Visionary ADU Investing: Q&A With Preston Rutherford
Preston Rutherford and his wife, Jackie, have an ambitious goal: to help solve the California housing shortage by building 1,000 ADUs by 2025. We sat down with Preston to chat about the need for attainable housing, how ADUs can help, and how ADUs present an unusual real estate investment opportunity—and a chance to make a real difference.
As the cofounder of menswear company Chubbies, how did you go from focusing on fashion to wanting to solve the California housing crisis?
I’ve always cared about housing. To me, real freedom means having options—having access to whatever the American Dream is for you. These sorts of things have been in my head for a long time. I feel like one of the most positive impacts I can have on the world is by helping bring freedom to as many people as possible.
I studied urban planning and design at Stanford; I wanted to be an affordable-housing developer. The place where a person grows up is, to me, one of the most powerful determiners of outcomes—whether in terms of educational accomplishments or ultimate success in life, however you define it. Being associated with shaping that narrative and maybe doing some creative things to help solve problems associated with the physical space in which people are raised and live…it’s always been in my DNA.
Sounds like there’s a lot of social equity in your mission!
That’s the core of it. How can I help as many people as possible as effectively as possible?
Fashion is something I kind of happened into, but there’s a common theme. In men’s fashion there’s a lot of exclusivity, and with Chubbies we wanted to flip that on its head and have it be fun and welcoming and inclusive. We wanted to represent the freedom of that feeling you get on the weekend or on vacation.
Can you tell us a bit more about your goal for creating affordable housing?
Sure, it’s a thousand ADUs in California by January 1, 2025, and then to educate and inspire fellow entrepreneurs/investors to create a million more. The mindset is to commit to it and then figure out how. I’m trying to open myself up to what’s possible and just putting it out there. And what I’ve found is that there are a lot of people who are really excited about it, who want to help and are inspired.
The need is there, and there’s no reason why a person or group of people can’t do something like that. As we build momentum, as we meet people, as we learn, as we fail, we’ll be making progress. A lot of families need help. It’s just not right that people in service jobs or construction or whatever have to drive an hour or two hours each way to their job because there’s no affordable housing where they work. There’s no reason that hardship should have to exist.
Where did the goal date of January 1, 2025 come from?
So, on January 1, 2020, the state of California updated their ADU regulations, and there are three big relevant changes. One is they removed a lot of the parking limitations. Two, you no longer have to be an owner-occupant in the property to be able to add an ADU. And three, there’s explicit allowance for multifamily properties. And my understanding is that those three changes will be up for review on January 1, 2025. So my goal is to do this by that date.
And you’re partnering with Villa to build these units?
Yes, we’ve signed to build seven ADUs across two properties in Santa Cruz.
What made you want to work with Villa?
First and foremost, the team—a lot of very impressive people. These are the people I wanted to embark on this vision with. And there’s obvious alignment in vision. We’ve been thinking about a lot of the same things and wanting to solve a lot of the same problems, and we have a lot of the same approaches. It just kind of felt like we were kindred spirits. We had momentum from day one.
Can you share your ADU financing strategy?
I have three or four streams that I’m actively working on. Financing to build ADUs hasn’t been done on this scale before, and there’s a lot of education involved. Some people have to take a little bit of a risk and do something they haven’t normally done. We’re exploring every option. I’m pleasantly surprised that there are people out there who actually want to see this happen.
Financing can be any source under the sun. There’s the bridge lending, more conventional bank lending, there’s private equity capital…we’re going to try to do all of that.
Are you going to be building all prefab ADUs versus stick-built?
So far, yes. Prefab is something I really believe in to keep construction costs low and reduce noise disruption in the community, and there’s a time-to-value factor. I want to solve this problem sooner rather than later. I have a background in manufactured housing communities, and I really fell in love with prefab housing. It’s a broader part of my mission to show how beautiful prefab housing can be.
One of the best metaphors I’ve heard about stick-built construction is this: If you were going to buy a car and the automaker said to you, “I’m going to send 30 people to live in your guest house for six months, and they’re going to build your car piece by piece, by hand, in your driveway, and you’ll have it in six months…” It sounds ridiculous. And that’s what stick-built construction is.
It’s interesting that prefab housing hasn’t proliferated more. If we can show examples of how appealing it is, and how we can create beautiful community character and control costs pretty meaningfully, I think it can go beyond just ADUs and change how things are built.
Any quick advice for ADU investors who want to follow in your footsteps?
I’ve been wading through countless investment/positive-impact options over the past decade, and this opportunity that we have now is completely unparalleled and unprecedented. I would recommend that everyone read through the regulations and start looking at properties that have extra land, because it really is incumbent upon us entrepreneurs/investors/homeowners to do our part here. We have a unique opportunity to do good and receive compensation for helping provide much-needed housing. It’s our responsibility, and this is a special time.