A Critique of NOW's ADU Proposal

It has been more than six months since the Housing NOW related zoning proposals were released, and then indefinitely tabled. I have yet to encounter a detailed critique of the proposals. Given the disappointing condition of the debate I've decided to offer one here for the topic of which I am most familiar: Accessory Dwelling Units [ADUs]. Are there problems with is proposal? The answer is "yes".

Aside: By "urbanism" this site means "finding a way to yes", so this critique should be read as either a suggestion to improve the NOW proposals or as an enumeration of issues to address in the next iteration. By "urbanism" this site means recognizing the dynamism that is a fundamental aspect of cities - so, of course, there will be a next iteration, or at least there should be.

CHANGE: 5.9.02.3. Special Land Uses. All uses listed shall be in accordance with the provisions of Section 5.12.09. Unless otherwise stated within this Article, the Planning Commission shall have the authority to waive or alter the Use Regulations contained in this Article provided the standards of Section 5.12.12.E. are substantially met.

All the worrisome aspects of the proposal are rooted in this change. NOW is promising a trade-off in certainty. Certainty is critically important to incentivizing investment; as there is enough risk in the material process itself without adding regulatory burdens. This certainty for the investor [who is most likely an individual home owner] is given in exchange for a rigid set of qualifications. There is a reasonable question if the certainty is worth the rigidity. Most of the points below will relate to the payoff for this compromise.

As an example of the value of certainty my own experience with approving an ADU project through the current Special Land Use (SLU) process was ~50 pages of documentation, a total cost of $4,000, and roughly 35 hours of meeting with a general contractor, going door to door to talk to neighbors, as well as attending the Planning Commission meeting [which occurs during business hours]. All this is required to get to asking the question "is this approved".

Aside: The overwhelming consensus as I went door to door to communicate with neighbors was a general bewilderment at the process involved in adding a two story building to a block of two story buildings.

Fortunately I am a l-o-n-g term resident of the neighborhood and white so I went into this process with a degree of optimism I could carry a project to the end. I am also blessed with a schedule flexible enough to manage all the requirements. In an era when we are so concerned about privilege and equity the SLU process should raise many red flags; it is a mechanism by with neighbors, the city, and the Neighborhood Associations, are empowered to play favorites. The elimination of the SLU process for ADUs would be a big step forward for equitable development, it should receive vociferous support. It is the trade-offs that this proposal ask for which raise some doubts.

Thought: Would an unfamiliar not white person experience the same reception going door to door as I did? I believe we all know the answer to that question.

CHANGE: 5.9.03.B Minimum Lot Area. An ADU may be developed on lots meeting the minimum lot size for the applicable zone district.

This is a sensible change; it makes a small step towards creating a more a coherent code. This change also serves to demonstrate how arbitrary the current code is; if a zone has a minimum lot size, why is it not the minimum for all reasonable uses in that zone? Verses the plucked from the air 5,000sq/ft threshold.

CHANGE: 5.9.03.D.2 : "The maximum permitted height for a detached ADU is twenty-five (25) feet where the applicable zone district setback requirements for a primary structure are met. Where zone district setback requirements for a primary structure cannot be satisfied, the detached ADU shall be no higher than(20) feet."

Like the previous change this one is principally clean-up. Most ADUs constructed in urban areas will be two stories as the first story is required to meet the parking requirements. They are also very likely to be replacing existing garages or garage-like structures.

Aside: Someday, many years from now, perhaps we could have a conversation about those parking requirements.

DATA: Each single family home is required to have two parking spaces. So the additional one required by the ADU elevates that to three parking spaces on a urban residential lot [do the geometry on that!]. Fortunately the two required by the single family home includes some flexibility. As an example, my ADU project adds the required one, but I started with zero and was also adding one via the ground floor of the garage. The Planning Commission agreed to waive the requirement for one space required, which has never existed, related to my existing home. Due to these parking requirements a by-right ADU project may still end up in front of the Planning Commission to seek such a waiver. My lot could not accommodate three parking spaces without running into the 40% green-space requirement or the removal of tree canopy.

CHANGE: 5.9.03. G. Minimum/Maximum ADU Size. The ADU shall not exceed forty (40) percent of the gross floor area of the primary dwelling unit, but in any case shall be at least four hundred (400) square feet and not larger than eight hundred fifty (850) square feet in gross floor area.

This is a necessary change as the previous 25% was a dramatic limitation. At the 25% limit only a large home - 1,600sq/ft+ - would be permitted to share its lots with an ADU, and then only at the minimum permitted size of 400sq/ft. Larger homes, particularly in traditional neighborhoods, tend to be larger by occupying more of the lot; meaning a lot with a larger home may be a lesser candidate for a well integrated ADU than a lot with a smaller home which leaves more of the lot's area available.

IMPORTANT: A lot in traditional low density residential zoning [zoning code speak for "single family homes"] must maintain 40% of the lot as green-space. Nothing in any Housing Now proposal changes that requirement. This requirement, again, favors projects in relation to smaller homes over projects in relation to larger homes.

It is noteworthy that many cities which have reformed their code have chosen either 50% or 75%. These higher numbers are largely driven by the recognition of the previous point about home size vs. lot size. The number chosen by Grand Rapids - 40% - is a modest and conservative number. The most likely impact of whatever the chosen ratio is that once it is high enough it being raised further will have little additional consequence. At 40% a house only needs to have a gross floor area of 1,000sq/ft to reach the 400sq/ft ADU minimum size, and a medium sized house (1,300sq/ft to 1500sq/ft) provides a comfortable range of 520sq/ft to 600sq/ft for the ADU. The ratio selected by NOW is modest but adequate.

The problem lies with the preservation of the arbitrary maximum of 850sq/ft. if the interest is in ensuring the code provides the margin sufficient to encourage good and appropriate design. On August 9th, 2018, the Planning Commission performed the first approval of an ADU SLU in ~6 years. That approval included waiving the existing 850sq/ft maximum limit. This approval was not controversial. If the site is a large lot or "double" lot a larger accessory structure may be entirely appropriate; or even necessary to meet parking requirement. Using the city's definition of a parking space as 20x10 ft the minimum area to park three vehicles is 600sq/ft, or 70% of this maximum; if the lower floor garage has any space allocated for a purpose other than parking - such as the utilities required by the ADU - it is not difficult to envision a building a mere 8ft. wider and 2ft deeper, hitting that maximum. A reasonable question is: what is point, or more specifically the problem meant to be avoided, by the 850sq/ft limit? Remember that NOW makes that limit absolute. What if the investor [almost certainly the property's resident] desires to provide additional parking, such as a fourth space/stall? Additional parking is a top priority expressed by the Neighborhood Associations.

It would be preferable, if the maximum cannot be eliminated, to establish maximum by-right and still permit larger ADU's structures through the existing Special Land Use process. There are too many potential instances where exceeding this arbitrary limit may be the appropriate design.

An interesting scenario to ponder regarding this maximum size limit, especially in terms of by-right development, is that I could, by-right, tear down my existing home and construct a new "single-family" home on my lot, at the maximum allowable height for my zone, and occupying exactly 59.999% of the lot, right up to the minimum set-backs. At a whopping 6,857sq/ft, or even larger if I got fancy with dormers in the roof line, such a structure could easily contain one or more informal ADUs. This would be by-right under the existing code because of the preference the Zoning code grants to "single-family" homes. It is probable such a reconstruction would prove easier to finance than construction of a much more appropriate ADU; see the points about Owner-Occupancy requirements below.

Aside: Informal [aka unlicensed] quasi-ADUs are not uncommon in the city of Grand Rapids, Typically they exist within the primary structure, often in a basement without to-code fire-escape provisions, etc...

CHANGE: 5.9.03. G. Bedroom Maximum. A maximum of two (2) bedrooms are permitted within an ADU. Occupancy shall be limited to no more than two (2) persons.

This change is a simplification; occupancy requirements move over to the residential code making ADUs the same as any other residential unit. This takes the code a step towards being less arbitrary. ADUs are a residence, leased or not leased, and should be treated no differently than any other residence.

CHANGE: H. Owner Occupancy. One (1) of the dwelling units shall be owner-occupied. If the ADU is leased, it shall be registered with the City as required in Chapter 140 of the City Code.

This is the most poisonous provision of the existing regulation, and NOW would make it absolute [currently it could be waived, theoretically]. The Owner-Occupied provision of many place's zoning code is the shining example of the arbitrary nature of zoning; and how zoning serves to install and persist economic inequity. Consider how there is not an Owner-Occupied provision for duplexes, quadplexes, flats, apartment blocks, or for-rent single-family homes? If rental of a divided house [duplex] poses no problem the zoning code needs to consider, why does an ADU?

In the words of Kol Pererson, one of the nation's leading experts on ADUs:

"With this restriction in place, ADUs generally will not be built.".

Unfortunately it requires non-trivial knowledge concerning how lending, finance, and [financial] equity functions to understand the degree to which the Owner-Occupied provision is a poison pill. Through the financial issues it creates this provision serves to perpetuate the very social|racial|class inequity which the Housing NOW proposals expressly intend to reduce. It is difficult to imagine the perpetuation of the Owner-Occupied provision, given the stated purpose of the Housing NOW proposals, as other than a strategy to render ADUs more palatable to the fiercely anti-renter Neighborhood Associations.

The most common defense offered for the Owner-Occupancy by those unwilling to admit that their discriminatory preferences is that it prevents "speculative" building. This is an example of the Zoning Code addressing an imagined problem, as there is no evidence of speculative construction of ADUs even in largely unregulated markets. In the market with the largest number of permitted ADUs - Portland, OR - which lacks an Owner-Occupancy requirement between 70% and 90% [depending how you want to count] are owner financed; and 64% are owner-occupied. The complexity of integrating an ADU into a site (each one is different) and the generally smaller size are a demonstrably sufficient barrier to prevent significant speculation. Profitable speculation requires turning over larger numbers of units with low (standardizable) labor costs. It is important to remember that Zoning is not the only restriction on the housing market; there are other financial, regulatory, and cultural constraints. None of those other restrictions are going away anytime soon; on the contrary, the current regulatory trends within the financial sector are more likely to amplify the social inequity created by those other non-Zoning related constraints.

Construction of ADUs is one of the very few approaches working class and lower-middle class households have to either expand their housing capacity or to create new assets - the very process by which many white immigrants to the United States in the past were able to lift themselves into the hallowed status of "middle class". Owner-Occupancy provisions strangle the construction of ADUs in the following, often obscure ways:

• The lack of ADUs in a market creates a situation where there are not "comps" [comparable homes] by which risk-averse financial institutions can determine the value an ADU adds to the property. An important point is that financial institutions will not consider potential rental income for personal loans. This means that an ADU often has a low-to-zero value on paper. Thus the obstacles to the construction of ADUs prevents the construction of ADUs as a feed-back loop through financial institutions.
• ADUs which are constructed are often done so using high cost (higher interest) debt, including credit cards, due to the lack of financial options. The owner builds the unit with the hope that once constructed the debt can be refinanced into lower interest debt - only to discover that the financial institutions view the unit as having little or no value. The sequence of purchase-then-renovate-then-refinance is a common practice for "starter" single-family homes.
• Financial institutions are wary of the Owner-Occupied restrictions, as they make a property less "flexible". The provision also creates a significant financial peril for the builder, they must be very confident they can remain the owner occupant for the term of the debt used to construct the ADU. In the case of a family health emergency, or unexpected job change, the owner cannot temporarily leave the property and cover the cost via rental until they return. This is not an uncommon circumstance. If the property were a single-family home it could be rented in that time with essentially no regulatory hurdles. In the case where an owner in a city with an Owner-Occupied provision must leave the property the financial institution is left holding an, on paper at least, "under water" asset. And there will be significant financial consequences for the owner forced to abandoning their property by the Zoning Code.

The deed restriction required for ADU construction, [which may not be avoidable] also may create social equity issues. Some lending institutions devalue properties with deed restrictions or exclude such properties from low-income assistance programs such as those backed by Fanny & Freddy, due to the complexity of those properties. The issues created by the deed-restriction are amplified by the Owner-Occupancy restriction.

DATA: The required deed restriction is a legal device which prevents the ADU from being separated from the primary structure in the future. This ensures the ADU remains an Accessory structure.

CHANGE: I. Leasing or Rental. No ADU shall be leased or rented for less than thirty (30) days and shall not be used as a short-term rental..

This, again, is about creating arbitrary inflexible. However, as that flexibility is extremely unlikely to be realized renders it a minor point; yet this is denying people otential income. I have communicated with people who AirBNB their own homes, condos, or even apartments on weekends as a way to afford to keep said asset. They coach surf at friends or families during those weekends. As a result my feelings towards short-term rentals is much more sympathetic than those who fear some other potential consequence. The better choice would be to allow the same avenues towards wealth which were permitted to my own ancestors.