Accessory Dwelling Units

Liveable City Position Paper:

Accessory Dwelling Units

August 9, 2015

Executive Summary

To promote the Austin City Council’s stated goals of increasing the supply, affordability and diversity of housing options for Austin residents, the Board of Liveable City supports the following actions regarding city regulation of Accessory Dwelling Units (ADUs):

  1. Direct the City Law Department to close a loophole in the current proposal to ensure that any new ADUs resulting from relaxed code requirements will provide housing for Austin residents, not be taken off the market as Short Term Rentals (STRs).
  2. Once this loophole is closed, enact Planning Commission’s ADU recommendations as quickly as possible. These would:

• Reduce building separation from 15 feet to 10 feet.

• Allow an entrance within 10 feet of a property line.

• Remove the driveway placement requirement.

• Reduce current parking requirements to a maximum of one off-street space for all secondary units.

• Prohibit the use of resulting new ADUs as Short Term Rentals.

• Apply the ordinance in all areas throughout the city where ADUs are currently allowed.

  1. Direct city staff to undertake the following measures to reduce construction costs for ADUs: (a) allow ADUs to use sub-meters and the same water/wastewater lines as main dwelling units, unless doing so will demonstrably overtax existing infrastructure or pose other health or safety problems; (b) develop a variety of pre-approved ADU architectural plans to save permitting time and costs for homeowners and city staff; (c) work with local affordable housing experts and lenders to identify appropriate financial tools to help low- to moderate-income homeowners finance ADU construction.
  2. Any additional proposed ADU code changes beyond the Planning Commission’s current recommendations should be addressed through the current Land Development Code (LDC) rewrite process to allow adequate consideration of, and adjustment for, Austin’s wide variety of topography, infrastructure, traffic conditions, existing uses, potential for flooding and other critical factors.
  3. Because the current Planning Commission recommendation would apply only to areas where ADUs are already allowed, city staff should also be directed to use the LDC rewrite process to examine existing barriers to ADU construction citywide and to eliminate them where feasible, while retaining appropriate development regulations to protect neighborhood character and nearby residents.
  4. Specific efforts should be made to ensure that future changes in ADU regulations that significantly expand property rights for some owners beyond the current Planning Commission recommendations should produce units that are affordable for renters making at or below 50-60% Median Family Income (under $25,000 to $32,000 per year). The City should explore the use of financing and incentive mechanisms such as Smart Housing and affordable housing bond funds to assist the development of ADUs that provide affordable housing options across the city.

Background

On June 12, 2014, the Austin City Council approved Resolution 20140612-062 initiating amendments to Title 25 of the City Code to “reduce regulatory barriers to the development of Accessory Dwelling Units less than 500 square feet in size.” The public goals of this resolution were clearly stated within its text:

•  To provide new housing units “without changing the feeling or texture of established neighborhoods”;

•  To provide a mix of housing types “including both rental and homeownership opportunities”;

•  To offer homeowners a way to “make ends meet while providing affordable, central-city housing opportunities.”

Some residents and several members of the Planning Commission believed it would be better to address ADU regulation in the context of the city’s current Land Development Code rewrite to take into account the wide variety of Austin’s neighborhoods, streetscapes and infrastructure. However, others were anxious to move this issue ahead of the code rewrite in hopes of producing additional housing units more quickly for Austin residents.

After multiple committee meetings and a robust public process spanning many months, the Austin Planning Commission arrived at the following recommendations regarding ADUs:

• Reduce building separation from 15 feet to 10 feet.

• Allow an entrance within 10 feet of a property line.

• Remove the driveway placement requirement.

• Reduce current parking requirements to a maximum of one off-street space for all secondary units.

• Prohibit the use of resulting new ADUs as Type 2 Short Term Rentals

• Apply the ordinance all properties throughout the city where ADUs are currently allowed.[1]

On June 9, the City Council Committee on Planning and Neighborhoods held a somewhat shortened public hearing on this item, and on June 15, voted to recommend the Planning Commission’s proposal to the full Council on First Reading Only. On June 18, after an abbreviated public hearing, the City Council approved Planning Commission’s recommendations on First Reading, and returned the item to the Planning and Neighborhoods Committee for possible additional changes before Second and Third Readings. 

Proposed ADU Changes Must Achieve Stated Public Goals

Any relaxation of city code requirements, including the current Planning Commission proposal, will effectively expand development rights for some property owners, over and above what they are currently granted under city code. In return, we must ensure that these expanded rights result in a clear public benefit and that any changes are designed to achieve Council’s stated public goals: to increase housing options for Austin residents at the most affordable rates possible, while respecting existing residents and neighborhoods.

If we relax ADU regulations only to wind up with more Short Term Rentals or if we inadvertently add to the pressure to treat residential areas as commodities rather than homes for Austin residents, then we will have merely benefited a few individuals, including the growing number of speculators in our city’s red-hot real estate market. The people of Austin deserve the assurance that any new units developed as a result of relaxed regulations will actually provide housing for local residents, not simply add more fuel for gentrification and ever-escalating property taxes.

Short Term Rental Loophole Must Be Closed

Planning Commissioners were quite clear in their intent that any new units should provide housing for Austin residents, in keeping with the clearly stated goal of the original Council resolution. For that reason, the Commissioners recommend prohibiting Type 2 Short Term Rentals in any new ADUs.

However, because of the way city code[2] is written, it would still be possible for a majority - or even all - new ADUs built as a result of relaxed regulations to be used as permanent Type 1 Short Term Rentals, in which the homeowner lives in the main dwelling and keeps the ADU perpetually rented out to successive groups of tourists – not available for rent by Austin residents. Clearly, this is not what the previous Council intended when they spoke of helping homeowners “make ends meet while providing affordable, central-city housing opportunities.”

Unless this loophole is addressed, Austin may have spent nearly a year of staff and public time only to end up with no new housing at all. Because the proposed changes would effectively expand development rights for some individuals, we must ensure that the ordinance language will, in fact, achieve the public goal of increasing housing for local residents.

For that reason, we strongly urge Council to direct the City Law Department to draft language that closes this loophole before enacting any changes to ADU regulations, and that any rental ADUs built after the effective date of the ordinance be prohibited for use as any type of Short Term Rental. 

A property owner should be able to reap a substantial monthly profit by renting a unit at market rates to an Austin resident, thus fulfilling the stated public goal of helping owners “make ends meet while providing affordable, central-city housing opportunities.”

Also, please note that none of the STR restrictions discussed above would affect anyone using an ADU for a family member or caregiver to live rent-free.

New ADUs Not Likely To Provide Affordable Housing for Low Income Households but Would Increase Housing Options for Diverse Household Types and Increase Overall Housing Supply

In considering the current proposal, it is important to understand that the new ADUs themselves are not likely to provide affordable rental housing for those at lower income levels. As city staff and affordable housing experts stated during the Planning Commission process, it will not be possible or practical for the average homeowner to rent out a new ADU at any truly affordable level due to myriad financial realities: financing, construction costs, insurance, maintenance, and the loss of all property tax exemptions on the ADU portion of the property.

Even if a generous-minded homeowner were willing to rent a new ADU at 80% Median Family Income (MFI) that unit would still only be affordable to a single individual making over $43,000 per year, though a working couple or two roommates who don't mind tight quarters might be able to swing it on a pair of lower salaries.

To put a human face on these numbers, the city currently has 1,590 employees making less than 50 percent MFI, or below $26,300 per year. Both the University of Texas and the Austin Independent School District have many employees in that same low salary range, which also includes most musicians, food service workers, hospitality employees and other private sector low-wage earners. However, providing smaller, more location-friendly housing options for a range of household types at market rates can significantly expand housing choices and take modest pressure off the middle and lower tiers of the housing market.

We hope that increasing Austin’s available housing options will ultimately reduce rents or at least cause them to rise more slowly. However, we feel it necessary to emphasize that the development of ADUs that meet the severe and growing needs of Austin’s lower income households will require city subsidies and incentives.

Direct Staff to Explore Cost Saving Measures for ADU Construction

During the Planning Commission process, it became evident that the most significant barriers to ADU construction were actually the cost of construction and the limited availability of financing tools. For that reason, we urge Council to direct staff to undertake the following measures as quickly as possible:

(1) Allow sub-metering of ADUs where possible, rather than requiring separate water meters and lines, which could potentially save over $20,000 in construction costs per unit;

(2) Develop a variety of pre-approved ADU architectural plans to reduce time and permitting costs for homeowners and city staff;

(3) Work with local affordable housing experts and local lenders to identify viable financial tools to assist interested low- and moderate-income homeowners in financing ADU construction.

Further Code Changes Not Tied to Affordability Should Be Part of LDC Rewrite

If further changes are contemplated beyond the current Planning Commission recommendation, we strongly urge that these proposals to be taken up as part of the ongoing Land Development Code rewrite, not as a separate blanket ordinance. This will allow fuller consideration of, and adjustment for, Austin’s wide variety of topography, infrastructure, traffic conditions, existing uses, potential for flooding, and other critical factors that may impact public health and safety.

Finally, please note that the current Planning Commission recommendations would apply only to those areas of Austin where ADUs are already permitted. If the city is seriously interested in using ADUs to increase the supply of housing stock, city staff should be directed to examine, and where possible address, existing barriers to allowing ADUs in all areas of the city, including restrictive covenants. While it may not be possible to overcome every barrier, with appropriate development regulations in place, many areas may be able to accommodate additional units without diminishing neighborhood character or negatively impacting nearby residents or property values. Again, such an effort would be best undertaken as part of the current LDC rewrite process.

Conclusion

Encouraging an increase in Accessory Dwelling Units may expand housing options for Austinites, though not at deeply affordable levels without the participation of experienced nonprofit developers and the availability of specific incentives and subsidies. To achieve the stated goal of providing more housing for local residents, City Council must take steps to ensure that any new units resulting from relaxed regulations are not permanently removed from the market as Short Term Rentals.

We strongly encourage City Council to adopt the Planning Commission’s current recommendations as soon as the Short Term Rental loophole is addressed. Further code changes relating to Accessory Dwelling Units should be tied to creating deeply affordable units and should be considered in context of the current Land Development Code rewrite.

Liveable City is a local nonprofit committed to ensuring an equitable and sustainable future for all Austin residents. Learn more at: http://liveablecityatx.nationbuilder.com


[1] At the time Planning Commission considered this proposal, the proposed ordinance was presented as applying citywide. Shortly before this item came to Council, city staff added the phrase “i.e., to all properties throughout the city that can currently build an ADU.”

[2] http://www.austintexas.gov/edims/document.cfm?id=199458