"Granny flat" is a term you will hear more often as the population ages and senior Australians increasingly choose to age with family instead of in an aged care facility. Here we dissect what they are, rules and regulations and why Canberra is a strong market to execute a granny flat addition.

What are the benefits?

Secondary income

It can take a yield from 3.8% to 5.2% - meaning from an investment point of view, an extremely desirable solution to maximise your return on investment. For home-owners, a granny flat offers the chance to generate a second income without a heavy initial investment.

Versatility

You have a lot of options with granny flats. While you can rent them out, families occupying the main residence can also use them as dwellings for family members. Such as providing their child with their first taste of freedom without them having to buy a home or space for the in-laws. Outside of this, they can be used as a home office or small office for a team up to 10, depending on how the space is created.

Depreciation Benefits

A granny flat that you rent comes with many of the same tax benefits as an investment property. You can claim depreciation on many of the assets and the capital works involved in the flat.

Increase total asset value

The right granny flat can have a huge impact on your property’s value. You’re creating extra living floor space and. At best, you may convert a patch of unused land into something of value. That’s something that buyers take notice of. Furthermore, the granny flat offers buyers the chance to earn additional income from the rent, or alternatively, families having the option to own a home setup for intergenerational living - all adding to the value of the asset.

Government policy

It's always a great sign when policymakers provide positive adjustments to pro-actively stimulate something. In the case of Granny Flats, regulation changes in 2013, meaning you no longer needed a granny to have a granny flat in your backyard in the ACT. Previously, Granny Flats used to be restricted to caring for an older relative or family member, now, used for a wide variety of purposes including; additional income streams, home office use and teenagers retreat to name a few.

In 2014, the government also changed the policy so that homeowners in the ACT can now build larger granny flats in their backyards following the approval of an amendment to the city’s territory plan. Granny Flats, were limited to a size of 75 square metres under previous planning laws. The ACT government has now approved an increase in size of the dwellings to 90 square metres following industry concern over the limitations of the previous size.

The variation also made it easier for Canberrans to build a secondary residence by removing eligibility conditions on the then termed “habitable suites” or re-locatable units. This means anyone can occupy a secondary residence and provides for more affordable housing options.

Approval requirements

Block size must be 500m2 or larger
Granny flat floor space must be between 40m2 and 90m2
Compliant with the total plot ratio allowable for the block (i.e. 50% when combining the size of the house plus the secondary residence on a 500sqm lot)
Only the primary residence owner can own the granny flat
The property must be zoned ‘residential’
One granny flat per property
Granny flat must have clear, unobstructed pedestrian access
A “water sensitive urban design” – meaning, the development achieves a minimum 40% reduction in mains water consumption
A water tank will help, they can capture almost 40%
It must suit the needs of people with disabilities
You must provide private open space for tenants plus one car parking space
Compatible with exterior building materials of existing buildings in the neighbourhood
Compliant with setbacks.
Development Approval for secondary dwellings is primarily governed by the Planning and Development Act (2007)
Lodge your Development Application with Access Canberra
The local Council performs a Completeness check, confirming you have met the minimum requirements
If minimum requirements are met, fee advice is sent. If not, they request further information
Once the application has been formally lodged, you pay the necessary fees
The Environment, Planning and Sustainable Development Directorate (EPSDD) can request further information
Application decided.

However, Development Approval may not be required for secondary residences if they comply with:

The rules in the Single Dwelling Housing Code.
A private certifier will confirm whether your development proposal meets all criteria, allowing it to be exempt from Development Approval.

Secondary residences require building approval – the guidelines are in Division 3.3 of the Building Act 2004. The process for gaining building approval is: