Aug 7, 2010

Estimated # of ADU's and Revenue Projections

3 Methods to Estimate Expected Annual # of ADU's if Ordinance is Approved:

NOTE: In Honolulu, the maximum # of allowable units is limited to areas with adequate sewer capacity. Is this a federal requirement? Or can this be modified at the local level? If so, then the # of eligible properties and the potential impact for this ordinance would be significantly higher.
  1. If Honolulu experiences a similar adoption rate as Santa Cruz (which has a smaller base of residential housing units: 77,362 vs 190,512 residential homes in Honolulu), we would theoretically see 470 new ADU units per year. (Santa Cruz: 67 ADU permits vs 120 New Dwelling permits: 56% adoption rate. Honolulu: 856 New Dwelling permits in 2009 x 55% = (est) 470 ADU permits.
    • In early in 1980's an evaluation of Ohana Dwelling Units showed that approx 25% of new homes built were Ohana Units. In 2009, there were 856 Building Permits for New Single-Family dwellings. 
    • As per MRSC of Washington: estimates 1 ADU per 1,000 housing units, based it says on a survey of 47 other cities. Therefore by this estimate, we would expect 190 new ADU's per year on Oahu.
      • 190,512 residential homes in Honolulu  (one and two-family dwellings)
    • LONG RANGE: There are currently approx 2,000 Ohana units on the island of Oahu. Over time, the # of ADU's would be expected to increase. As per Patrick H. Hare's 1981 report, "Amending Zoning to Permit Accessory Apartments," other municipalities have seen a range of 8% to 20% of their entire single-family housing stock contain ADU's. Applying these estimates to Honolulu's 190,512 residential homes, would equate to a range of 15,241 to 38,102 ADU's. However, this number is capped at approx 15,000, as that is the quantity of homes in the Ohana eligible zone that have not yet built 2nd units. 
      • Additional sewer capacity would be required to add more ADU's.
    Estimates of Revenues Generated by ADU's - 1st Year of Adoption of ADU ordinance:

    LOW ESTIMATE (214 new units/yr)
    • Sewer Fees
      • $    68.39 Sewer Base Charge x  214     = $  14,635/month (recurring)
      • $1,146.00 Sewer Connection Fee x 214 = $245,244 (one-time fee)
      • Sewer Usage Fee (amount varies and is not included in this analysis)
      •  GET (Hawaii State General Excise Tax, 4%)
        • $1,100.00* Est Rental Income from ADU x 214 x 4% = $9,416/month (recurring)
        HIGH ESTIMATE (470 new units/yr) 
        • Sewer Fees
          • $    68.39  x  470    = $  32,143/month (recurring)
          • $1,146.00 x 470 = $538,620 (one-time fee)
        • GET
          • $1,100.00* x 470 x 4% = $20,680/month (recurring)

          LONG RANGE: Over time, ADU's will multiply the revenue stream.
          • ALL AVAIL PROPERTIES IN OHANA ZONE (est 15,000 new units)
          • Sewer Fees
            • $    68.39 x   15,000    =  $  1,025,850/month (recurring)
            • $1,146.00 x 15,000 = $17,190,000 (one-time fee)
            • GET
              • $1,100.00* x 15,000 x 4% = $660,000/month (recurring)

              These amounts can be leveraged through Municipal Bonds to fund sewer upgrade improvements. The more revenue raised through New Customers, means less rate increases for all of the existing customers.

              And remember, there are approx 2,000 existing Ohana Units already built. Without those dwelling units, the City would have less revenue today. Those 2,000 Ohana Units contribute:
              • $    68.39 Sewer Base Charge x   2,000    = $136,780/month (recurring)
              *NOTE: Rental Income of $1,100 is based on HUD fair-market rent for a 1-bedroom unit, not including estimated utilities of $297/mo.

              NOTE: Further information and research on historic numbers of ADU units built in other municipalities and community response to ADU's can be found in publications by Patrick H. Hare:
              • "Accessory Apartments - Using Surplus Space in Single-Family Houses," by Patrick H. Hare, with Susan Conner and Dwight Merriam, Planning Advisory Service Report Number 365, American Planning Association, Chicago, IL, December 1981
              • "Accessory Units: An Increasing Source of Affordable Housing," by Patrick H. Hare and John Danbury, PM, September 1991
              • Accessory Units: State of the Art - Report I - Summary of Experience, by Patrick H. Hare, Washington D.C., December 1989
              • Accessory Units: State of the Art - Report III - Model Zoning, by Patrick H. Hare, Washington, D.C., September 1991