Jun 15, 2012

Rec Rooms built in 2011

Although this is only a partial study of 2011, it shows homeowners are building Rec Room additions/alterations at about the same rate as new dwelling units. In fact, June 2011 had more Rec Room permits than new legal dwelling unit permits. It also shows that Ohana Dwelling Units are under utilized.

To gather this data i manually reviewed each and every permit issued in 2011 (until June), counting all residential permits (R-3 occupancies) that required an Affidavit or Restrictive Covenant. My understanding is that Dept of Planning & Permitting has a policy that all Rec Room or spaces that can easily be configured as separate rental units, require an Affidavit or Restrictive Covenant. In practice, this is a judgement call on the part of the plan examiner. Also, data entry errors mean some permit's data field for Affidavit/Covenant were erroneously not checked. I found at least two such  cases where the Affidavit box was not checked for a new Rec Room. 

Other sources of error: some Rec Room permits are refurbishment of existing spaces, not the creation of new Rec Rooms. I could not distinguish the difference at this level of investigation. Also, in practice, some homeowners do not obtain permits or may obtain a permit only for the structural shell and add plumbing without a permit, thereby creating Rentable spaces without a permit. Work done without permits is notoriously difficult to quantify. There were also a few data entry errors on my part. Most of them were corrected when I mapped the actual locations of these permits onto GIS.

As a next step, it would be interesting to see how the number of Rec Room vs SFD/TFD permits has fluctuated over time ie. were there more Rec Rooms created when the economy is slowing down? What geographic areas have more Rec Rooms?

Further research questions:
  • What % of residential properties already have a Rec Room or Rec Room-like space? 
  • How many of those are paying an additional monthly sewer charge? What is the estimated GE Tax revenue that would be generated if only 50% of all of these Rec Room structures reported rental income? 
  • What would be the estimated step-up in property tax revenues collected if all properties with Rec Room-like structures were assessed as 2nd dwelling units? 
  • What would be the projected increase in value of homeowner equity? 
  • Might this lead to a source of passive rental income and more homeowners being able to qualify for 2nd mortgages? 
  • What is the projected quantities/amounts of capital liberated by the private sector in this simple reallocation of Land Uses? 
  • Would this be a more sustainable way to stimulate the economy than gov't subsidized programs?

In practice, areas in town are more prone to Rec Room conversion because the outlying areas with new housing development (Ewa,  Kapolei) often have an AOAO or Assoc of Apartment Owners, which acts as a watchdog, enforcing deed restrictions against illegal rental activity within their neighborhoods. The older neighborhoods in town do not have such restrictions. =)