Jul 30, 2010

State Mandated 2nd Units: the Fast Track to Affordable Housing

The history of Second Units in Hawaii and California shows that when local counties are unwilling or unable to create Affordable Housing units, state mandates are a much needed kick start.

According to Dept of Planning & Permitting records, in 1981, Hawaii State law required counties to allow 2nd dwellings (dubbed "Ohana Units" in Hawaii) on any residential zoned property that had adequate public facilities (ie sewer, water, roads). The stated purposes of the law were: 1) to assist families to obtain affordable housing and 2) to encourage the extended family.

As originally adopted, this "Ohana Unit" law did not contain a requirement that occupants be part of your "ohana" or family. Until 1992, anyone, even a paying tenant, could legally occupy an Ohana Unit.

The number of Ohana Units demonstrates that when restrictions are loosened, the private sector (without any gov't subsidy) will build additional housing units, which increases the supply of homes and eases Housing Affordability. 

SOURCE: Dept of Planning & Permitting website

Recent building permit activity confirms this. The very low # of Ohana Dwelling permits issued in Honolulu (see chart - right) suggests that Ohana Dwelling requirements are choked by red tape.

Before the numerous restrictions, Ohana Units were a very popular option for homeowners, but the # of Ohana Units declined in direct proportion to the number of added restrictions.
In fact, in 2008 and 2009, 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 on retrofits to bring it up to code, rather than apply for an Ohana Permit.

Comparatively, a 1984 Program Evaluation of Ohana Housing states, “It was a slow year for single family residential construction on Oahu in 1982-83. However, in the program’s first year of implementation, ohana units comprised roughly one-fourth of all single family construction (emphasis added). Without the ohana zoning provisions, these units probably would not have been built. Theoretically, about 45 acres of additional land would have been required had these additional units been constructed in a typical subdivision.”

In 2006, City Councilwoman Barbara Marshall spearheaded the removal of size limits for for Ohana Units. Her goal was to ease restrictions to increase the # of Ohana Units built and the supply of housing in Honolulu. Although this was helpful, it has not been enough to significantly increase the # of Ohana Units built.

Top 5 Restrictions why we don't have more Ohana Units:
  • Ohana eligible areas limited to areas with adequate road, water and sewer infrastructure,
  • $5,541 sewer connection fee 
  • a Restrictive Covenant stating the unit can only be rented to people related by blood, marriage, adoption,
  • Ohana Unit must be attached to the main house (cannot be a separate structure),
  • 2 additional parking stalls
Similar to Hawaii, California passed a 2nd Dwelling Unit law in 1982. According to a SPUR report, California promoted 2nd units as a source of affordable housing in all jurisdictions. In an effort to remove barriers to affordable housing, the California law went further to state that local agencies could not create requirements "so arbitrary, excessive, or burdensome so as to unreasonably restrict the ability of homeowners to create second units…." 

Despite the new California state law, not all jurisdictions allowed 2nd Dwelling Units. Interestingly, those that resisted, had problems with illegally built 2nd Units. San Francisco refused to allow 2nd units. Consequently, the SPUR report states, "in the 1980s and ‘90s, many new buildings were constructed with ground floor spaces (e.g. a recreational room, a wet bar, a bathroom, and a separate entrance) that were easily convertible to a secondary unit." In other words, in the absence of reasonable laws that permit increased density in areas of high market demand, the market will create ILLEGAL DWELLING UNITS.

In Honolulu, we are seeing a similar increase in the # of illegally built 2nd Dwelling Units. The market response to strict regulation of Ohana Units has also been a strong preference for Recreation Rooms converted illegally into a separate rental unit. A comparison between Ohana Units and Rec Rooms used as illegal rentals, highlights why flying under the radar is so attractive: Rec Rooms are allowed in all residential zones, can be detached from the main house, have no required parking, have no required sewer connection fee, and have no recurring utility fees (ie Sewer Base Charge). The current regulations actually create strong incentives for owners to prefer an illegal use to a conforming one. 

With regard to occupancy restrictions, a study by the state Legislative Reference Bureau in 1988, found that restricting occupancy to relatives would be counterproductive to the objective of providing affordable housing and promoting neighborhood stability. Furthermore, that study found that 25% of ohana units surveyed were already occupied by non-relatives.
"[Even] when used for non-family members, [ohana units] help to alleviate the housing shortages experienced by all four counties. Third, the family restriction works as long as there are family members who are available to occupy the ohana unit. But young couples may eventually move to their own home, and elderly relatives will eventually pass on. If the unit must remain vacant because no family member is available to live there, not only is a valuable resource wasted, but the family may be caught in a financial bind if it is unable to realize any income at all from the unit to offset the payments on the debt incurred to build the unit. In a worst-case situation, this restriction could devastate the family if the loss of income from the unit that must remain vacant leads to foreclosure on the entire lot."
The LRB report adds that sewer capacity upgrades would greatly broaden the ohana eligible zone and multiply the number of properties that could host a 2nd dwelling unit. The report published in 1988, states, "up to 40% of [ohana] applications were rejected because of inadequate sewers." A current map of ohana eligible zones (with sewer capacity) is provided at the end of this article.

With the recent EPA ruling that the Honolulu sewer system must be upgraded, now is the time to plan for increased residential neighborhood capacity, while we are re-examining and planning the future of our City. Re-using existing capacity and adding new customers (via 2nd dwelling units) in town is more cost-effective than building brand new public infrastructure (sewer, water, roads) and stretching development further West into Ewa.

Whether you call it Ohana Units or Accessory Dwelling Units, Second dwelling units hold enormous potential to help revitalize one of the largest sectors of our local economy -- the Construction Industry -- and provide affordable housing in the core of urban Honolulu.
The following excerpt from HRS 46-4, the section of the Hawaii Revised Statutes, currently in effect, is the remnant of the law that originally required counties to allow Ohana units.  

Current state law re: 2nd units (HRS §46-4  County zoning):
     (c)  Each county may adopt reasonable standards to allow the construction of two single-family dwelling units on any lot where a residential dwelling unit is permitted.

Original Ohana law (as passed in 1981):
(c) Neither this section nor any other law, county ordinance, or rule shall prohibit the construction of two single-family dwelling units on any lot where a residential dwelling unit is permitted; provided:
     (1) All applicable county requirements, not inconsistent with with the intent of this subsection, are met, including building height, setback, maximum lot coverage, parking, and floor are requirements; and
     (2) The county determines that public facilities are adequate to service the additional dwelling units permitted by this subsection.
This subsection shall not apply to units developed under planned unit development, cluster development, or similar provisions which allow the aggregate number of dwelling units for the development to exceed the density otherwise allowed in the zoning district.