Two twenty-something University of Minnesota graduates see a business opportunity in the housing shortage for the elderly.

Jesse Lammi and John Louiselle are making portable housing units that are a cross between a tiny home and an RV. They created the so-called granny pods because the pair felt the need for a certain type of housing.

"We saw our grandparents moving onto housing situations that were not ideal or affordable for them at that time," Louiselle said in a recent interview at the Big Lake offices of NextDoor Housing. "So, we recognized the need for a more affordable way to keep loved ones next door."

Come Sept. 1, granny pods will be legal in Minnesota on residential property to provide short-term housing to a relative requiring personal care or supervision. That is, unless a city acts to ban them.

Many cities — including St. Cloud, Minneapolis, St. Paul and a number of metro-area suburbs — have banned the structures or are likely to.

Despite the granny pod bans in some cities, there's still plenty of opportunity remaining in rural Minnesota, Louiselle said.

"North of St. Cloud and up, you know, those Iron Range communities, a granny pod can really benefit a family," he said.

A 2014 study projected the demand for affordable senior housing in Minnesota would jump by more than 50 percent over five years, but that the need is unlikely to be met.

Jesse Lammi and John Louiselle founded NextDoor Housing , which sells small mobile housing units that people can put on their property to provide short-term care to a relative. Martin Moylan | MPR News

Lammi and Louiselle designed the homes, consulting with experts to make the units accessible. They found a Minnesota manufactured home company, Homark Homes of Red Lake Falls, to build the homes and mount them on steel trailers that can be hauled by a pickup truck.

The units can get water and electricity from a nearby house. On-board tanks store waste water for up to four weeks until it's pumped away by a septic waste company.

The mini-houses are designed to meet or exceed the construction standards for recreational vehicles and withstand Minnesota winters, and Louiselle said units typically sell for about $45,000.

By law, these small portable homes can be no bigger than 300 square feet and must be on property where a caregiver or relative resides. A medical professional also has to vouch that the granny pod's occupant needs help with two or more daily activities.

This past February, Anita Burke of Apple Valley considered getting a NextDoor Housing home for her ill, elderly mother, who was in an assisted living facility. Burke did not have a spare room in her home for her mother, never mind an accessible bathroom.

"It's hard when you're in the sandwich generation and you're taking care of elderly parents, as well raising your kids," she said. "I thought that if I could move her into my backyard I would be closer to her. It would be cheaper with me being able to provide most of her care."

But Burke doubted her home town of Apple Valley would allow her to put a pod on her property. Her mom passed away in July so she no longer needs one. But she thinks the tiny dwellings should be an option for families needing to care for a loved one.

"You might be in an accident and need to have some care," she said. "And it's costly in long-term and rehab care centers."

In Minnesota, the average cost of care for a year in an assisted living facility is about $40,000. Nursing home care averages $62,000.

Louiselle says his firm's mini-homes can be hitched to a pickup truck and moved as needed. Martin Moylan | MPR News

Many communities choosing not to allow granny pods want more time to study how to deal with this new type of housing.

"They don't have time to spend much time discussing this right now to meet the September 1 deadline," says Craig Johnson of the League of Minnesota Cities. "So, people are opting out and may look at it further in the future as something they want to be part of."

Johnson believes communities recognize they need to help residents find housing for aging or impaired family members.

"There is a huge fear and demand for how are we going to deal with preventing people ending up alone that need to have some sort of support," he said.

DFL state Sen. John Hoffman was a sponsor of the legislation intended to encourage the spread of granny pods. He says some colleagues wanted to permit larger housing units and let them stay in place longer.

"Some communities are saying, 'We really, really, really want this,'" he said. "Other communities are saying, 'Not in my backyard.'"

The Minnesota Department of Human Services gave NextDoor Housing a grant of several hundred thousand dollars to get the company started. Minnesota Board on Aging executive director Kari Benson said money invested in developing granny pods is well spent.

"We do see it fitting into the mix of housing options for older adults," she said. "As we're looking towards an aging population with the aging of the baby boomers, we need all of the options at least considered and on the table."

Whether communities decide to welcome granny pods or not, discussion about the mini homes at least raises awareness of the need to address the elderly housing issue, Benson said.

NextDoor Housing appears to be the sole company selling such granny pods in Minnesota. So far the company will say only that sales total three to five units.