Accessory Dwelling Units (ADUs)

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Accessory Dwelling Units (ADUs)

The City of Minneapolis has had initial success with its newly adopted accessory dwelling unit (ADU) ordinance. The idea had percolated for a long time within the community and received overwhelming support when adopted in December 2014. ADUs are known by many names, including granny-flats, laneway or carriage houses, or secondary units, and they essentially offer the gentle creation of additional, more affordable housing using the existing housing stock. Generally, ADUs must contain their own sleeping room, bathroom and kitchen and can be created as part of an existing house (i.e., an upper level, attic or basement), attached to an existing house (i.e., a rear appendage to the principal structure, which is particularly amenable to creating accessible units), or as a standalone, i.e., detached structure.

Life-cycle housing

One of Minneapolis’ primary goals in passing an ADU ordinance emerged from the City’s desire to provide more housing options for residents to remain in their homes or communities as they age—or to “age in place.” Seniors could rent out the new ADU or the principal dwelling and generate an income stream, house a caregiver, or move into an accessory dwelling unit on the site of one of their adult children’s homes. Allowing all three types of ADUs was one way to accommodate the housing needs of different families. For example, detached/internal ADUs are great for a person or family with excess space who could use the income to remain in their home, while attached ADUs are often the preferred option for multigenerational and/or accessible living. Beyond the provision of some functional assistance—shoveling snow, climbing a ladder to change a lightbulb, etc. – having one or more additional people on-site can also address the growing challenge of older adult isolation and its consequent health impacts, and help reduce costs to society.

Community response

The City’s Community Planning and Economic Development Department met with all Councilmembers and asked how best to connect with their constituents. They created a website, including a survey that encouraged residents to interact around the proposed ADU ordinance, and executed five community meetings at various sites and times of day. Many community members were pleased that the ordinance would offer a path to legalization for previously unrecognized dwelling units. Illegal second units proliferate around the country, particularly in high-cost cities; in Los Angeles, for example, it is estimated that 50,000 such units exist according to Vinit Mukhija, University of California, Los Angeles, August 2016. Unpermitted units such as these pose fire and structural risks, since jurisdictions cannot ensure compliance with health and safety standards.

The community engagement process revealed some key concerns and the City responded in turn:

1. Residents were concerned that the ADU would not fit with the neighborhood’s character, so the City developed multiple design and regulatory standards to ensure that the ADU would be smaller than the principal unit and would also retain the character and context of the city’s low-density residential areas.

2. Residents were concerned about absentee landlords, so the City required owner-occupancy of one of the units. The owner must record a covenant on the deed with the Hennepin County and also obtain an annual City rental license.

3. Residents wanted to ensure the safety of new and illegal ADUs, so the City requires a building permit and inspection for the construction of each ADU.

Encouraging Adoption

The City also reached out to local architects for feedback on bulk and design requirements. City staff presented model ADU drawings to help people visualize what they can look like and distinguish them from other structures, like duplexes. Other cities have gone even further, such as Santa Cruz, CA, which invested in the development of an ADU Plan Sets Book containing seven ADU prototype concepts which were designed by local and regional architects, and thus take into account the area’s unique culture and climate.

Additionally, the City has eased the costs of building ADUs by waiving the two largest development fees tied to adding dwelling units to a property—a sewer availability charge ($2,499 per unit) and a parkland dedication fee ($1,500 per unit). The first newly constructed accessory dwelling units under the new ADU policy were multi-generational single family homes developed by the City of Lakes Community Land Trust in early 2016. Multi-generational is defined as two or more generations of relatives beyond parents and minor children living together under one roof. The City of Lake Community Land Trust found that they were increasingly working with families who wanted their aging parents to live with them while maintaining privacy and separation or immigrant families that were looking for housing for their very large or extended family. The multi-generational homes are 1,600 square feet combined and include a single common area, three bedrooms, one and a half bathrooms, and two kitchens, with the option of locking internal doors separating them into two semi-separate living areas.

Course corrections

The ordinance was recently brought back to the City Council for a housekeeping amendment in order to gain increased flexibility on a number of requirements. Property owners interested in building detached ADUs were constrained by the maximum floor area requirement of 1,000 square feet, which includes all enclosed parking and living areas within the detached ADU structure. On September 2, 2016, the Minneapolis City Council increased the maximum floor area allowance from 1,000 square feet to the greater of 1,300 square feet or 16 percent of the lot area (up to a maximum of 1,600 square feet). They also relaxed larger setback requirements for internal ADUs with side-facing entrances and reduced off-street parking requirements in neighborhoods near the universities in Minneapolis.

As of May 2016, 50 units have received zoning approval, 22 of which were illegal units that were brought up to code through a legal conversion, a construction permit, and an annual rental license. Most ADUs that have been approved are internal, or located in an attic or basement, since attached and detached ADUs are typically more expensive.

Overcoming Obstacles

Minneapolis found a public that was aware of and had already been engaged in conversations about ADUs, which led to overall receptivity. Yet, many cities around the country that seek to adopt an ADU ordinance are met with opposition, often based on concerns about parking or preserving the “character” of the neighborhood. These generally stem from a fear of possible impacts and are based on assumptions, rather than from actual experiences in other cities. A 2014 survey in Portland, Oregon, which leads the nation in its ADU uptake, indicated that 70 percent of ADUs are owner-occupied and only four percent are used for short-term rentals.

Usually the pushback is over one particular concern, so Eli Spevak, Co-Editor of accessorydwellingunits.org, recommends addressing that key issue with a greater code restriction but ensuring that the other rules are more liberal. Even where cities have adopted ADU ordinances, most experience a negligible uptake due to excessive restrictions, applicant fees and red tape, euphemistically referred to as “death by a hundred paper cuts.” Consequently, many cities are now looking to liberalize their ordinances through ADU updates. After relaxing a few regulatory requirements and waiving fees, Portland permitted approximately 360 units in 2016. Now, primarily to enable people to age in place, the City of Portland even allows two ADUs on one lot—one inside and one outside the principle residence.

Even under the most progressive ADU ordinance, traditional financing poses a barrier to actually getting them built. Most banks today will only finance an ADU if a person has sufficient equity in the property as it stands, with no loan product like those that existed prior to the recession, which would enable a second mortgage based on the as-completed value of the house plus the ADU. Some ordinance requirements also pose obstacles with respect to lenders, such as owner-occupancy, since the resale worth of the home is linked to what you can do with it and limited if both units cannot be rented.

In numerous cities around the country, middle-income people can no longer afford to live in their desired neighborhood, therefore the political push is increasingly coming from the middle class. Grassroots efforts around the country, from Seattle to Cambridge to Austin, are advocating for accessory dwelling units as an important part of the solution.

For questions, contact us at ProsperityPlaybook@hud.gov.