Have you noticed that no one really parks in their garage anymore? Instead, garages are recording studios, workshops, storage spaces, extra bedrooms, apartments—pretty much anything except a place to put the car. Done right, garage conversions can be a way to green a city or town by "invisibly" increasing population density.
That invisibility can be a real boon for places that are hung up on an image of single-family propriety. An efficiency studio in the garage doesn't cost much to put in, and in a college town it can bring in a significant chunk of change every month. When it seems that everyone is worried about paying a mortgage, it seems that encouraging people to convert their garage into an apartment could be one way to reduce the number of foreclosures... not to mention the amount of land being used up for new housing. Increasing density like this also tends to reduce the amount of driving people do and make public transportation more financially feasible.
It's usually legal to convert the garage to living space, though it's less common for apartments to be legal. (They're usually called "accessory dwelling units" or ADUs.) What happens, of course, is that people build them anyway, without the benefit of safety inspections from the building department.
A number of places are starting to deal with reality and make ADUs legal. They will soon be legal in all cities in California, and in Portland, Oregon, you can build one legal ADU in most areas of the city. In fact, there's at least Portland-area one contractor who specializes in ADUs. We're thinking this is a great market opportunity for the green-minded builder.