Reply to Say it with me: ADUs drive housing prices UP not down

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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]We live in a starter home with a decent sized yard. We could easily fit an ADU and we could pay for it by borrowing against the appreciation in the value of our home. And that would increase the value of our home overnight by probably 30 percent.

How exactly does that help affordable housing? How does that help someone trying to save up to buy their first home, a starter home like ours? All it does it drive the price of our starter home beyond the budget of anyone who would be in the market for a starter home.

I can't tell if the D.C. government is cynical or just stupid in how they portray policies that are designed to enrich developers and people who already own homes as somehow helping everyone else. [/quote]

1) the income it provides to you helps make your house more affordable
2) the rental unit provides a lower cost option to another person or family[/quote]

But it DOESN'T make the original property more affordable to the next buyer. It creates cheaper housing in people's backyards for rent. The property itself won't be cheaper after adding an ADU, but more expensive.

Do I have that right? [/quote]

Yes, the property will be more expensive because there are two units of housing on it instead of one. Just like, generally, a one-acre parcel with 20 units of housing on it will be more expensive than the same parcel with 1 unit of housing on it. It should go without saying that a one-acre parcel with 20 units of housing on it has 20 times as many housing units as a parcel with 1 unit of housing on it.[/quote]

So what you’re saying is ADUs are zero sum and we have to choose between rental affordability and purchase affordability. If that’s the case, it’s worth a conversation about balancing rental and purchase affordability, because those two things are actually linked. Monthly mortgage payments put a soft cap on rents, so if mortgage payments go up on average, rents have more headroom to grow. [/quote]

No, that's not what I'm saying. I'm saying that the purpose of ADUs is to add housing units, not to ensure that the PP at the top can afford to buy a "starter" home with a yard big enough to put an ADU in. [/quote]

It may not be what you’re saying but it’s the effect of what you’re recommending. It’s tricky to balance affordability in the purchase and rental segments and I don’t know what the answer is but some controls to prevent non-resident investors from squeezing out first-time buyers probably are necessary. The investor funding would produce more housing if it were bundled and put into MF high-rise anyway. [/quote]

Nobody is suggesting that first time buyers will be able to buy a SFH on a large lot near metro under this policy. But they can’t do that now anyways. However they will be able to now live in that same neighborhood in a condo or apartment rather than a SFH w/ yard. That’s the point. Letting people with more modest means access the benefits of transportation and infrastructure.[/quote]

[b]Since the property with an ADU is only affordable to speculators[/b], who is going to buy them? What's the likelihood that both units would then be rented? [/quote]

Says who?[/quote]

[b]Are you questioning the only affordable to speculators part? No one knows how much property values will increase, so that’s unknown.[/b]

We do know that property values will increase and that no one that can’t afford a house now will be able to afford a house later because of an ADU.  However, more people will have the option to rent in areas where you can build an ADU.

Of course, we don’t know how many would be owner occupied, because I doubt that many people want to go through that expense and also have to share their property, but some will.  Otherwise it will be developers buying up properties to develop and sell as multi unit investments.[/quote]

There are plenty of models for valuing rental properties. Let’s say you can reliably rent a 1BR ADU at a rent that generates $12,000 NOI annually. The risk premium in your market is 500bps above the 10-year Treasury, so the average CAP rate is about 8 percent. That makes the rental worth $150k at sale.

So, to your point, people stretching to afford a property without an ADU will be priced out of the same property with an ADU. [/quote]

If so, that's ok. I don't know why housing policy should prioritize the desires of people who want to buy large properties near Metro at below-market prices.[/quote]

Back with the “near metro” strawman. This could be in the backyard of a post-WWII home that’s affordable to the middle class right now. It doesn’t have to be near metro and NOI is going to be more than $12,000 near metro, so the price will push even higher making the economic viability of house-sized MF (which is among the things we actually should be building near metro) even more challenging. Housing advocates are their own worst enemies when it comes to attaining best and highest use. [/quote]

Something tells me you are not actually in favor of “best and highest use” … btw *the market* determines “best and highest use.” so allowing people to build what they want on their property is how you do that. [/quote]

No, best and highest use maximizes density especially near transit. You’re at good figuring out what I’m in favor as you are at housing. [/quote]

Best and highest use is reflected by what someone will pay for. [/quote]

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