Seattle’s housing affordability plight has remained a hot topic of conversation as the city is becoming more expensive and less affordable. Especially in the Puget Sound region, challenges in building housing to accommodate future growth have resulted in many owners of single family residences building separate accessory dwelling units (AUD), or mother-in-law units to help add to the inventory stock and make some extra cash.
Jumpstarting the Market for Accessory Dwelling Units: Lessons Learned From Portland, Seattle and Vancouver, a new April 2017 report from the San Francisco chapter of the Urban Land Institute in conjunction with the Terner Center for Housing Innovation at UC Berkely explores the successes of these units and the ways in which those three Pacific Northwest cities have utilized them to offer some affordability relief.
“As cities around the country try to ramp up ADU production, many look to the three large cities considered North American ADU leaders: Portland, Seattle and Vancouver,” states the report.
The report, which is based on a homeowner survey and stakeholder interviews, attempts to identify the benefits of adding these units and found that homeowners have embraced the accessory dwellings because of the flexibility they provide, for rental income or for friends and family members in need.
Historically, Seattle has allowed attached accessory dwellings since the mid-90s and detached units since 2006. From 2006 to 2009, a pilot program allowed detached accessory dwellings to be constructed in specific areas, which was successful. And while these units typically provide a cheaper option than traditional housing, the report found that to date, most of the applications submitted for these units come from wealthier homeowners, which researchers attribute to the escalating cost of construction. “Still, city staff argue that because even new ADUs typically rent for less than conventional housing units, they provide a relatively affordable option in Seattle’s expensive neighborhoods.” In Seattle, ADUs accounted for only .8 percent of issued housing permits in 2009 and in 2015, after reforms, Seattle’s share rose to 2.1 percent.
The report contacted 1,837 homeowners who had built ADUs across the three markets of which 23 percent responded. The majority of respondents (67 percent) built detached accessory dwellings from the main house and of those, the most common type is a freestanding cottage (56 percent), followed by freestanding garages (25 percent) and then converted garages (18 percent). With attached ADUs, the most common is a converted basement (65 percent), which the study said is likely due to the fact that this type of conversion is typically less costly than other methods.
While these types of housing are typically more affordable, some homeowners have experienced barriers and slowdowns in the zoning, permitting and financing stages, which have often been overcome due to city actions. However, some factors such as restrictions on parking, lot size and setbacks can make it impossible to construct units.
Even without those factors, there are many neighborhood groups opposed to more density, which can also restrict the units. Of course, upfront capital and lack of experience in the real estate and development market can tend to be a drawback. “Seattle has experienced a growth spurt in ADU permitting and construction. However, this is perhaps due less to zoning reforms than to a hot housing market and an ongoing public discussion about potential policy reforms,” according to the report.
For those who overcame building dilemmas, the average owner in all three cities paid approximately $156,000 to build, with construction labor and materials being the two largest costs, according to the report. Seattle homeowners paid around $230 per square foot for the development while Vancouver homeowners paid about $318 per square foot and Portland around $161 per square foot.
But what homeowners lose in upfront costs, they make up for in monthly rent from tenants. The survey found that the average accessory dwelling rented to a tenant collected $1,298 per month with Seattle, on average, having the highest average per square foot rental cost at $2.50 per square foot. Vancouver averaged around $2.25 per square foot and Portland at about $2.15 per square foot.
And while not every accessory dwelling is used as a primary residence, the majority of respondents said that was their main intention. Only 9 percent reported the accessory dwellings are used as extra space for the main house. The report found that all in all, the two most common reasons respondents decided to build accessory dwellings was due to extra income from long-term rentals and space for a household member or helper. Respondents reported that 87 homeowners built accessory dwellings within the past five years, with 67 percent of the units detached and 33 percent attached. But the vast majority (81 percent) had one bedroom or less with the average square footage of 631 square feet.
While the report focused on the successes of these units, it touched on the challenges homeowners face as they look to build these units on their property. In terms of hold ups, the biggest reported were obtaining a loan and paying for the cost of construction. To finance the accessory dwelling, 30 percent of respondents used only their own cash and an additional 15 percent drew entirely on other personal resources such as credit cards, according to the report.
In order to achieve and overcome, the report listed three key factors to the success of accessory dwelling implementation; cities with reformed zoning regulations, waived fees, and education for homeowners. “To date, no city has developed a comprehensive and fully effective approach to assisting homeowners with financing ADUs,” according to the report. “As a result, aside from homebuilders, only the most affluent homeowners, who can tap into savings, are building ADUs.”
Here in Seattle, local media including Kiro7 have reported that in 2016, the city attempted to make it easier to build the units by modifying regulations, but the Queen Anne council sued over the proposal, putting off the issue until the summer of 2018. The debate over the units is still ongoing in the city and has remained a topic of conversation within the community and for those looking to add these accessory dwellings to their property.