PLAN (Peoples League for Action Now) – Boulder County applauds and strongly supports City Council’s effort or expand opportunities for the creation of Accessory Dwelling Units (ADUs) and Owner Accessory Units (OAUs). We support expanding opportunities for the purpose of increasing PERMANENTLY affordable housing opportunities in Boulder and garnering the community diversity benefits that ensue.

As City Council considers these legislative changes, PLAN-Boulder County recommends several essential guiding principles for incorporation into the final ordinance.

PERMANENT Affordability: 

The reason why the community is engaged in this ADU/OAU discussion is to combat the erosion of affordable housing options and the hollowing out of middle and lower income households in Boulder. So let’s ensure that affordability is permanent. Permanence is critical; what is affordable today will not be affordable in the future because of Boulder’s hyper-inflated real estate market. In 2015, Boulder’s median rent increased 7768 % more than inflation. 

 

 

 

 

What if we were to enact a policy that would reduce that difference to a mere 4900%? Until this paradigm is addressed, housing affordability measures will be inadequate.

Permanence can be achieved by making it a condition of licensing for ADUs and OAUs. The rationale for making it a condition of licensing is that by expanding ADU and OAU options, the City is using a community-owned resource (increased use of property) and granting that increased use to property owners. That increased use has value and the increased value, being the result a community action and not actions on the part of property owners, should be captured by the community in the form of a community benefit (in this case, PERMANENTLY affordable housing). By not capturing that value, the city would be forfeiting the community benefit of permanent affordability and handing a windfall to property owners, which in essence, would be a public subsidy for property owners and investors. This means that property owners and investors gain wealth at the public’s expense and the public’s goal is still not achieved.

Capping the rate at which rents may rise to some fraction of the market rise while still enabling landlords to capture some portion of that market rise, can achieve permanent affordability while still maintaining the economic incentive for the creation of ADUs and OAUs.

Some who oppose rent caps, want to maximize earnings for property owners. Others want to maximize bulwark against redevelopments of older modest houses into large expensive houses. However, that maximization comes at the expense of the OAU or ADU renters whom are generally lower on the economic ladder than property owners. We need to be clear about our priorities and whom we are trying to benefit the most. If an indexed rent cap is applied with the appropriately calibrated affordability factor that affords a return greater than inflation, property owners can still achieve year over year increased profits from rents.

There are several common scenarios with lot redevelopments.

  1. Someone with limited income faces a choice of selling their house because they can’t afford to keep it up. If they sell it, undoubtedly a developer will buy it and the economics dictate that they will put up the largest house possible. An alternative outcome is for the owner to be enabled to build an ADU or OAU and that income enables them to stay on the property.
  2. Someone dies and their heirs sell the house to a young family or couple that may rely on the ability to rent an ADU or OAU in order to comfortably afford the house.
  3. Someone dies and the heirs sell the house or, someone job transfers them to another city, or for some other reason they move from Boulder and sell. Undoubtedly a developer will buy it and the economics dictate that they will put up the largest house possible.

ADUs and OAUs will not resolve this issue. The solution lies elsewhere and it is probably NOT a market based or incentive based solution. If we don’t want McMansions, we will need to tighten the compatible development standards and energy and resource consumption standards. There are too many people with a lot of money who want big houses. That is the market and developers seek to satisfy that market. With land costs what they are, that paradigm will be perpetuated.

Whatever the approach, the goal is to have market rents and ADU or OAU rents rise at divergent rates so that ADUs and OAUs become increasingly affordable over time, relative to the market. Then, owners and renters more equitably share the benefits.

It is worth noting that ADUs and OAUs will inescapably increase the overall value of properties because of their income potential. Non-ADU/OAU properties can be sold at prices that purchasers (in example B described above) can still afford. With ADUs or OAUs added, they will sell at prices beyond the reach of the many of those example B households.

Grandfathering:

Because Boulder is proposing changing the rules in the middle of the game, existing legal ADUs and OAUs should be grandfathered and exempt from rent caps for a period of time, but only until such properties change ownership.

Short Term Rentals (such as Air BnBs):

Research indicates that short term rentals cause local market rental rates to increase, in part, because they reduce supply by removing dwelling units from the long term rental market. Thus, short term rentals are antithetical to the goals of expanding ADU and OAU and affordable housing opportunities. No short term rentals should be allowed for new ADUs and OAUs, or existing legal ADU and OAUs once they change ownership.

Compatible Development:

Properties with ADUS and OAUs must comply with current bulk, mass, scale, floor area and lot coverage standards (compatible development standards).

Expanded Limits:

It may be worth considering changes to current standards that will allow increased proximity of ADUs and OAUs, increases to their percentage of all dwellings within specified areas and increases to the size of OAUs, when such increases are part of adopted neighborhood plans, area plans or subcommunity plans. However, increases to the limits for number of units should be based on an understanding of the number of existing legal and illegal ADUs and OAUs relative to the total potential available under current rules. To our knowledge, such an analysis has not been done but would seem to be the rational basis for increasing limits. If current utilization is near the current limit, then increases may be justified. If not, why would increased limits be necessary?

Enforcement:

The City has been lax in its enforcement of occupancy limits, ADUs, OAUs and short-term rentals, and has placed an uncomfortable complaint burden on neighbors to report non-compliant properties. In order for an expansion of ADUs and OAUs to achieve the goal of expanded affordable housing opportunities, much more robust enforcement is required.