[BoulderCouncilHotline] ADU Update - First Reading Questions with Answers from Staff

[Sugnet, Jay]

May 22, 2018 First Reading Questions - ADU Update

Attached is a worksheet of the 12 options to help council during the hearing to make notes and track the discussion. Hard copies will be provided at the hearing.

QUESTIONS

Neighborhood Diversity

  1.  How does the proposal address the diversity of neighborhoods?
At the Feb. 27 council study session, the feedback from council was to focus the ADU Update process on a citywide policy regarding accessory units (a baseline) and then use the neighborhood/subcommunity planning process to make modifications to the baseline based on different neighborhood needs and preferences. The current ordinance reflects this feedback.


Affordability

  1.  How is affordability addressed in the proposal?
National research shows that accessory units are typically rented well below market rents (58 percent of homeowners report renting below the market rate).  Boulder accessory unit rents are lower than market rents and 85 percent include utilities (see chart below). The average size of an ADU is 711 sq. ft. and an interior OAU is 738 sq. ft. Therefore, 2-bedroom apartments are comparable; however, 1-bedroom apartment rents are also included for context. In comparing either 1-bedroom or 2-bedroom, 88.5 percent of all accessory units in Boulder are affordable to a household earning 75 percent of the area median income (AMI).  In comparing the median accessory unit rent to our 60% AMI affordable rental program, the median rent is less than that of our affordable units of similar size.

The data for accessory unit rents comes from a Dec. 2017 survey of current owners. All of the 230 legally established accessory units in the city received a survey and 70 percent responded. The raw data for rents changed is attached (ADU Rent Survey Data and Affordable Rents).


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Note: The market rate rents are from Zillow Research and the raw data is attached (Zillow Rent Data 2010-2018). See below for the discussion on Other Rental Data Sources for more information.

One of the primary purposes of the ADU Update was to provide "a diversity of housing types and price ranges," which is a core value of the Boulder Valley Comprehensive Plan<https://bouldercolorado.gov/bvcp>. In addition, the project purpose for the ADU Update project is intended to achieve the following:

  *   provide additional flexibility to homeowners to stay in their homes by allowing for options that may either create supplemental revenue sources or allow for aging in place on the property; and
  *   increase workforce and long-term rental housing opportunities while balancing potential impacts to existing neighborhoods.

Staff anticipates that ADUs will remain affordable in the future for several reasons:

  *   ADUs are not a typical rental product in Boulder as the property owner is sharing a house or at a minimum a yard with a renter(s).
  *   The renter is agreeing to some sort of relationship with the property owner rather than a typical property manager in other rental situations.
  *   As a result, most ADU rentals are arm's length transactions (e.g., someone you know, friend of a friend). Typically, when a property owner finds someone compatible - they are not likely to raise rents every year to keep up with the market - all in an effort to keep a compatible tenant. This is why national research shows that 58% of all accessory units rent for below market rate rents.

Staff finds that ADUs present a unique opportunity to provide a diversity of housing types and prices through market mechanisms. ADUs are currently affordable, and highly likely to remain affordable in the future. Staff will continue to monitor ADU affordability to determine if changes are needed in the future.

Other Rental Data Sources

  1.  What are other sources for market rate rents?
Unfortunately, market rental data is not very reliable which makes it difficult to establish a rent limit for accessory units based on market rents. Some sources are self-reporting - often  from predominantly larger apartment complexes with a limited sample (i.e., Denver Apartment Vacancy & Rent Report). Some sources (e.g., Rent Jungle, Denver Apartment Vacancy & Rent Report) use average rents, in which high end rental units tend to skew the results higher. Staff recommends focusing on median rents (one half of the unit rent for less and one half rent for more) as a more accurate reflection of the market. Finally, many sources use proprietary predictive modeling to determine rents which makes it difficult to determine the size of the sample, margin of error, etc.  As a result of these challenges, it may be difficult to create policy choices or implementation approaches based on market rents.

Staff assembled a sampling of sources for comparison below. Zillow was used in the staff memo to council and throughout the ADU Update process. Zillow has many of the same limitations as the other sources, but provides monthly updated estimates over a long period of time that can be useful in analyzing market trends.

Rent Jungle - https://www.rentjungle.com/average-rent-in-boulder-rent-trends/
Location

Average 1BR rent

Average 2BR rent

Boulder, CO

$1,748

$2,140

(accessed May 30, 2018)

Apartment List - https://www.apartmentlist.com/rentonomics/rental-data/
Location

Median 1BR rent

Median 2BR rent

Boulder, CO

$1,140

$1,400

(accessed May 30, 2018)

Denver Apartment Vacancy & Rent Report - https://www.colorado.gov/pacific/dola/denver-metro-area-vacancy-rent-survey-data
Location

Average 1BR rent

Average 2BR rent

City of Boulder - Except University

$1,313

$1,418

City of Boulder - University Area

$1,414

$1,582

(accessed May 30, 2018)

Other

  1.  Did the BVCP Survey question indicate what "some" means to the people answering the question?

As part of the Boulder Valley Comprehensive Plan Community Survey (available here), 62 percent of the respondents were supportive of the statement "Allow options for residential infill such as accessory dwelling units and small detached homes in some single-family Residential Neighborhoods." 28 percent were opposed to the statement. There was not a follow up question to indicate which neighborhoods would be more appropriate.



  1.  What are other cities doing to ensure affordability?
The June 5 council memo describes programs in Santa Cruz and a pilot under development in west Denver. Both programs are voluntary and the cities provide consideration in the form of low- or no-interest loans and partner with Habitat for Humanity to keep construction costs to a minimum.


  1.  What metrics will be used to track the effects of the change in accessory unit regulations?
As discussed in the memo to council, changes to the accessory unit regulations will be accompanied by monitoring and enforcement. The monitoring will ensure that the intent of the changes is met, and any unintended consequences are addressed in future code changes. Experience from other cities shows that as community attitudes towards accessory units change over time, so must the regulations. The city will also continue enforcement efforts as directed by council related to occupancy, nuisances, and life safety issues not just in accessory units, but also rentals in general.  The Housing Advisory Board indicated that they would like to work with staff to develop a communication plan to bring illegal rentals into compliance.

If directed by council, staff is able to conduct periodic research related to accessory units. The ADU survey of current owners (2012 and 2017) provided valuable information to understand how ADUs are used over time and the how the current regulations function (e.g., rents charged, income of residents, number of ADU occupants, number of complaints, etc.).

Illegal Units

  1.  How many illegal units are in the City?
The city's code compliance team identified 35 active cases for illegal units in a single-family residences (may be others not yet found). 82 illegal units were identified and resolved in 2017. It is important to note that of the 35 cases, it is not known if the unit could become a legal accessory unit under the current requirement (e.g., meet the size requirement, parking requirement, allowed by zone, etc.).


  1.  How many short-term rentals are in accessory units?
25 out of 35 illegal units currently in enforcement have been identified from short-term rental advertisements (does not include closed cases). In 2017, 125 suspected illegal units were investigated with 82 illegal units found. Of the 82 units in violation 48 were identified by short-term rental advertisements.


  1.  How many accessory units has the city licensed as short-term rentals?
Short Term ADU/OAU licenses: 36 (there are a total of 767 short-term rental licenses issued for single family residences)

  *   Owner occupied in main house, accessory short-term rental: 31
  *   Owner occupied accessory, main house short-term rental: 5


  1.  Enforcement is already a concern, what is the plan for new/additional units?
Staff's proposal is to prohibit short-term rentals for newly created accessory units and only allow short-term rentals for properties with an existing short-term rental license. This simplifies the enforcement of short-term rental activity because staff will no longer need to determine if the property meets the conditions for short-term renting, the requirement is simply that it is not allowed. Staff is also pursuing additional research tools to improve proactive identification of short-term rentals that are in violation.

Any illegally established accessory units will be required to follow the process to become legal or the unit must be removed. Should the proposed changes become adopted the process for them to become legal will be less challenging which will encourage voluntary compliance.


  1.  Will illegally established accessory units be grandfathered?

No, only legally established properties prior to a code change can claim "grandfathering". Since the units were never legally established they must meet all currently applicable code requirements. It is anticipated that many illegally established rentals will be able to meet the new simplified regulations with greater ease. For example, accessory structures permitted as an office and converted to a dwelling unit without permits will be encouraged to meet the new regulations for accessory units rather than continue illegally. It is a similarly situation for illegally created rental units in the basement of a home. The Housing Advisory Board discussed this issue in detail and recommended that the city begin a campaign to educate homeowners on the benefits of legalizing an illegal rental.

If you have any other questions, please contact me at 303.441.4057.
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