Considering a Granny flat with your new home build?

Are you considering a granny flat with your new home build?  With the current housing shortage in Sydney and Melbourne the building of an extra space can be a prudent and economic choice.

When is a granny not a granny?

That’s easy.

When a granny is a disabled adult, a grandchild, visiting relatives, a home office, bed and breakfast, a grown child saving for a first home, another returning from a broken-down marriage or even a renter.

Granny flats are big news in the current Australian housing market, particularly in NSW where the planning laws have relaxed to allow additional dwellings on a single site.

It is estimated that in Sydney alone, there are 100 new granny houses approved per week.

The big news about granny flats is the enormous versatility it brings to homes and families.

While the term “granny flat” has stigmatised the building as an aging, unsightly relic taking up precious space in the ever-coveted back yard, the term has been modernised to reflect its truly multi-purpose and desirable edge. A granny flat has been renamed a multi-generational living space, and even that does not truly encapsulate the many different adaptations that dwellings are being used for across the country.

With imagination and style the units can be used not as a living area at all, but as an extension of a business for a studio, home office, rental dwelling or tourism site all subject to council approval.

More likely it will be used by any one of the four generations of family that may be living at one time, or all four at once.

The Rules

The good news is that granny flats can be built within a relatively achievable budget.

The average rate of building a brand new granny flat is about $100,000 (in 2017) as the new dwelling, attached or detached from the existing home, generally should not exceed 60 square metres in size. However, this cost may come down dramatically by converting existing space within the house, purchasing a prefabricated dwelling or renovating an old garage or large shed.

The units range in size from a studio apartment with a single room to a two room flat. No matter the floor plan, the granny flat will be planned with efficient use of space as a large priority in the design brief.

Other restrictions include the limit of only one granny flat on any existing block of land. The council may also be concerned about access way width and the size of the available land on the block.

In Australia, the council will explain any restrictions in Section 149(2), a Planning Certificate can be purchased for about $40 and any new dwelling must receive final approval from council.


In the past aesthetics has not been a known prerequisite for a granny flat, hence the bad reputation.

Look around at the ever expanding market and it is possible to see a large range of styles and materials used to suit many urban blocks.

A new home will need to be compact and work within the existing site. There are several companies that have specialised in building off-the-plan dwellings similar to a project home. The homes reflect current housing styles and can be built in materials that help reflect and blend into the existing home. Materials include brick, weatherboard and blue board.

The homes can be as comfortable as an inner-city unit and the largest can include a kitchen, laundry, built-in wardrobe and veranda. When you combine that with the convenience to family it is easy to see how a granny flat can be a much more attractive home for an aging family member or a ‘boomerang’ child.

As always, the more customised work you are after the more the price will soar, so it important to keep a tight budget in mind to make it economically worthwhile.


You might also need to include accessibility as a major design aspect of any granny flat. You might be bringing a sprightly, aging family member into your home, but illness or an accident might mean they need additional features to maintain their lifestyle such as ramps, single-level dwellings, safety rails and accessible storage units.

If the unit is designed for a self-care disabled adult they will also need to meet the accessibility standards that relate to their disability. These are all important decisions in the initial design and budgeting process to prepare for the maximum benefit of the site. They may also need additional space to cater for carers while allowing them maximum independence from the family home.

Social Returns

Granny flats are not just a convenient alternative to a retirement centre; they offer real social benefits for all the members of a multi-generational household.

If families are going to live in multi-generational units for cultural, health, social or economic reasons the granny flat offers each member of the family something they long for – space. While privacy is not considered a premium in all cultures, it can be the lynch pin for creating multi-generational harmony in many westernised families.

When grandparents come to stay with young children they create lasting bonds and provide important role models for a children and an excellent way to pass on a family’s culture, heritage and values. A familiar criticism about western culture is that children can grow into a selfish adult simply because they have not exposed to the wisdom of their grandparents and not being able to be involved in a caring and giving relationship that can go both ways. Grandparents also benefit from building close bonds with their grandchildren and feeling the value and joy of the bond with the younger child.  

Financially, parents can forego the cost of childcare while the cost of sharing a single roof, or block, can lessen living costs across all generations depending on how the costs are organised and split.

Besides that, granny flats do not just have to be for the aged. It can be for boomerang children who have had a run of bad luck and need a safe haven in their adult life. They might also need a helping hand as they are a step up to something bigger such as saving for a new home, returning to study or about to embark on a major change in their life.

Whatever their reason, it is nice to know as parents that you can still offer them something worthwhile and meaningful in their adult lives.

Economic Returns

However, many people might consider cashing in on whatever granny has to offer.

These units can be a legitimate business expense and, as such, will need to follow strict guidelines for taxation purposes.

If a homeowner has borrowed money to build the proverbial goldmine in the backyard, then any interest on the loan can be a tax deduction plus any expenses associated with the site.

The granny flat can be used for a multitude of functions such as international student housing, bed and breakfast, Airbnb, fruit pickers in rural areas or as a general rental especially in Sydney where demands are high. Alternatively, it could be used as a studio or home office depending on council restrictions.

While getting an additional dwelling with an income and tax break can be appealing it can also bring additional costs at the time of selling when the property is subject to capital gains tax.

The selling cost is also an important consideration when taking on the challenge of building an additional dwelling. And the answer to the million dollar question whether a granny flat improves the bottom line at resale is yes….. and no.

The yes comes back to that original price tag that was paid at the onset of building. If the granny flat belongs to the original design creating an overall aesthetic appeal which adds to the ambiance of the home then you are bound to improve the sale value.

Obviously the opposite is also true. The less the additional dwelling adds interest and appeal to the original home than the less value it will bring to the final resale of the home.

It is one of the catch 22s, that those who need the granny flat because of difficult financial circumstances will be the least likely to benefit. While that may be so, the years of mutual benefit and ease on financial pressure might make that risk worthwhile.


This is not your boundary lines between your neighbour’s house and yours, but your new boundary lines between your family members.

While there is a great deal of information about how multi-generational living has enormous benefits for everyone, there are also many anecdotal stories where it has not been such a success.

It’s not hard to see why, joining many independent adults together and have them share in the decision making about extremely personal matters such as how to raise children or how to manage finances can be fingernails-on-the-board aggravating.  

Just because you have already lived together when you are younger does not mean you will easily make the transition to living together when you are adults. The best way to begin the new live-in relationship is to be honest and openly discuss no-go zones and other boundaries before they become an issue. You already know what sets your teeth grating so open, non-judgmental communication will help establish a harmonious relationship where everybody feels they have equal worth and value in the new relationship.

Once you have created the right environment for the new relationship, the benefits of multigenerational living should flow for all members of the family. Just think … if it works well the kids and grandkids may never want to leave home.

If you are thinking of building a granny flat either as a separate build or as part of your investment or dream home build, check out our granny flat reviews.

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  1. Masterton Granny Flat Review - Haven 2 ⋆ New Home Review

    […] Granny flats are “in”.  A small home build at around $100,000 can provide an income source or housing for an extended family member or as a guest room.  And with Sydney’s housing crisis and escalating prices, it can be a great solution to provide housing and even a source of income.  If you haven’t considered one before or just want to get more information about what to consider, check out our Granny Flat primer article. […]

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