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][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 &quot;starter&quot; 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]

I get it. You don’t care about inequality or promoting efficient land use over the long term. You want developers to be able to make a quick buck even when what they want to build is at odds with public policy (which is to deliver more units). That’s YIMBYism at its core but most of the time it’s covered up with talking points on equity and climate. Thanks for your honesty. [/quote]

I’m not the one who was randomly throwing around phrases. [/quote]

You kind of were but in any event it seems like the more we take advice from people with your beliefs the worse the housing market gets for buyers and renters. The results of policies you’ve advocated have stunk. [/quote]

Dude you're the one stupidly throwing around phrases like &quot;highest and best use&quot; while valiantly (and deceptively) arguing that people should not be allowed to build on *their own property.* You are a NIMBY through and through, worried that your precious neighborhood will be invaded by evil renters.  [/quote]

You couldn't be more wrong. People should be able to build *whatever they want* on their own property but we should use tax and regulation to discourage outcomes that are contrary to public policy and to generate revenue for subsidized housing to remedy those bad outcomes. (I added the asterisks that time because maybe that will help you understand?)

My neighborhood has lots of renters. The percentage of renters who are evil is about the same/slightly less than the percentage of owners who are evil, so no concerns there.

You still haven't disputed that everything you've advocated has made the housing market worse for buyers and renters and that your desire to have investors flood the market would push families out of the purchase market so I guess we agree there.[/quote]

So, instead of &quot;investors&quot; making money you want more rich homeowners making money while their house increases in value for no reason other than curtailed supply? All the while the young have no where to live?

Yep, you're a NIMBY. Actually, the worst kind, the lefty-NIMBY. The self-righteous type.[/quote]

DP, but to the extent that we're at all attempting to discuss ADUs specifically, i.e., the ostensible subject of this thread, I think this idea of (a) allowing ADUs by right but (b) requiring that people who build them live in either the ADU or the other property on the lot would be better than allowing them to be put in on spec by flippers or other investors. The desired outcome would be to add density and cheaper housing, in the form of the ADU.

If the debate is between allowing ADUs vs. otherwise adding density through different zoning and different types of building, that's probably a different question. But as an interim step, or a more politically feasible one, or whatever, I agree with the PP that it'd be better for any additional value to accrue to individual homeowners rather than to real estate developers. You could incorporate rent controls or other regulations that bolster the affordability of the ADUs.

The bigger housing affordability problem is not whether well-off families who can not QUITE afford to buy in expensive neighborhoods are able to make it work; it's whether people can afford to pay their rent, period. Anything that makes that easier seems better than anything that doesn't.[/quote]

So then we should follow literally every peer-reviewed study out there and allow more housing. Any (literally any) argument against it is simply putting the desires of homeowners first, and others second. Painting any group (evil investors! companies! ... local businesses building housing?) as bad isn't helpful and it's a shame to see such a message take hold here. Nobody here builds housing, or has built a business, and it shows.[/quote]

Of course we should build more housing.

ADUs, except if you let people build them and not rent them out (which is a problem you can regulate for), are more housing. Does it have to be a choice between no regulations at all and the status quo?

I would prefer allowing different kinds of more housing in my neighborhood, which is right near lots of transit and currently zoned for single-family housing primarily. I don't appear to be in anything approaching a majority in my neighborhood, or in my ward, or, really in the city. So while we can go on and on about what we should do in the abstract, sometimes it's also worth considering what is a feasible policy that would improve housing affordability even if it isn't the best possible change. If it were up to me, we'd be building lots of city-funded high-quality public housing units all around neighborhoods like mine, with as little profit motivation as possible for anyone. But I'm sure THAT isn't happening, either.

I do think it's true that too often, advocacy for loosening existing SFH zoning winds up pushing policies that primarily benefit developers. And here, you're suggesting that greedy homeowners are bad, even while you resist the idea that real estate developers are. Greedy homeowners aren't any more the only problem than greedy developers are. The real problem is that we have allowed housing to be primarily market-driven at all, instead of seeing it as a human right.[/quote]

You are fundamentally misunderstanding the real estate market. Investors operate within a completely different frame than family home buyers. Investors want discounted properties (think &lt;80% ARV) that are priced below market value usually due to condition and are frequently working with a different class of broker who specializes in investment properties. Family home buyers pay at or above market rate, take out mortgage loans  and don’r usually want to buy a dated property that needs work.[/quote]

The ARV goes up when you have the potential to add an ADU, genius.[/quote]

Adding square footage to a plot of land always raises it’s total value but it doesn’t raise price/sq. ft. which is how rental housing is priced. In fact, the more square footage that there is available for rent in a single market, the cheaper the average cost to rent a given unit, genius.[/quote]

At the expense of home ownership for middle income families. The problem is that the potential increased square footage has value to investors but no value for prospective owner/occupants who lack the means to or interest in becoming a landlord so there’s an asymmetry that favors investors and squeezes owner/occupants out of the market.

The good news is that we can achieve both affordability for middle income purchasers and increased rental production through reasonable regulation and taxes. It doesn’t have to be winners and losers. It can be both![/quote]

Uh, I would love some extra sq ft in my house. What are you talking about? You need to read up on the housing market, and supply and demand... and how markets work. You're very, very off base here :)

Also, rent control and "regulations" don't work. Ever. Look at SF.[/quote]

Congratulations on having the means to add square footage to your house. We’re not talking about you. We’re talking about people stretching to afford $550k.

I have an advanced degree in economics and if you tell me that the housing market is functioning such that the law of supply and demand is operating like it does in textbooks then you’re telling me you got a C in economics 101. The prevailing force that’s driven rents higher in this market is rent seeking behavior, not zoning or any other regulatory force. It becomes really clear if you bother to read the industry trade press. [/quote]

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