’t need to be a zero-sum game. In addition to my support for subsidised affordable housing, funding for homeless services, and upzoning, Abodu has proven that there is a skyrocketing demand for constructing relatively small and modest high-quality housing units in the backyards of large homes located in wealthy communities, particularly high-opportunity and service-rich suburbs close to job centres and universities. Their turnkey strategy of creating high-quality, low-friction ADUs at lightning speed is a meaningful part of the affordable housing toolbox.”

Abodu will use the funding to design new products, expand to new geographies and develop new methods.

Earlier this month, Mighty Buildings raised US$22 million. It offers ADUs and other housing options, with a focus on 3D printing.