On 4 October 2018, PlanNH and Vital Communities sponsored a talk titled, Can Accessory Dwelling Units Help Meet Our Region’s Housing Needs? at the Kilton Library, in West Lebanon NH.

The primary speaker was Kol Peterson from Portland Oregon. He has published many books/resources on the subject of Accessory Dwelling Units: http://BuildingAnADU.com, https://accessorydwellings.org, and Backdoor Revolution.

His answer is a strong, YES. Primary drivers for people to create an ADU:

• Rental income
• Flexible space for intergenerational use
• Age in place

Why are ADUs valuable for a municipality?

• 75% of 2018 households have 1-2 people
• In major cities, 35-45% of households have a single person
• But they have no option but to purchase a large single family home
• Average home: 1950 – ~950sf; 2018 – ~2600 sf
• Small homes cost less to build, and have HUGE energy savings
• A huge benefit of additional housing using existing homes with minimal impact to the town/streetscape.

Parking: In Portland OR, the US city with greatest penetration (1%), ADUs have no observable effect on parking. (A municipality only needs to find space for one additional car per hundred homes.)

The Finances: ADUs (like all construction projects) are expensive to build, therefore, breakeven has multi-year payback:

• 250sf => $100K
• 600sf => $200K
• 750sf => $150K to $300K

ADU Construction is not financially viable for ordinary developers who want to “build-and-flip”:

• Doesn’t improve the value of the property enough to make up for the $100k-300K construction cost.
• But… rental income breaks even over 5-10 years (depending on construction cost and market)
• Attractive for people who plan to stay in the neighborhood for 20-30 years

Financing is hard: must rely on home equity line of credit, savings, cash out of liquid assets, family, sweat equity (often 50% of cost)

Takeaway: Given the difficulties of building anything (brainstorming, finding an architect, talking with the neighbors, schematics and design, etc) and the modest financial returns, ANY limits of permitting and zoning regulations discourage people from developing ADUs. There is a good discussion in the slides. Another example of a disincentive, the State of NH requires an attached ADU to have a connecting door.

Furthermore, many laws/ordinance/regulations require owner-occupied ADUs. This is also a disincentive, for the following reasons:

• Appraisers will undervalue because of deed restriction, therefore may not be able to refinance
• Lenders cannot (by definition) owner-occupy, so may choose not lend
• Affordable housing NGOs cannot occupy, so may not fund either
• The requirement places a significant restriction if the owner needs to move
• Why wouldn’t owner simply build an un-permitted ADU?
• No cities have seen large number of ADUs, so it’s not a practical problem
• Finally, what other property type in the US has this requirement?

However, certain restrictions are not unreasonable:

• Regulations limiting ADU to 750-800sf are not an important restriction because ADUs are designed for secondary home/smaller unit
• Regulations preventing ADU from being subdivided is not important restriction

What about people who use ADUs as Short Term Rentals?

• There’s no data on the trends
• If it is becoming a problem, decouple ADU reg’s from ST rental reg’s – they’re not the same thing.

Slides: https://vitalcommunities.org/wp-content/uploads/2018/10/Kol-Peterson-Slides-Lebanon-NH-Oct-2018.pdf

Video: https://www.facebook.com/bmlgreenguy/videos/vb.1523616449/10217649924829603/

Sponsors: Vital Communities – Workforce Housing and PlanNH

Feel free to share this post on Facebook, LinkedIn, Twitter, or email. Any opinions expressed here are solely my own, and not those of any public body, such as the Lyme Planning Board, Budget Committee, or Trustees of the Trust Funds where I volunteer. I would be interested to hear your thoughts – you can reach me at richb.lyme@gmail.com.

On May 3, 2019, I attended the Spring 2019 Business Leaders Housing Breakfast sponsored jointly by Vital Communities  and Twin Pines Housing. Twice a year, these groups bring together a group of speakers to address questions about housing. I have included links to the three presentations. Here are my takeaways:

Bennington Healthy Homes 

Kevin Dailey of Southwestern Vermont Health Care (SVHC) described how potential employees have trouble finding housing close to the hospital and consequently endure a long commute. SVHC established a program to acquire abandoned homes that are not economically viable as a commercial renovation. They then upgrade the homes so that there will be no major expense for 10 years, then pay the closing costs for an employee to purchase. They expect to spend about $25,000 per home. They have done four homes so far.

Woodstock Housing Initiative

Jill Davies spoke about how Woodstock Community Trust established a program to help moderate income people live in Woodstock, Vermont. They point out the need by asking these questions:

• Who’s saving your life?
• Who’s teaching your kids?
• Who’s cooking your food?
• Can they live in your community?

• A buydown program, where the initiative puts up the down-payment, mortgage insurance, closing costs, to help a person who can afford the monthly payments, but doesn’t have the cash for up-front costs
• They make structural repairs and fix major appliances, to avoid big bills in the first three years

Upper Valley Real Estate Update

• They consider the Upper Valley to have 69 towns, about 187,000 population, and 87,000 jobs.
• Affordable housing is a core component of community health. If housing isn’t readily available, the community is suffers.
• Rental property across the Upper Valley have less than 3% vacancy (very low), this is down about 10% from a year ago.
• The commute to jobs has not changed much in the last year, but remains high at about 45 minutes.
• Number of home sales has remained roughly constant over the last year, but inventory has changed:
  • Homes below $300K: inventory is strongly down – hardly any are available
  • Homes between $300K and $600K: down, less available
  • Homes above $600K: about the same, or slightly higher inventory

Feel free to share this post on Facebook, LinkedIn, Twitter, or email. Any opinions expressed here are solely my own, and not those of any public body, such as the Lyme Planning Board, Budget Committee, or Trustees of the Trust Funds where I volunteer. I would be interested to hear your thoughts – you can reach me at richb.lyme@gmail.com.