California faces a housing crisis and needs approximately 3.5 million new homes to accommodate its population. Real estate company Yardsworth has come up with an innovative solution to this problem: the Company purchases backyard land from homeowners who have enough yard space to support new, small homes. Homeowners get a 6-figure cash offer and Yardsworth converts the land it buys into a new lot, completely separate from the original.
Sound novel? It is, and it’s only possible thanks to a new CA law enacted in 2022 that allows homeowners to split off and sell part of their land so that new, permanent housing can be built.
Yardsworth and its co-founders, Matt Lucido and Joe Salerno launched the company with a singular focus: “to help solve the housing crisis by making homeownership more accessible in some of the most expensive housing markets in the country,” says Lucido, the company’s CEO. “For the last five years, we’ve helped low-to-middle income homeowners build ADUs, and it really opened our eyes to the tremendous value that has been locked up in backyards for the past 80-100 years due to restrictive zoning. So, when CA SB9 became law, we recognized a once-in-a-generation opportunity to be impactful.”
“Historically, there were only two ways for a homeowner to tap equity in their homes,” Lucido adds. “One, by selling and moving, but that’s not a great option with today’s interest rates; or two, borrowing against their home with a 2nd mortgage or cash-out refi — which are also untenable with today’s interest rates.”
Tapping your home’s equity by selling unused yard space
Yardsworth’s model is revolutionary in that it allows homeowners to extract hidden equity value without selling their homes or taking on more debt. By selling just a piece of the backyard to Yardsworth — around 30 feet of land— homeowners can get $100,000 to $200,000, and keep their home. This yard space is turned into a new lot, and new fencing is installed to ensure the homeowners keep their privacy and still have a yard to enjoy.
Accessory Dwelling Units (ADUs) used for rental income are also growing in popularity. But, “one of the advantages of using Yardsworth over building an ADU is that Yardsworth can offer you as much as 30 years’ worth of net rent in one tax-free lump sum payment,” says Lucido. “It can take up to two years and more than $150,000 to get an ADU built in your backyard — and even then, you’d only make around $2,000 a month in rent. After you take out the costs of loans to finance the ADU, maintenance, and management fees, the amount of income you walk away with from your ADU isn’t as impressive as it may have initially seemed.”
Yardsworth will invest hundreds of millions of dollars into low-to-middle-income communities across the state of California over the next 5 years, while also presenting a potential solution to the housing crisis the state faces right now. “As a debt-free — and typically tax-free — way to tap equity, we’re a compelling alternative to the existing home equity options in today’s rate environment, and we offer something no other company can,” Lucido asserts. “We create value for homeowners by actually increasing their family’s net worths.”
This approach to “creating” more space from homeowners’ yards is possible thanks to California’s new upzoning law — Senate Bill 9, better known as the “California HOME Act.” This bill was designed to help solve the housing crisis in California by streamlining the process by which homeowners could create a duplex or subdivide their existing lot. The bill was written in a way that allows it to preserve historic districts, environmental quality, and the look of communities, while also ensuring that the benefits lie predominantly with the homeowner, rather than the institutional investor.
How Yardsworth’s model benefits both homeowners and those looking for affordable housing
Homeowners partner with Yardsworth to sell some of their yard space, and then use the money they have made from the sale for any number of purposes, from funding retirement or college educations to completing home renovations. According to Lucido, the payments they give homeowners can be “life-changing capital infusions.”
As for the tenants themselves, this model benefits them by creating more affordable housing in metro areas, rather than the outskirts where most affordable options have been in the past. “Living on the outskirts of town may provide more affordable housing, but it also creates brutal commutes that cost time and money, and are harmful to the environment” explains Lucido. “At Yardsworth, we create affordable housing in the hearts of cities like Los Angeles and San Diego while avoiding gentrification-related displacement. In other words, we pay homeowners to stay in their homes and communities.”
For California homeowners looking to access their home equity without selling their house, moving, or taking out another mortgage, Yardsworth’s model presents a tremendous opportunity. Yardsworth is a solution to the California housing crisis that uniquely benefits middle-class homeowners — paying them to stay in their homes and communities, while increasing their net worths and opening a multitude of options for them and their families.
