Call them cottages if you must but Seattle looking to ease construction of backyard rentals

(Source: City of Seattle)

(Source: City of Seattle)

(Source: City of Seattle)

(Source: City of Seattle)

With the waves of development that continue to cross Capitol Hill only occasionally breaking into areas currently dominated by single family homes, the Seattle City Council is preparing a new push to ease the creation of new housing in the backyards of some of those single family homes.

“No one needs to be told that we’re in a housing crisis right now,” Mike O’Brien said. “Backyard  cottages are a great place to add more capacity. They could happen in our single family neighborhoods, which cover the majority of our real estate, and [they] can be done in a way without having some of the visual impacts that some neighbors are concerned about.”

O’Brien, who represents District 6 encompassing Ballard and Fremont, has unveiled his new legislative proposal to ease some of the city’s standing regulations on backyard cottages to encourage their construction and add to the city’s overall housing stock.

The backyard cottage blog features design ideas, resources, and news related to Seattle’s backyard cottages

The “detached accessory dwelling units” — or DADUs — have been praised by proponents as a way to add modest density in desirable, family-friendly single-family neighborhoods, increase access to said neighborhoods — where houses are selling for more than half a million dollars for the less affluent — as well as provide an income stream for single family homeowners who construct and rent out DADUs to tenants.

Seattle has had a cautious and tentative relationship with DADUs for the past decade or so. DADUs and attached accessory dwelling units were common in Seattle up until the 1950s when both were banned throughout the city. In the ’90s, concerns about insufficient affordable housing stock led local lawmakers to reintroduce ADUs. It wasn’t until 2006 when the council passed an ordinance allowing single family homeowners in the southeast to build DADUs as a pilot project that backyard cottages were reintroduced. Four years later, in 2010, the council allowed for DADU construction citywide.

Backyard cottages were still highly controlled in the years following the citywide expansion, however, and concerns about over-regulation stifling DADU construction prompted the city council to look into code changes back in 2014. A DPD report (PDF) published the following year revealed that only 200 DADUs had been permitted or constructed despite widespread availability of single family lots eligible for DADUs (around the 60 percent of all single family lots in the city), and identified regulatory restrictions on DADU height, lot area coverage, and requirements like having (or building) one off-street parking space for a new DADU and the owner occupancy requirement—which mandates that the owner of a DADU either live in the cottage or in the adjacent single family home—as the main culprits behind low figure. Solicited public input from DADU owners (and potential owners) and designers revealed similar sentiments.

“The two we’ve heard the most about are the owner occupancy requirement and the parking requirement,” O’Brien told CHS, adding that he has heard during public meetings that the owner occupancy requirement in particular has stopped residents from pursuing DADU construction because they may want to move out of their home in the future.

The report issued by Mayor Murray’s Housing Affordability and Liveability Agenda (HALA) task force also took aim at these regulations,  namely calling for the removal of the the parking mandate, the owner occupancy requirement, and the rule allow for strictly a ADU or a DADU on a lot, but not both.

In contrast with Seattle, DADUs and ADUS are more common in Vancouver Canada, a phenomenon advocates attribute to the city’s more liberal regulatory code. Portland recently loosened its own DADU regulations and have seen a spike in backyard cottage permitting and construction.Screen Shot 2016-06-04 at 7.13.20 PM

"Property value can serve as a proxy for wealth, income, and educational attainment. Removing barriers to DADU construction, such as removing the off-street parking requirement and adding some flexibility in development standards, could make it easier for a wider range of households to construct a DADU and benefit from the rental income and additional equity it can provide and could reduce the cost of the rental unit. As part of this effort to remove barriers to DADU construction, DPD proposes to continue examining who is building DADUs through both quantitative and qualitative analysis." (Source: City of Seattle)

“Property value can serve as a proxy for wealth, income, and educational attainment. Removing barriers to DADU construction, such as removing the off-street parking requirement and adding some flexibility in development standards, could make it easier for a wider range of households to construct a DADU and benefit from the rental income and additional equity it can provide and could reduce the cost of the rental unit. As part of this effort to remove barriers to DADU construction, DPD proposes to continue examining who is building DADUs through both quantitative and qualitative analysis.” (Source: City of Seattle)

O’Brien’s proposed amendments seek to ease some of these restrictions, while also appeasing neighborhood concerns about development, renters, and increased density. He wants to decrease the minimum lot size eligible for DADU construction, remove the off-street parking requirement, allow both a DADU and an ADU on a single lot, and tweak the owner occupancy requirement so that the owner of a DADU must live in the structure or the primary single family home for at least one year before the requirement expires.

O’Brien doesn’t have any data or specific estimates on how many DADU’s will get built as a result of his legislation, calls his proposal a starting point.

“I don’t have any data to point to other than that Portland and Vancouver are significantly ahead of us on this,” he said. “I feel like there is pent up demand and just haven’t unleashed it yet. I’ve heard from dozens of folks at public meetings saying they want to do one.”

“It’s not a total fix, but it’s something,” he said.

There are those who don’t think his proposal goes far enough. Developer lobbyist and density and housing development advocate Roger Valdez slammed O’Brien for his perceived “capitulating to the neighborhood lobby.”

He argues that while the amendments are a good step, without identifying financing mechanisms for homeowners interested in building DADUs, as well as completely removing the owner requirement—to allow homeowners to sell constructed DADUs alongside their homes and developers to independently build DADUs on single family lots they’ve purchased (as well as the subdivision of single family lots , to allow for potential split ownership between a homeowner and a developer)—there isn’t going to be a major jump in construction.

“It helps to have the height limits taken away, it helps to have the parking away. In order for it to take off and really fill out the potential, there has to be some sort of financial benefit in doing it,” said Valdez. “There’s the architecture, the design, the permitting, and the construction. If there’s an older couple in Ballard, they have to figure out how to pay for that.” “Real people are going to see that they have to meet all these requirements. Forget it. There’s no way to do it,” he said.Screen Shot 2016-06-04 at 7.14.07 PM Screen Shot 2016-06-04 at 7.14.18 PM

O’Brien said his office has talked to few “lenders in town” and wants to work on future ways to connect prospective DADU owners with financing.

Valdez pointed to the HALA recommendations regarding backyard cottages, which call the owner occupancy requirement a “a barrier to securing financing to build an ADU/DADU.” The report also calls on the city to “explore the opportunities and implications of unit lot subdivision which would allow separate ownership of the primary dwelling and the accessory dwelling.”

“The worst case scenario is that someone might make this a viable business strategy to build more housing,” Valdez said, in reference to allowing developers  into the potential DADU business in single family neighborhoods. “But what’s wrong with that?”

“It goes back to the discussion of who is loudest voice in the city on housing and that’s single family home owners who don’t want things to change,” he said.

According to O’Brien, the one-year mandate is intended to find a compromise between neighborhood concerns about preventing outside investors and developers from creating DADUs (as well as some anti-renter sentiment) and the setbacks of the owner occupancy requirement identified by DPD.

“They are concerned about a private developer coming in and building a backyard cottage and flipping it. What we did is that we have an owner occupancy requirement essentially saying that the owner of the house has to build it but they can rent it out.”

“I get how someone says ‘I’m much more comfortable with my neighbor building something than someone who isn’t from there.’ That’s a legitimate concern,” said O’Brien.

“Some folks are saying that it’s caving to the neighborhoods. I say it’s a nod to folks that have this concern [regarding private developers]. I think we can address this concern and still significantly increase supply,” he said.

O’Brien’s office told CHS that they expect the legislation to go before the council’s planning and land use committee in July.

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17 thoughts on “Call them cottages if you must but Seattle looking to ease construction of backyard rentals

  1. DADUs are much, much better than Airb&b/VRU/vacation rental units because they are constructed with that sole purpose in mind. Currently the majority of thousands of airbnbs around town convert what could be long term rentals or places for first time home buyers. shameful. so glad the city council is taking action on this important issue this month! Airbnb has absolutely ruined my condo building and this city.

    • You don’t need the city to fix that problem. If AirBnB has ruined your condo, you and your fellow owners need to close some loopholes in your condo association’s bylaws.

    • actually we DO need the city. since half the condo building is short term rentals now, and these owners have taken control of the board, there is no way for the rest of the owners to regulate them. it’s a horrible situation for those that actually live there.

  2. Having built a backyard unit I can vouch for the benefits

    – typically you would finance with a heloc, or a larger loan on the main house
    – the rental income is a useful addition and safety net
    – the longer term plan is to move in to the unit later in life, and then downsize but stay in the same neighborhood

    I applaud the city for making it easier to build these. They help both the renter (new units in nicer neighborhoods) and homeowner, and make use of often empty garages or backyards and have minimum impact (most of my neighbors don’t know it exists).

    I can also recommend Bruce Parker at microhouse (some of his work is shown above).

    • Just a question, Pete. The costs to build a DADU must be substantial. How long will it take you to recoup those costs from the rent you collect?

    • Hey Bob.

      Construction cost was approx. $160k. It would be hard to buy a 2 bed condo in seattle in this area for less $400k. It also provides some interesting tax advantages since you can deduct existing expenses (property tax, WSG, interest) that you may have for the main residence.

      Repayment period is approx. 6 years.

      The other benefit is renting out the main house later in life. The rent would be significant and perhaps provide for early retirement.

  3. Backyard cottages are fine as long as they are small, tasteful and fit in with the neighborhood. It sounds like Pete was respectful of his neighbors when designing his cottage, but I can guarantee that would not be the case if the regulations are loosened for developers to get involved. Backyard cottages are being sold to the public as a way to add rental units by homeowners looking to make some extra money. If that is the case, there should be no problem with the current rule that only requires owner occupancy six months out of the year.

    I find it disingenuous that the developers and their lobbyist, Roger Valdez, were involved in this. It appears that these proposals were never about homeowners hosting renters but about developers turning single family neighborhoods into investor owned duplex and triplex zones and/or the subdivision of lots to build full-sized houses in small backyards.

    I also find it inappropriate that someone who makes their living as a lobbyist is complaining about the “neighborhood lobby.” I thought the right to advocate for one’s position was open to everyone, not just wealthy corporate investors.

    • I think it would be great to give people the option to buy a new house that had an DADU as part of the property… but that is illegal, which makes zero sense. The process of designing, permitting, managing the build, and finally paying for an DADU is far more than most any homeowner can or is willing to deal with. There would be way more happy homeowners and renters if people could just buy DADUs with a new or renovated home. Also, when the DADU is part of the purchase of the house the cost will be amortized over 30 years instead of your heloc/higher rate 15 year which would require higher rent to cover.

      I would think that most homeowners that can afford build an DADU don’t need the income to keep them in their primary house, just more of a safety net and planning for the future. But I certainly know many people that could stretch and get a house in Seattle if only the property had an income DADU or ADU, but if it is a stretch to get into a house in the first place you will have zero money or credit to build a DADU. I think allowing builders/developers to build/renovate homes and include a DADU then sell would provide an opportunity for more middle income families to be able to buy in Seattle.

      I guess the only problem would be that a typical bank probably would not count the rent for the the yet to be rented DADU as income for your qualification… shrug, but that is another story.

  4. You can buy (or sell) a house with a DADU (or an ADU) on the lot. What you cannot do is subdivide the lot and sell the DADU independently. The current proposals being put forward under the HALA recommendations would not change that part of it. They would allow for both units to be rented once 12 months have passed from final inspection. Before that 12 month period is over, the owner of the property would need to have either the DADU or the main house as a primary residence. The full report on the recommended changes to the DADU code is here:

    http://www.seattle.gov/dpd/LUIB/AttachmentProjectID73982016_05%20ADU%20DADU%20Director%27s%20Report.pdf

  5. This is my only hope for aging in place at my home. I will be taxed out long before my mortgage is paid. I’m hoping to downsize to a backyard cottage (perhaps with my elderly mom) and rent out the main house. If I can live to be 76 and still working, my house would be paid of and I’d have it to leave to my kids – who at this point have no hope of buying in Seattle despite all of us living in Seattle for generations.

  6. I’d like to add my three cents if possible….. I keep reading about seniors possibly losing their homes due to high property taxes. I was under the impression that there is some type of senior tax exemption for King county residents. (still pay, but at a reduced rate) secondly. I say keep the parking restrictions for the DADU and ADU’s. Living in a SFR neighborhood, with not a lot of parking to begin with, would make the situation worse. That being said, I have a legal 1000 square foot ADU that I have not got around to renting.

    • The need for 2 parking spaces is a significant problem given most lots are small to begin with, and the obvious place to build is in place of a garage.

      Given the amount we are spending on transit, you would hope that people in denser neighborhoods would not need cars.

  7. The property tax exemption is for seniors with an annual household income of $35,000 or less. This is not much to live on in Seattle these days, especially if a significant chunk is going to pay property taxes for a longtime residence that has appreciated significantly in value. Yes, they or their families could cash in some day, but what if they want to stay in their own home or keep it in the family?

    • But what about the possibility of getting a “reverse mortgage” as a way to afford to stay in your home? I believe it is possible to get such a mortgage even if you are still paying the primary mortgage on the property.

  8. …but the DADU has to be built and financed by a previous homeowner. They need to go through all the hassle and expense; which very few will be willing to.

    Why is it buying a brand new house with an DADU included something we need to ban? Same true for someone flipping a house, why should we disallow them from adding an DADU in the flipping process. Houses are gonna be flipped DADU or no DADU, let’s allow them to add DADUs to meet whatever market demand there is by home buyers.