Jun 27, 2010

Converting Illegal Dwelling Units into a Moneymaker

Other jurisdictions are actively seeking to cultivate illegal units into conforming status to help create affordable housing units.

In Marin County, California, "the high demand for affordable apartments, coupled with poor economic conditions that impel many homeowners to look for additional sources of income, is expected to spur an increase in second unit development over the next few years. In addition, changing demographics, as described earlier in this element, will create a long-term increase in demand for “granny” units for aging parents."

In 2008, Marin County created an amnesty program to offer owners of illegal second dwelling units, reduced fees and no permit penalties for legalizing their unit. They provided a Checklist and website to educate the public.

An estimated 15,241 illegal dwelling units exist in Honolulu. If even a fraction of those units were converted into legal dwellings, it would go a long way to creating safe affordable housing units and contribute to the tax base (GET, property taxes) and utility infrastructure costs (ie. monthly Sewer Base Charge). For owners, they could then apply for separate utility metering and possibly qualify for funding to assist with installing energy efficiency upgrades.

Santa Cruz implemented an ADU public outreach and education program, which included a financing component. Rental Units that committed to renting at affordable rates were offered decreased permit fees and offered favorable financing terms from the City. In total, these efforts increased the # of ADU permit applications and ADU units. According to the chart, approx 5 ADU's were created before the program vs 67 new ADU's were created from 2007 to 2009.

The table at right also shows that from 2007-2009, the # of Accessory Dwelling permits in Santa Cruz, was approx 50% of the # of single family permits issued.
In Honolulu, when Ohana Permits were first introduced in 1982, Ohana Permits accounted for 25% of all single family permits. In a slow economy, ADU's can provide a more cost-effective option for homeowners. Interior Alterations generally cost less than building a New Addition. Also, since the ADU is built on the same property, there is no land acquisition cost.

Comparatively, the very low # of Ohana Dwelling permits issued in Honolulu (see chart - right) suggests that the requirements are too restrictive. In 2008 and 2009, Ohana Permits were 1.4% and 1.2% of New Dwelling Permits. In fact, there were more Relocation Permits than Ohana Permits, meaning that people found it more desirable to haul an entire house from one property to another and spend the money to retrofit and bring it up to code, than apply for an Ohana Permit.

In summary: 
Santa Cruz's ADU permits = ~50% of New Dwelling permits
Honolulu's Ohana permits = ~1% of New Dwelling permits... we need to change!

If Honolulu allowed ADU's and had similar adoption rates as Santa Cruz, we would expect approx 428 new affordable housing units per year, without any government subsidy. Only those landlords who choose to add a rental unit, would be asked to contribute to the tax base.