Agenda Packet 2-20-19 Work Session

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Eugene Housing Tools & Strategies Evaluation 27 ADUs can be regulated in a manner that allows them to be visually compatible with their neighborhood’s existing fabric. Municipalities’ typical ADU site design regulations tend to require that ADUs be smaller than the primary unit and set back from the primary street. With these policies in place, ADUs have a minimal impact on the urban design characteristics of their neighborhoods. Building ADUs can be relatively straightforward. The barrier to entry for homeowners wanting to build an ADU is very low, compared to other, more complex housing products. In this sense, ADU-supportive policies can open up the real estate development arena to a larger swath of the population, which increases the rate at which new housing can be delivered. Homeowners building ADUs do not have land acquisition and assembly requirements typical of larger development, (including other Missing Middle development types). Additionally, ADU development, when guided by sound policy, can bypass administrative hurdles that more complex developments tend to require, such as site plan reviews, zoning changes, or subdivision applications. In tight housing markets, ADUs provide property owners with supplemental income, and renters with an “affordable-by-design” housing option. In a balanced housing market, ADUs’ efficient size and less expensive construction cost can translate to housing cost savings for renters. They also provide an opportunity for seniors to “age in place,” in which a senior homeowner could reside in an ADU while earning rental income on their primary property. Barriers to ADUs Barriers to ADUs include zoning and permitting issues as well as lack of capital or other financing issues. This section summarizes nationwide financing issues and barriers arising from Eugene’s existing ADU policies. NATIONWIDE ADU FINANCING ISSUES Homeowners frequently are required to take on substantial personal financial risk when building an ADU. A comparable amount of upfront development costs per unit are likely to be completely reasonable for professional developers to absorb, who benefit from greater access to financing products and more experience navigating the real estate development process. However, for homeowners, these costs can impede ADU development, and the threshold at which per unit development cost can kill an ADU project is likely to be considerably lower than for larger developments that traditional developers oversee. A study that surveyed ADU owners in Portland, Vancouver, and Seattle, for instance, found that monetary challenges, including obtaining a loan and paying for construction costs, were the largest challenges that homeowners building ADUs faced. 27 Larger-scale developers typically rely on construction loans to finance development projects, through which they borrow against expected future equity following the project’s completion. However, this type of loan product is typically not available to homeowners adding ADUs. Rather, homeowners rely on their own savings, or borrow against existing equity in their primary dwelling. A 2014 study that surveyed over 200 Portland ADU owners found that 62 percent of respondents financed their ADU (either partially or in-full) with cash, while a sizeable share also relied on their existing home equity, 27 Chapple, Karen, et al.. “Jumpstarting the Market for ADUs: Lessons Learned from Portland, Seattle, and Vancouver.” The Terner Center for Housing Innovation, 2018. February 20, 2019, Work Session – Item 1