The ADU Hour is a podcast that probes deep into ADUs and other small alternative infill housing. Kol Peterson, a nationally known ADU subject matter expert, interviews experts in the ADU space and then we have the guest take some questions from our live audience.
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[00:02:18] Kol Peterson: Welcome, Ethan, good morning.
[00:02:22] Ethan Stuckmayer: Thanks for having me.
[00:02:23] Kol Peterson: Yeah. I'm excited for this, I was bantering with Ethan before this and I was kinda thinking what is exactly is the professional experience that you need to have to do this job that nobody else in the country has ever done before?
What an interesting position you've been put in. For people's benefit, could you describe kind of your particular role within DLCD as far as your relationship to House Bill 2001, which we will describe in a minute?
[00:02:47] Ethan Stuckmayer: Yeah. So I'm the Senior Housing Planner at the Department of Land Conservation and evelopment, which is really state of Oregon's land use department.
We regulate what are called the Statewide [00:03:00] Planning Goals, and there's 19 of them, one of those is Goal 10. Goal 10: Housing, which is my domain, I guess, and this is the area which we implement the intent and the purpose of Goal 10. House Bill 2001 in 2003 are two pieces of legislation that advance DLCD's work in housing.
And prior to House Bill 2001 and 2003, really, the 2019 session DLCD did not have a housing team, which we do have now, which is really exciting.
[00:03:30] Kol Peterson: Do other states have a Goal 10 equivalent that is like a statewide housing goal mandate or is that unique to the state of Oregon?
[00:03:39] Ethan Stuckmayer: I don't think it's unique to the state of Oregon. What is unique about the state of Oregon is just the context within which that sits. The state of Oregon is one of the few growth management states, Washington, there's others, that have high preference on preserving forest and farm lands and regulating the development [00:04:00] within a certain geographic boundary, urban growth boundary or, or similar.
So I know that the state of California has things like The Housing Element that their Housing Community Services Division at the state level manages. But from my understanding, the state of Oregon is, is really quite unique in that.
[00:04:17] Kol Peterson: All right. So let's describe House Bill 2001 in two minutes for a random Planner in N ew Hampshire, who's never heard of it. What is House Bill 2001?
[00:04:26] Ethan Stuckmayer: Sure, so House Bill 2001, really pretty simply end s exclusive single family zoning in big and medium sized cities and the state of Oregon. So as a requirement to House Bill 2001, cities must basically update their development codes to allow certain middle housing types, which I'll define in just a bit, but those need to be allowed in every residential zone that also allows for the development of a single family detached home.
So, converting those lower densities zones into a little bit higher density zones. Cities are still [00:05:00] allowed to regulate the citing and design and the look and the feel of middle housing, as long as those standards don't cause what's called unreasonable cost and delay. So basically those cities can apply only standards that they might only apply to single family detached homes, previously, things like building height, setbacks, lot coverage, all of those standards can't place an undue burden on the development of middle housing.
That's pretty short version of House Bill 2001.
[00:05:25] Kol Peterson: And describe for us this term, middle housing you're using that term that most people have been familiar with was coined by Daniel Parolek, "Missing Middle"housing. What is it? Are those the same thing? Why, why are we using the term "middle housing"?
[00:05:38] Ethan Stuckmayer: Yeah. So middle housing, for the state of Oregon is a well-defined term.
It's a collection of missing middle housing types that Perolek talks about. For the Oregon context, there is five: duplexes, triplexes, quadplexes, townhomes, and cottage clusters. And the reason why Oregon's not using "missing middle" housing is because it's [00:06:00] a long-term policy.
We're hoping that in 20, 50 years, we're not missing those middle housing types anymore. It's just called middle housing. It's just part of our housing continuum.
[00:06:10] Kol Peterson: Now House Bill 2001, unfortunately did not capture ADUs within this middle housing definition, which has some weird administrative history that we don't need to go into, but can you describe what House Bill 2001 did for ADUs, explicitly?
[00:06:26] Ethan Stuckmayer: Yeah, I think the beauty of House Bill 2001 is that it's got so many different layers. For ADUs House Bill 2001 followed up the previous bill that you were just talking about, Senate Bill 1051, that required cities to allow ADUS in conjunction with a single family detached home. And city could only subject those ADUs to what are called reasonable standards. So basically House Bill 2001, with some years of experience of implementing Senate Bill 1051, the legislature identified a couple standards that cities were using that were maybe more unreasonable than reasonable.
So [00:07:00] basically House Bill 2001 clarified that off-street parking requirements and owner occupancy of either the primary or accessory dwelling were quote unquote unreasonable for ADUs specifically. Yeah.
[00:07:11] Kol Peterson: Right. For those who are on the call, it's the opinion of many people, including myself, that owner occupancy and off-street parking requirements are the two most common largest poison pills for ADUs that you will see prominently throughout regulations across most of the country. If you look at cities that actually do allow ADUs, they are oftentimes have those provisions in effect, so this is a really good example of a very simple one line legislative effort that effectively changes the course of the potential for ADUs to happen. Not that not to say that they will happen in great numbers, but that they can now potentially happen in Oregon cities.
So how many cities does House Bill 2001 impact in the state of Oregon? And what does the total population that House Bill 2001 effects compared to the [00:08:00] overall state policy?
[00:08:02] Ethan Stuckmayer: Yeah. So House Bill 2001, applies to cities and counties, but cities outside of the Portland Metro with a population of 10,000 or greater, and then cities within the Portland Metro of 1000 or greater. And there's different thresholds within those broad categories, but in total that's 56 cities across the state and three metropolitan counties. And then there's quite a few cities who are just under those thresholds. There's maybe about five or six cities that are definitely coming online in the next couple of years, but that's pretty close to two and a half million people in the state of Oregon.
In the whole state, that's about 60% of the population.
[00:08:43] Kol Peterson: Yeah. So 60% of the population is captured by hospital 2001. Okay. You know, and, and that's we have, I guess it's a fairly small population relative to a lot of us states. But th but the majority of the population is covered by this.[00:09:00]
All right. So tell us about the history of house bill 2001 came into being.
[00:09:03] Ethan Stuckmayer: Yeah, well that's tough, because there's a lot of history, there's kind of like two major history threads here. The first is the long-term history of race and income segregation in America. And then that plays into the short-term history of just rising home prices brought on by housing market that's really failed to keep up with the number and the capacity of the units that we've really needed over the past decade or so.
Naturally that short term history is influenced by that long-term history and the conversation about middle housing is is important because it used to be part of our housing market, right? It used to be these row houses, multiplexes kind of all over our, our state and our country. And they're even referenced as kind of like traditional housing types because that's traditionally what we've seen built across the country.
But I think in [00:10:00] the even shorter term, House Bill 2001 came into being as part of a follow-up to what the city of Minneapolis did in 2018, which was the first kind of city-wide elimination of exclusive single family zoning.
And Oregon kind of took that a step further and did that on a statewide level, but really it learned from the success of Minneapolis, where they will able to create these coalitions of, of, of interest groups or advocates that don't usually play on the kind of same team and brought them together for this, this greater purpose of creating more housing, housing choice, housing options, and then leading to more affordable housing. And I think the lead up to House Bill 2001 saw a lot of housing advocates teaming up with the home builders association and Realtors teaming up with their housing advocates.
Some of those things you just don't really see on a regular basis legislative session to session. So House Bill 2001 really I think, learned and was successful in [00:11:00] part because of City of Minneapolis.
[00:11:02] Kol Peterson: Yeah. I think one of the themes this week has been the impact of this coalition building at a local, regional, and now a state level and the importance that that's had in terms of this general movement towards small infill housing or middle housing or whatever we're going to call it.
So, what is your role and DLCD's role, more broadly, in developing regulations for House Bill 2001. For those who aren't familiar with the general rule making process, there's the law, the legislation, then there's the rulemaking process. So what is DLC D's role within the rulemaking or regulatory development process?
[00:11:37] Ethan Stuckmayer: Yeah. So DLCD has got a very singular role in the state process. Like I mentioned, there's these 19 statewide planning goals and we're kind of like the protector of those statewide the Oregon statewide land use system. I say protector. I think some others would probably say more like passive observers or even some other people might say we're the [00:12:00] arbiters of the land use system. So DLCD's role is to be that face in front of the land system. Implementing it statewide and interpreting rules and, you know, playing referee at some points. And so basically when legislation comes through, right, the legislature sets the land use policy direction, that gets codified in statute, and then basically DLCD's role in that is to translate those statutes, which are broad policy directions, into actual rules and regulations to put forward an operationalize that that policy direction. So my role within all of that was to lead the rule-making effort for House Bill 2001, along with a huge group of advisory committee members to create the framework around how cities can and should and must implement House Bill 2001.
[00:12:55] Kol Peterson: We'll talk more about the rulemaking process in a minute. Before we get there, let's talk [00:13:00] about the number of states staff DLCD department of land conservation and development staff that are 100% dedicated towards the implementation of these new standards across the state.
[00:13:09] Ethan Stuckmayer: Right. So now, finally, DLCD has a housing team, which is an incredible asset, I think, for the state.
So right now we've got four full-time staff members who are working on housing implementation across the state, focusing on Goal 10. And then we're supported by probably close to five others on a part-time basis. So we've got this big crew now to focus on monitoring, reporting, rule writing, enforcement, reviewing standards, providing technical assistance.
And so it's really kind of incredible to see the amount of work that we've been able to do now that DLCD has a housing team, right. It's kind of new core work for DLCD.
[00:13:50] Kol Peterson: And you referred to this as a big crew, and I just want to put a pin in that and be like, there's only four people for the whole state of Oregon that are executing this bill [00:14:00] that is going to have such significant impact across two thirds of the state as a reference point for other states that are considering this. The amount of bang for the buck there is really significant. Perhaps we'll see, we'll see how this all plays out.
[00:14:14] Kol Peterson: So how is monitoring for compliance with the state standards going to be handled?
[00:14:20] Ethan Stuckmayer: Right. So now that we've actually got some capacity to do that monitoring, reporting, and enforcement, it makes that job of fulfilling the intent of Goal 10 a lot easier. But historically DLCD has never really had much authority to play in an enforcement role. We manage the process that's known as the Post Acknowledgement Plan Amendment Process.
For people outside of Oregon, that's basically the process by which cities and counties submit their new comprehensive plan and development code language, and the state kind of reviews it and says, yes, you meet all of the state's laws and requirements, that's kind [00:15:00] of DLCD is domain there. And thankfully we already have that infrastructure in place, so we can kind of utilize that. And there's some checks and balances there. House Bill 2001 is unique in that I think the legislature played a little bit of hardball to some extent with House Bill 2001. There's definitely more authority for DLCD to enforce the provisions in House Bill 2001. Specifically the state's model code for middle housing, which really has an enforcement mechanism. If cities fail to comply with House Bill 2001, by the specific deadlines and timelines. Then the state's model code removes or preempts the local control of how middle housing gets regulated in their city. So it's yet another tool in the toolbox for the department.
[00:15:47] Kol Peterson: I had the perception going into the rulemaking process that model code meant we were talking about the best possible gold standard platinum level standard code. And that isn't [00:16:00] necessarily what the model code is, is that accurate?
[00:16:03] Ethan Stuckmayer: Yeah, I think it's a blend of reasonable standards with best practice standards for regulating middle housing.
It's definitely, I would say quote unquote goes above and beyond what most cities would consider reasonable regulations for middle housing, and that's really the intent of the model code is to be this shining star in some manner, but also be able to be implemented, right?
It has to be drafted in a way that can be implemented without further amendment or adaptation.
[00:16:35] Kol Peterson: And just to give some ground-truthing for those who are not intimately involved with this process. Let's give an example of model code for parking for say a quadplex what is the state's model code for parking for a quadplex going to be? How is that framed? And then what is the minimum compliance standards for a quadplex if a city doesn't want to use the statewide model codes?
[00:16:56] Ethan Stuckmayer: Right. Yeah. For even more context there, we've got the [00:17:00] model code, which is very specific set of standards. And then what Kol mentioned was these minimum compliance standards, which are basically just setting the range of acceptable outcomes.
And the model code is just one of those kind of cherry-picked acceptable outcomes. So the model code for parking might say for a duplex, you do not, or you can not require any off street parking spaces for that duplex. And then in the minimum compliance standards that says a city can apply basically no more than one off-street parking space for per dwelling in that duplex.
So up to a maximum of two, but they have that option of going zero one or two from the total development, but nothing higher.
[00:17:42] Kol Peterson: Got it. Thanks. Give us some context for the state laws that pertains to housing production metrics, land use and how a state housing policy is handled. How does this vary from how other states handle housing policies?
[00:17:55] Ethan Stuckmayer: Yeah. So like I mentioned Oregon is I think, [00:18:00] fortunate to benefit from some fore- thinking way back in the seventies of the statewide planning goals, right. Goal 10: Housing sets the framework for all of what we do in the state for housing planning in the future over a 20 year period, the 20 year planning horizon.
And so housing production, land use, all of that stuff sits within that frame. And there's a couple of things that the state of Oregon does that I think other states do, but the state of Oregon requires cities to basically run an analysis of their needed housing over a 20 year period.
And then they have to take action on that information that they gleaned from that analysis. And so we're getting better at using things like data and metrics to actually measure progress towards achieving those needed housing units, but I think House Bill 2001 and even House Bill 2003, to some extent, which we haven't talked about, just beef up those metrics and beef up the state's ability to have at least a sense of [00:19:00] accountability at the local level.
[00:19:02] Kol Peterson: Describe quote unquote clear and objective standards and why this is important in Oregon law.
[00:19:08] Ethan Stuckmayer: Yeah. So part of past legislation, a few years ago already, required cities to only, they're only able to subject residential development to what are known as clear and objective standards. So those are standards where there's a measurable outcome that results from that standard and say your standard for building height is 25 feet.
And that standard is, you know, very clear, very objective. There's no subjectivity in that analysis. And those are the only types of standards that cities can apply to residential development. And it's an incredibly important in not only the state of Oregon, but if other states or other jurisdictions use it because it removes some of that conflict or the tension at the local level in making land use and residential approvals. It removes the conversation about neighborhood compatibility and, and [00:20:00] all of that kind of stuff, which just opens the door for more residential development, which we know is needed.
[00:20:06] Kol Peterson: I will say that there's still opportunities for a loophole exploitation from local jurisdictions. For example, you could measure 25 feet from the lowest point of grade or the highest point of grade against a structure. So there's plenty of opportunities for cities to still be squirrelly if they wish to do so. Any commentary on that?
[00:20:27] Ethan Stuckmayer: Yeah, there's certainly no no end to the conversation of what is truly clear and objective all of those standards. There's definitely some like you say, wiggle room to regulate those in a particular way that may or may not be clear and objective.
And we even within, like you say, the building height standard it varies from city to city, do you measure it at the average grade or the lowest grade, the top grade? What is a true, clear, and objective standard that we've only kind of begun down that path in the state of Oregon. It's [00:21:00] a couple of years old at this point, but even some cities are still struggling to get to that true clear objective path, even today.
[00:21:07] Kol Peterson: So speaking of jurisdictions attitudes towards this particular set of regulatory rules that they must be subject to now. There's potentially some awkward tension that is embedded within removing land use authorities from local controls. And this is, you know, historically a lot of zoning occurs at the local level as opposed to at the state level.
So as an advocate for more housing or outside observer, I don't have any particular issues with reassigning those authorities towards the state if it achieves my particular interests in promoting more small infill housing. But can you speak to this issue for us? What have been some of the tensions that you've observed or that you foresee as House Bill 2001 rules come into effect?
[00:21:52] Ethan Stuckmayer: Yeah, I think part of the impetus for House Bill 2001 was an understanding of the [00:22:00] extent of the crisis that we find ourselves in. And there's been a structure in place where cities regulate housing for a long time in a particular way. And in part, and there's lots of other factors, but in part, those regulations have led us down a path that we are in right now.
And so I think the sentiment at the legislature in advocates is that if cities and regulatory bodies had kind of had their chance to allow these housing types and they just haven't taken up the opportunity. And so it was time for the state legislature to step in and make some changes at a top level so that it could achieve some outcomes at the local level.
And I think that's really where the tension arises. When I speak to planners across the state about, "Well, now there's all these regulations and it's opening the door for the state to preempt my local codes. And, you know, I thought that [00:23:00] was part of our statewide planning system where there's community engagement and we're able to regulate our community in a certain way. And now you're kind of removing that."
I think that can both work in unison, right? The legislature sets the policy that you hope kind of better society in a way. And I think yeah there's opportunity for both the community to regulate itself and for the state to set the direction. I think both of those can exist at the same time.
[00:23:26] Kol Peterson: Let's give a one minute overview to differentiate the political legislative process and the actual administrative rulemaking process. Can you describe what the rule making process for House Bill 2001 established for the state?
[00:23:40] Ethan Stuckmayer: Yeah, so the political legislative process at the state level, like we've mentioned, sets the policy direction and it sets these broad parameters that then get codified into Oregon revised statutes.
[00:23:54] Kol Peterson: Give us an example of the broad parameter.
[00:23:56] Ethan Stuckmayer: Sure like a definition of a cottage cluster [00:24:00] or something like that.
[00:24:01] Kol Peterson: Okay.
[00:24:01] Ethan Stuckmayer: Maybe that's a bad example. How about the language in House Bill 2001 that says "the cities must allow middle housing in areas zoned residentially that allow for the development of middle housing." Right. And so what does "in areas" even mean? That's, DLCD's role to define what that actually means in rules and regulations. So, those kind of north stars that the legislature provides become really important because the rules have to implement that purpose, that intent of that policy. And so to help us do that, DLCD brought together a group of about 55 people on an advisory committee and then various technical advisory committees that help us kind of build out those rules. It was really important to DLCD to have a broad range of experiences on that advisory committee, because, we don't have the understanding of local context in a city like Eugene, and then a city like Hood River, and Ontario, and all of these places are [00:25:00] completely different.
So bringing those people to the table is really important to create a good set of rules and something that could be implemented on a statewide level or rules that are drafted on a statewide level, but then can be implemented at the local level.
Our rulemaking process was a full year. We had hours and hours and hours of long meeting. Cole was there for, for lots of them. And really, it ultimately led to kind of three major pieces of rules. The first is like the nuts and bolts of these rules, sections of the definitions, purpose, the applicability, how DLCD will enforce the rules. But then it also adopted a model code, one for medium cities and one for large cities, those are different.
And then it established the set of minimum compliance standards, which we kind of talked about. What is the range of acceptable outcomes? How do we define unreasonable siting and design standards? So those packaged together is what we adopted in the rulemaking process.
[00:25:56] Kol Peterson: And what were some of an example of a significant [00:26:00] policy change or outcome that occurred as a result of the rulemaking process? Just to ground truth, like give some examples for people to understand.
[00:26:08] Ethan Stuckmayer: Yeah. I actually have like a top five.
[00:26:10] Kol Peterson: Okay.
[00:26:10] Ethan Stuckmayer: Highlight list.
[00:26:11] Kol Peterson: Okay.
[00:26:12] Ethan Stuckmayer: So first is that the rules established a clear expectation for cities and that middle housing needs to be allowed and an as needed housing, its desired housing and that cities must allow it. And then, second, it kind of shifts the paradigm away from city development codes that basically kind of subsidized single family detached home dwellings exclusively, and then kind of treats middle housing on at least an equal footing.
Maybe even a stronger foothold for middle housing in some cases, but at least equal footing. And then we had this legislative direction about unreasonable cost and delay, and I think the rule making process better defined what that phrase actually means.
And so that was a huge piece to tackle in that rulemaking process. Number four, I think one of the things [00:27:00] that surprised people in the rulemaking process is that the state kind of took a little bit of a hard line stance on off street parking mandates, basically limiting that to no more than one off-street parking space per dwelling unit in the middle housing.
And then finally, and I think maybe the most important one is that it opened the door for continued conversation about Goal 10 and just how badly Goal 10 needs to be reformed, or at least how DLCD and forces Goal 10 across the state.
[00:27:29] Kol Peterson: As other state legislative bodies and advocates consider a statewide legislation, akin to House Bill 2001, which has now occurred in Nebraska, Connecticut, and has been considered in states such as Washington, California, Montana, Minnesota, Maryland, Virginia, North Carolina, New Hampshire, and Vermont. Can you speak to what advice you would offer to make legislation better than House Bill 2001?
[00:27:55] Ethan Stuckmayer: Yeah. It's hard to get better than House Bill 2001. No, I'm just kidding. I think the catalyst [00:28:00] behind all of these states taking this action is really just an understanding of just how in depth and how broad the housing crisis is.
And there's just a need to use kind of every tool at our disposal to overcome it. So it's great to hear about all of those states and I've had conversations with some of the folks in those states kind of trying to learn from the state of Oregon, but I think really the suggestion that I would make for the cities is just to ask the legislature to be abundantly clear on the purpose and intent of all the specific provisions in the bill.
Kol, you know, that there was many times in the rulemaking process where we had the kind of sit down and try to read between the lines as best we could on certain phrasing things like "unreasonable cost and delay", the "in areas" question that we talked about. So I just think that the more clear the legislature can be and the intent and the conversation around those provisions, the better.
I also think that the model code played a huge role and is absolutely critical in [00:29:00] the enforcement of House Bill 2001. And in all of those kinds of future legislation pieces. So it's really invaluable. I've talked to a lot of planners across the state about how the model code acts as this like boogeyman in the corner of the council chambers, when they're having conversations about how to implement House Bill 2001 and elected officials are, really, I think nervous to accept the state's model code as a default option.
And so they're kind of making decisions that they may not have made in lieu of a model code kind of looming over them. So it is a little kind of like punitive in that, in that sense the model code is, but I think it plays that role really well.
[00:29:44] Kol Peterson: So California state laws related to ADUs are very prescriptive, such as cities must allow for ADUS to be four feet from the property line in contrast to House Bill 2001, which are not as prescriptive. The legislation might say something to the effect of mental [00:30:00] housing must be as, as easy to develop or to permit as single family dwellings. So I see pros and cons to this level of prescriptiveness within legislative language.
Do you wish the House Bill 2001 had been more clearly defined or do you think it's better to have left it vague enough for a more technocratic rule making processes like the one we were just talking about to allow for flexibility on the implementation of these legislative intents.
[00:30:27] Ethan Stuckmayer: I understand the vagueness and the undefined terms that need to be used in the legislative process, because there's, I think a desire for legislators to not really be very prescriptive in how they're providing this policy and then kind of let it play out.
And they don't want to be the final decision maker on some of those topics. So things like "unreasonable cost and delay". I think questions around unreasonable cost and delay may be better answered by litigation and legal challenges to fully set case law around what is and what isn't [00:31:00] unreasonable cost and delay.
So I understand the need to be vague in that respect. But every time something's left undefined it led to a lot of headaches that I wished I didn't have to have in the rulemaking process and conversations that seemed like they were going around in circles about really what was intended by the legislature, in that, with that certain provision.
But I think it's important to have those conversations because you get to a better policy outcome when you're able to kind of sit down and work in the trenches with like a really knowledgeable advisory committee and work through those sticky issues to, to come up with a better outcome than maybe a a legislative direction might've been.
So I understand the pros and cons. I see both, but I don't think I would change it.
[00:31:47] Kol Peterson: So let's talk about Senate Bill 458, which is not House Bill 2001, but it was just enacted recently in the last few weeks, subsequent to House Bill 2001. Can you describe what Senate Bill 458 is and what the timeline [00:32:00] for the passage of this new law was and how it relates to House Bill 2001?
[00:32:04] Ethan Stuckmayer: Yeah. So Senate Bill 458 is really a bill that's directed at House Bill 2001 implementation. So basically Senate Bill 458 requires cities that are subject to House Bill 2001. They allow middle housing lot division. For any middle housing type that's built after June 30th, 2022, which is also the deadline for implementation of House Bill 2001.
So cities must allow if a property owner comes with the development of a form of middle housing, they must also allow for the division of that lot into an equal number of lots to the middle housing type. So if it's quadplex and they have to allow a division of four lots of that parent lot.
Senate Bill 458 was in response to some how the rulemaking was playing out for House Bill 2001. We had lots of conversations in the rulemaking about, do we allow detached Plex [00:33:00] developments and cottage clusters? What does that mean for a property owner to build that? And how difficult is that actually, to move that housing type after you've built it? Knowing that House Bill 2001 had really kind of this limited home ownership opportunity associated with it.
I think there was a need for Habitat for Humanity who is the sponsor and author of that Bill to go forward with this follow up to House Bill 2001.
[00:33:26] Kol Peterson: What was the legislative intent of Senate Bill 458? Maybe putting words in the mouth of habitat for humanity here. And what does this mean for the relative impact and scalability of the House Bill 2001?
[00:33:40] Ethan Stuckmayer: Personally, I think Senate Bill 458 has a huge impact on House Bill 2001 implementation. I think one of the major criticisms that I heard of House Bill 2001, that it's, "Oh, it's created all this new rental stock. And, you know, that's not really creating generational wealth through home ownership."
So I think really the [00:34:00] legislative intent of Senate bill 48 was to clarify that no, House Bill 2001 really is this home ownership opportunity, but we just needed to fix a couple of things because splitting those lots to be able to sell those in a fee simple manner was really difficult and now it's much easier. So I think it's it, even in my mind goes a little bit beyond House Bill 2001 and Kol, you and I were talking about this earlier. I think it really opens up the door for deeper conversations that we need to have about our kind of systems that we have in place that really center around home ownership.
So infill developments, infrastructure, cost, sharing, tax base, how cities spend money on schools and health outcomes. I think it really goes beyond just providing more housing choice. Especially when you tie the home ownership aspect to that.
[00:34:52] Kol Peterson: What was the rationale for allowing for detached middle housing types in the model code? And just to be clear you know, a lot of cities [00:35:00] defined duplex or triplex or fourplex as attached dwellings within a single structure, but the model code that is the default code to which cities will be subject, if they don't pass their own code, that is compliant with House Bill 2001.
You must allow for a detached duplex or triplex or fourplex on your property
[00:35:17] Ethan Stuckmayer: So further clarifying that the Oregon Administrative Rules that the quote, unquote, minimum compliance standards also give cities that option. So we define a Plex as an attached in an attached configuration, but give cities the option to also allow a detached configuration.
So basically the rationale for that was that really boils down to like ultimate flexibility. And I think also a realization that there's now a lot of parody in housing types in Oregon. If a property owner can build a detached ADU because of Senate Bill 1051, what is the real difference between a detached ADU in somebody's backyard and building a detached duplex?
It's still at the end of the day two units on that same [00:36:00] lot. There's no real difference there than maybe I guess size is the only thing I can think of. But so I think detached middle housing is really just a recognition of we need to kind of get out of the way of like these standards that don't make a whole lot of sense.
And why are we kind of segmenting all of these housing types when we should just be focused on providing as many options and as much choice as we can.
[00:36:23] Kol Peterson: So cottage clusters are a concept that have a lot of potential application, but we haven't seen many actual cottage clusters examples built in modern times.
What are cottage clusters and why haven't we seen many of them built?
[00:36:35] Ethan Stuckmayer: Yeah. So cottage clusters is one of the only housing types in House Bill 2001 that was really defined. Townhouses had some definition, you know, units on a lot that share property and share a wall on the property line. And then they kind of just said, quadplexes, triplexes, and duplexes.
Like everybody knew what that was. But cottage clusters was different. Where it's no [00:37:00] less than four units an acre, they're surrounding a common courtyard, each unit has a building footprint of 900 square feet or less. And so the legislature really defined that closely, which is different than how they talked about other middle housing types.
But I think cottage clusters are an interesting prospect. They look really nice when drawn on a schematic drawing. And I think like this green space and these trees and all that kind of stuff really resonates with people and they can visualize what it looks like. But the reason why we don't see any of that built is I think this Russian nesting doll effect of standards that just create all of these barriers.
First, most cities don't even allow those outright and forced them to go through some sort of like design review or PUD process. Maximum density requirements basically preempt all consideration of cottage clusters because of the density is just so high on a per on an acre level. Off-street parking requirements, setbacks, pedestrian connections, the size of the [00:38:00] courtyard all create this, a small building envelope where you just can't pencil the development.
And then the owner, the home ownership portion of that, and the fee simple sale of those units was really difficult. I mean, what do you you're supposed to do condoize those units? I don't, I, I don't know of many property owners who are interested in doing that. So now today, as we sit here in 2021, kind of all of those hurdles have been removed or diminished greatly.
So I do have high hopes for cottage clusters, but I think the other part that I didn't talk about was just like the capacity, interest, institutional knowledge of people who have the opportunity to build those and whether they would choose to build those over some other type of middle housing.
So that's my only concern. In relation to cottage clusters, we've kind of cleared the hurdles, but is there a desire for those?
[00:38:52] Kol Peterson: Yeah, we don't know it's interesting now that the hurdles are removed. The way I think about it is with the way that the legislation was [00:39:00] written, you can't do this realistically on a lot that's less than 7,000 square feet and really, really want 10,000 square feet or more. Aside from that, I think certainly coupled with 458, there's a lot of potential with that particular bill to make less expensive fee simple housing, ADU sized housing out there, which is pretty cool.
But what unique roles do you see cottage clusters playing compared to other middle housing types and also to follow on what unique role do you see townhouses playing compared to other middle housing types?
[00:39:28] Ethan Stuckmayer: I think cottage clusters are really primed for things like mixed income, mixed generational, mixed family opportunities.
I think those are really interesting. I'll also like cottage clusters for co-housing and cooperative housing developments, where I think cottage clusters create this home ownership opportunity for maybe smaller like budding family groups, or even kind of downsizing boomers who just want their own little space, their private space, but then [00:40:00] also are okay with sharing an open space and interacting with their neighbors in that particular way.
And then compare that to townhouses, which I think is a slightly different segment of the population where I see townhouses being built and more infill lots where services and transit and jobs are readily available. Whereas I think cottage clusters are kind of on this, like Greenfield, large lot developments.
Whatever's kind of left in a city because like you said, they just need more space. And I think that's kind of the beauty of middle housing, right? The whole purpose of middle housing is to create these options for people and creating the choice to live in a particular area or in a particular building or unit depending on your needs is really the, the underlying purpose of middle housing and House Bill 2001.
[00:40:49] Kol Peterson: Do you think it made sense to include both those particular housing types within the definition of middle housing? And conversely, do you think ADUs should have been perhaps included in the [00:41:00] definition of House Bill 2001?
[00:41:02] Ethan Stuckmayer: I think it was important to include both cottage clusters and townhouses.
I think also it was important at the time because the legislature was operating in like a pre Senate Bill 458 world where cottage clusters and townhouses. The townhouse was really kind of like the home ownership opportunity where you have all of these these lots that can be built in this infill kind of context.
And then cottage cluster is where something similar, but maybe in like a Greenfield context. So including both of those, I think was really important. And, I think part of the reason why the legislature went with cottage clusters was because they really defined the cottage cluster and because they were looking for smaller units that were quote unquote, more affordable as a result.
So I think it was important to include both of those. I, I do think the conversation about ADUs is an interesting one because when people talk about middle housing, I think it's, it's mostly intended [00:42:00] to be kinda like a form-based response to creating more density. I think that's probably what Daniel Parolek would kind of lean on when he talks about middle housing and maybe why ADUs aren't there, because it is still rely on the single family detached home to be part of that development.
And so it's a transition piece that ADUs can be used as this kind of transition piece into a more dense neighborhood context where I think middle housing is more like we're going to jump in and it's still looks and feels like single family detached homes. So there's not this kind of conversation about out of context, but then it is kind of like this paradigm shift, whereas ADUs are maybe a little bit more incremental.
[00:42:43] Kol Peterson: What are some lessons that you've learned about how to talk about middle housing so that it's not perceived as a threat?
[00:42:50] Ethan Stuckmayer: Hmm. Yeah. I think a lot of people still do, to this day think of middle housing as a threat. And early on, I tried to dispel [00:43:00] some of the the fears or the, or at least the kind of article headlines about House Bill 2001, that it was kind of criminalizing the single family detached home that you owned or would result in somebody coming knocking on your door, asking to buy up your house so they can tear it down and build a cottage cluster, a huge apartment complex or something like that.
And I, which is just not the case of House Bill 2001. If anything, it provides you as a property owner with more options to do things with your property, which I think kind of flips that conversation a little bit when you're talking with people and they're like, oh, okay, I think that makes sense.
The other thing is that I think a lot of people think that, oh, now all of a sudden this is going to just, you know, completely overnight, snap on my fingers and it's going to change the context of my neighborhood and nothing's going to be the same and it's going to be this rapid change.
But my boss at DLCD, Gordon Howard, likes to remind everyone that this is really a 20 year, 50 year transition of our neighborhoods. It's definitely not overnight. He [00:44:00] likes to try that the analysis that he did for the city of Portland a couple of years ago when they allowed ADUs across their city and basically kind of did the math that at the rate city of Portland is building ADUs, it would take something like 300 years for every eligible lot to have an ADU. So the timeframe of change is really long. And so it's not going to be this kind of rapid change. And I think another part of how we talk about middle housing is that if you're trying to relate to people in understanding how their housing needs have changed over the course of their life.
And at certain times you wanted or needed or had to live in apartment because maybe that's what you could afford, or it's near a job, or maybe later on in your life, when you have married and kids, you want to more room or more space or something like that. And so your needs are constantly shifting.
And so why do we need to limit ourselves to just these two options? If we have the ability to make people's lives easier and have provide more choice and more affordability, [00:45:00] why not do it?
Talking about middle housing in those terms makes people think in a little bit of a different.
[00:45:05] Kol Peterson: Final question. What role do you see mobile dwellings, such as tiny homes on wheels or RVs on residential properties playing in the future of residential zoning?
[00:45:16] Ethan Stuckmayer: Yeah, I think House Bill 2001 and the other piece of legislation in House Bill 2003 is opening up this conversation about how does the state of Oregon define housing? And especially needed housing?
We know that we need more housing, but do we need every single type of housing at our disposal to meet our housing need? And lots of people say, yes, lots of people say we should be focusing on other types of housing other than what lots of people think are temporary dwellings, right? And so I think the conversation about mobile dwellings and specifically tiny houses on wheels and RV, comes into that conversation about [00:46:00] what type of housing should we be planning for? And that really boils down to the bigger question of what is housing in the state of Oregon. So you know, 2020 was an interesting year in terms of writing rules for middle housing in the context of people experiencing COVID based homelessness because of the loss of a job or loss of income or things like that.
And then in the state of Oregon, huge wildfire displacement impacts. And we're kind of sitting in this crisis even greater than the one that we were experiencing prior to 2020 and just trying to get people housed. So we need to have a greater conversation in the state about what's the appropriate amount of housing or what types of housing should we be planning for to accommodate those people?
So I don't have a good answer, but other than it's a work in progress and I think those will become more and more important in that conversation.
[00:46:54] Kol Peterson: Thanks. Great. Great answers Ethan. Kelsey, come on out. Well, one question we wanted to [00:47:00] pose to you before we get to the attendee questions and I understand there's quite a few good ones.
What, what big changes do you foresee having some of the largest impact in terms of housing production in the coming decade if you were to speculate?
[00:47:11] Ethan Stuckmayer: Yeah, well, some of the things the state's already done, which is great. Making fee simple ownership of middle housing more approachable and easier. And I think Senate Bil 458 does that. It dispels a lot of the fears about this boon in rental housing, which we do need, but we also need the home ownership. So I think you get both with 2001 and Senate bill 458 paired together. One of the things we didn't talk about, the other thing is that the state of Oregon is doing is House Bill 2003, which has two big pieces that I think are really important.
The first is housing production strategies, which requires cities to set forth their 20 year plan to accommodate the housing that they're needing over the next 20 years. So what are the specific policies and actions that you'll be taking to facilitate the [00:48:00] production of housing in your city? And what role are you playing as a city to see the production of that housing?
That's going to be huge. I think that has a long-term impact on removing barriers, providing incentives, helping out financially with development of affordable housing, big time stuff. And then the other piece of House Bill 2003 is the Regional Housing Needs Analysis, which the state of California does currently, the state of Oregon is considering adapting that to the Oregon context. And that includes an analysis that is not currently included in how the state does housing planning of including the underproduction, the historic underproduction of housing in the calculation of future housing. And then also trying to ask cities to respond to people experiencing homelessness in their community.
So it's kind of a, yet another reform to Goal 10, which I think ultimately is what's necessary.
[00:48:56] Kol Peterson: Thank you. Kelcy take it away.[00:49:00]
[00:49:00] Kelcy King: So why are you still using the term single family? Single detached is more equitable and does a better job of describing the housing type.
[00:49:09] Ethan Stuckmayer: Amazing, amazing point. And I catch myself doing that all the time. Part of why single family dwellings we use in the in the Oregon Administrative Rules is because of the way that the legislature has codified the conversation around residential development.
It's still listed as the needed housing type. And I think ultimately what needs to just take places, a full rewrite of the statutes, or at least in the edit to eliminate the use of single family detached from the conversation in the state of Oregon. It's, it's one of those things where the state has not gotten to the point to the point of rewriting those basically.
[00:49:51] Kelcy King: Owner occupancy is not an unreasonable cost and delay. It can actually lower cost and rents by preventing large developers from buying up density in market rate [00:50:00] housing. Affordability needs to have the same priority as densification.
[00:50:03] Ethan Stuckmayer: Yeah, I can, I can definitely sympathize with that. The, the ADU provisions and hospital 2001 I think were a reactionary response to some of the standards and the litigation that took place over the course of the four or five years prior to House Bill 2001. Related to ADU is as a result of Senate bill 1051. And those were the two major pieces that constantly went to legal challenge.
And so the legislature kind of just said, you know what, we're just gonna eliminate that. And these are now considered unreasonable standards for ADUs.
[00:50:42] Kelcy King: Can you comment on the potential downsides of state preempting, local control, such as state legislatures controlled by rural districts, potentially prohibiting local jurisdictions from banning single family housing?
[00:50:54] Ethan Stuckmayer: Yeah, that's the conversation that we have all the time internally. As DLCD is [00:51:00] getting more and more directive from the legislature about using House Bill 2001 as kind of a model for state preemption of local codes what is the right balance to strike there? Like I said earlier, part of the catalyst for House Bill 2001 was the sentiment about, well you had your chance, and now we need to take action at the state level to remedy some of those those a decade long or decades long injustices in the housing market. So I think there is a time and place for those kinds of preemptions, but again, couched in understanding that we should not let it run rampant.
Especially because that's part of the heart and soul of Oregon's land use system, right? Everybody likes to tout Goal 1 as the community engagement, Goal 1 for a reason. But yeah, fine line to be drawn.
[00:51:49] Kelcy King: So I'm gonna ask this question then I also have a personal follow-up question based on this one. What plans do you have for legislation that facilitates permanently affordable home ownership, such as Trusts and [00:52:00] Co-ops?
[00:52:00] Ethan Stuckmayer: Hmm. Hmm. So I think that's part of a broader conversation that we expect cities to have related to the housing production strategy portion of House Bill 2003. So, typically, cities have gone through the housing needs analysis process and the accommodation of needed housing through usually only zoning and land use using only those kinds of tools, rezoning lands, bringing lands into UGB, annexing so on and so forth.
But House Bill 2003 changes all of that and asked cities to use all the tools at their disposal to accommodate the needed housing. And so no plans currently, and I think it takes legislative direction to go that way to require cities to do that. It's definitely encouraged, just include in one of the menu of options.
[00:52:47] Kelcy King: Is eminent domain a tool that is available in terms of the menu of tools?
[00:52:53] Ethan Stuckmayer: From DLCD perspective, it's an option, certainly, I think that's the, [00:53:00] the legal right for cities to use that, whether they use it in the political firestorm, that results after using that is kind of up to the city.
And I think, partially, the reason why you don't see it use a whole lot is because of that.
[00:53:13] Kelcy King: House Bill 2001 defines cottage clusters as made up of detached housing units with a footprint less than 900 square feet each. Do you think that there is a path or a plausible advocacy opportunity to have cities, example Portland in RIP to project or by state model code, including this in conception, tiny houses that are movable either by being on wheels or being redeployable, detached to foundations?
[00:53:38] Ethan Stuckmayer: Interesting. I think there's probably a pathway there. I think one of the issues that we run into with the cottage cluster definition in House Bill 2001 and in rules is that it is so specific. And so we've had lots of conversations with cities about, well, we want to allow some sort of like attached version of cottage clusters, where it's in this U shape and the [00:54:00] courtyards in the middle and something like that, and that's a great housing type. Right. But the way that the legislature has defined a cottage clusters as detached units with a building footprint of 900 square feet or less, doesn't really lend itself to that option. So we're encouraging cities to go that route, but then please provide the path for the definitional cottage clusters in your code and anything above and beyond that is great.
[00:54:28] Kelcy King: I think of that from a financing perspective of how hard it is already to finance any sort of mobile dwelling, what products you would have to come up with to make those things work?
Specifically, how was the fee simple problem of cottage clusters or ADU addressed by Senate bill 458?
[00:54:45] Ethan Stuckmayer: Yeah. So basically Senate bill 4 58 allows that land division process for those middle housing types. So example I can provide is a detached quadplex right. You have four detached units on a lot.[00:55:00] Prior to Senate Bill 458, it was really hard to be able to sell those units.
Each of those four, individually, without going through some sort of like condominium visitation of those lots, creating an HOA, creating all of the insurance issues that come with that. But now, thanks to Senate Bill 458. You can subdivide those. You can sell those lots in those units off individually without having to go through those administrative hurdles of condoizing.
[00:55:26] Kelcy King: What leverage or strategy is there to get cities to allow more than four units in the cottage cluster?
[00:55:32] Ethan Stuckmayer: Sure. So the way that the administrative rules for cottage clusters are drafted is that cities can not apply things like maximum density standards, they can not apply maximum lot coverage standards above and beyond what is allowed for single family detached homes. So there's no kind of maximum litmus for how many cottages you can put on a lot. And we ask cities to just regulate that trending maximum [00:56:00] based on things like setbacks, parking, building separation, pedestrian connections, the courtyard.
So cities are are, in fact, prohibited from placing that maximum number of units standard on those cottage clusters.
[00:56:14] Kelcy King: Thank you. Are there any provisions in place for consideration of square footage per occupant in the primary dwelling before allowing expansion of footprint?
[00:56:23] Ethan Stuckmayer: Hm, not in House Bill 2001, no. There may be local city standards for ADU is that Kol might be able to speak to better on that, but hospital two doesn't one does not.
[00:56:34] Kelcy King: Are cottage clusters is intended to be a rental or ownership option or either?
[00:56:39] Ethan Stuckmayer: Yeah, either. So the way that the definition of cottage cluster exists in Oregon Administrative Rules is that the cities can allow cottages to be built on one parent lot. Or this was again, prior to Senate bill 4 58, they could have those be built on individual lots.
So cities have the [00:57:00] option to play a role in creating more home ownership opportunities in that regard. So definitely both that's, there's nothing in 2001 that speaks to how they must be tenured.
[00:57:10] Kelcy King: I'm also really curious about this. Why are mobile home parks never mentioned as options?
[00:57:16] Ethan Stuckmayer: Yes. Recently we've been having a conversation about manufactured dwellings as middle housing. And what does that mean and how do the two state statutes, one for middle housing and one for manufactured dwellings interact and overlap? And so part of the pathway that we're proposing or recommending is that cities shouldn't be prohibiting manufactured dwellings as middle housing, but what they can do is just require that those dwellings be meeting the Oregon residential building codes.
I think there's a lot of anxiousness at the city level about, oh, somebody is going to take an old 1960s manufactured dwelling and put it in their backyard and call it a [00:58:00] detached duplex or something like that. And so, I don't know how real of a problem that actually is or how real the concern that actually is, but the cities, I think, can't get in the way of somebody doing that, other than just saying it should meet building codes.
[00:58:16] Kelcy King: I'd be curious, too, to see in terms of affordability, whether it can be more of a land trust model instead of a single ownership model with a lot of space fees.
[00:58:27] Ethan Stuckmayer: One of the early iterations of the rules and defining middle housing was that we specified that it could be either site built or built offsite.
And we kind of remove that because we felt like it tried to be inclusive, but it was actually exclusive. And so we just remained silent on it to give the ultimate amount of flexibility in that regard.
[00:58:48] Kelcy King: Last question, the general framework of Oregon's new laws focuses on supply and demand to solve the affordability problem.
We know that this is inadequate. How do you plan to push back against this in the future legislation? [00:59:00]
[00:59:00] Ethan Stuckmayer: Yeah, so thankfully DLCD is not the only state agency working on housing. And I think House Bill 2001 is a land use bill that focuses on that supply and demand conversation about the housing affordability crisis.
Thankfully , in the same legislative session, and in this current legislative session that ends in about 13 days, the legislature is doubling and tripling down on the amount of subsidy that they're providing for affordable capital, a affordable housing development across the state. So it's not a, we just do House Bill 2001 and we do nothing else, it's House Bill 2001 plus 13 other options as well.
[00:59:42] Kelcy King: Thank you.
[00:59:43] Ethan Stuckmayer: Thank you, Ethan. Great answers. Super helpful.
The ADU Hour w/guest Michael Andersen
Saison 1 · Épisode 16
mardi 17 août 2021 • Durée 56:25
Michael Andersen: Thanks for the invitation.
Kol Peterson: I'm just gonna start by having you say a few more words about yourself that are not covered by your bio, that you would like for people to know about you. You've done a lot of things over the years that are relevant to the questions we'll be talking about today is so provide a little context for things about you that we should know.
Michael Andersen: Sure. I, I became obsessed with housing policy and transportation sort of in tandem. When I was a reporter in suburban Portland covering Clark county, Washington I was covering county government and like two parts of county government are covering poor people who are interacting with the criminal justice system and covering rich people who are building new homes or even middle class people who are building new homes on the fringe of the urban landscape.
And I was seeing all these poor people, but get being screwed by the fact that they were being forced to live in [00:03:00] places without that we're not designed for people without cars. And then they would own a car, but it'd be a crappy car. And then their car would fall apart. Then their life would fall apart.
And I was like, there's got to be better. Our solution. Meanwhile, I was spending time with all my 20 something, friends in Portland who didn't have cars and they didn't care. Like, and so I was like, it's not as simple a story as that. Like there's a lot of privileges both ways, but that was sort of what got me thinking about transportation and housing.
So since I've been working on public transportation, journalism and biking journalism, and since more recently housing advocacy, I've been sort of doing content in various ways.
Kol Peterson: So tell us a little bit about your own family's experience, living in an ADU.
Michael Andersen: Yeah. It started with just trying to continue to live with our housemates.
So I was interested in living with housemates when I started a little business 10 years ago because I was new, I was going to be socially isolated otherwise, and I needed to save money it worked in both dimensions. And then my wife moved in and then our housemates had a kid and then we were going to have a kid.
The ADU Hour w/guest Tracy Morgan
Saison 1 · Épisode 15
mardi 10 août 2021 • Durée 51:29
This week's guest is Morgan Tracy. Morgan Tracy, a member of the American Institute of Certified Planners has been actively involved in the Oregon land use planning in both long range planning, projects and development review for the last 25 years. He has worked for the cities of [00:01:00] West Linn, Lake Oswego, Tigard and has been with the City of Portland for the past 15 years in both the Bureau of Development Services and the Bureau of Planning and Sustainability. Currently, he is a staff project manager for Portland's Residential Infill Project, which seeks to increase the range of permitted housing types while lowering housing costs in single dwelling neighborhoods.
Kol, what are your thoughts on our interview with Morgan?
Morgan has been very deep in the weeds and details of overhauling, a complex residential zoning ordinance for the City of Portland for the last five years. This task was daunting and a journey, not just for him, but for all of the engaged citizens who saw this overhaul as a great opportunity to make a difference in the future of the city that likes to chart new territory nationally in matters, related to urban planning and infill.
Capturing his perspective on how this process could be translated to other jurisdictions is hopefully going to be valuable for future research and application of middle housing, zoning, rewrites. Kelcy, what were some of your takeaways?
[00:02:00] Morgan gives great examples of how one can participate in city council meetings in an effort to make change in one's local jury state. And why it's crucial that citizens get involved with the process of rulemaking as a planner, as a planner, deeply involved in quite possibly the most progressive zonings shift in the country.
Morgan shares his experience as someone on the front lines, as the liaison to the community and rule makers.
Let's get to our interview with Morgan.
Kol Peterson: [00:02:25] Good morning,
Morgan Tracy: [00:02:26] Morning, morning, Kol and Kelcy, it's great to be here, thanks for having me.
The ADU Hour w/guest Alexis Stephens
Saison 1 · Épisode 14
mardi 3 août 2021 • Durée 55:48
Alexis Stevens is the co-founder of tiny house expedition, the DIY tiny house, dweller and advocate. Along with our partner Christian Parsons, they inspire others to rethink housing through thought, provoking storytelling, educational events, and resource sharing.
Their work includes the acclaimed educational documentary [00:01:00] series. Living tiny legally. Living, tiny legally. It was featured on Washington post NPR business, insider parade magazine, curved entry, hugger. Cool. What were some of your takeaways from listening to this episode? Well, I'm in a real kick right now with mobile dwellings.
So it's really fun to banter with Alexis who is equally wonky about tiny house on wheels regulations. The tiniest moment is very fractured and stealthy by nature. So it's fun to try to anticipate how the stealthy movement will actually play out. In the future technology has enabled mobile dwellings, like RVs vans, tiny homes, and park model RVs to be far more convenient and practical than they would have been for living 20 years ago.
And I expect that we will look back almost consoling only to the days when tiny houses on wheels weren't even legal to live in, in residential zones. And think how weird it was that we didn't allow people to live in mobile dwellings.
Kelsey, what were some of your takeaways? Alexis is incredibly personable and we had a great time chatting with her.
She has traveled the country in search of knowledge [00:02:00] and experience of how tiny house communities are collecting and advocating to improve local regulations, to make this lifestyle more accessible.
Let's get to our interview with Alexis.
Kol Peterson: As, as Kelcy was introducing you, my Alexa device was responding and I was like,oh shoot, ,that's going to happen this whole episode -got unplug that. That that must be so annoying.
It is so annoying.
The ADU Hour w/guest Kol Peterson
Saison 1 · Épisode 13
mardi 27 juillet 2021 • Durée 39:09
Kelcy King: Kol Peterson is an ADU expert based in Portland, Oregon. He has helped catalyze the exponential growth of ADUs in Portland over the last decade through ADU advocacy, education, consulting, policy work and entrepreneurship. He is the author Backdoor Revolution, The Definitive Guide to ADU Development, and also happens to be the host of this podcast.
For this episode of the ADU [00:02:00] Hour, we decided to shake it up a little bit, and I take on the role of the interviewer. So Kol, what were some of your takeaways from listening to this episode?
Kol Peterson: In this episode, we talked about building coalitions. Now that ADUs being folded into broader policy conversations about middle housing, more generally. A conversation that has really taken off in a big way in the last year.
I think that this idea of coalition building and meeting regularly with that coalition has even more salience. The power of a disparate group with diverse expertise, but with a common mission of getting more ADUs built cannot be overstated. Groups like this can definitely, help change regulations, change laws, impact financing opportunities, raise awareness about ADUs and much more.
Kelcy, what were some of your takeaways?
Kelcy King: Well, I will second that your interview offers some great nuggets in regard to forming coalitions in an effort to advocate for ADUs as a piece of the puzzle for building greener, resilient cities, and as affordable housing, you've also built quite a few ADUs on your properties and you offer a few [00:03:00] design tricks that you've used offer highly enjoyable living spaces in a small structure.
Let's get to our interview with you.
A quick heads up to our listeners. My audio in this episode is subpar. So sorry about that. We also had some technical issues during the original recording and lost the introduction. So we'll start here with the second question I asked Kol.
For those looking to advocate at their local municipal level. Where would one start to address ordinances that only allow ADUs in certain zones within a city? For example, some residential zones, but not other residential zones.
The ADU Hour w/guest Tim Cocaro
Saison 1 · Épisode 12
mardi 20 juillet 2021 • Durée 35:31
Timothy is CEO of RESCON Builders the largest dedicated Granny Flat building company in Australia, and founder of Canibuild, a sales app changing how the world’s builders sell construction.
The ADU Hour w/guest Willie Dean
Saison 1 · Épisode 11
mardi 13 juillet 2021 • Durée 37:10
Kol Peterson: All right. So this is Willie Dean and Willie Dean is a residential designer working primarily doing ADU design and has worked [00:02:00] quite a bit in both Oregon and now in California. I thought he would be an appropriate guest to have because yeah his experience in both those states.
On top of that, Willie is also an excellent ADU designer. We're going to be talking about ADU design as a general matter. And hopefully everybody can get something out of our conversation. So, Willie why don't I give you a second to introduce yourself in a little bit more detail?
Willie Dean: Sure. My name is Willie Dean. I am an architectural designer in Portland, Oregon. My company is called Ground Up Design Works and I specialize in residential design of all types. But I'd say specifically, probably 80% of my work is accessory dwelling units here in the Portland area. And over the last few years I had a opportunity to work with a company in South bay, San Jose area and with them, we, we executed probably twelve ADUs in the South Bay, Silicon Valley area. It's a good amount of [00:03:00] work within a short period of time. But I definitely have some observations about differences, good and bad and in general.
I got my master's degree in architecture from the University of Oregon and that's what got me out to Oregon. I'm originally from Wisconsin. I got my undergrad from University of Wisconsin, Milwaukee.
Kol Peterson: So for those who don't know, I actually went to a design school myself and everybody wore black rim glasses.
So is it a requirement that you wear a black rim glasses if you're an architect?
Willie Dean: You know, some people with other colored glasses but it's a standard. These are actually technically navy blue.
Kol Peterson: Navy blue. Okay. I'm color blind. All right. So we're going to dive right into your work in Oregon, California.
So which markets specifically have you worked in ? Well, I should say in Oregon you probably just worked in Portland, correct?
The ADU Hour w/guest Ashley Salvador
Saison 1 · Épisode 10
mardi 6 juillet 2021 • Durée 40:47
Ashley is the founder and president of YEGarden Suites and Calgary Backyard Suites - Alberta’s only education and advocacy-based non-profits dedicated to informing citizens on the benefits, challenges, and regulations surrounding backyard housing. She is also the CEO of Municipaction Inc., a consulting firm that supports Edmontonians in their city-building endeavours. She has experience working across sectors on projects related to affordable housing, climate change, social isolation and inclusion, infill policy, seniors housing, and demographic change. Born and raised in Edmonton, Ashley holds a BA Honours in Sustainability and Sociology from Dalhousie University, and an MA Planning degree from the University of Waterloo.
[00:00:00] Kol Peterson: Good morning.
Ashley Salvador: Morning, Kol..
Kol Peterson: Thanks so much for coming on today.
Ashley Salvador: Thanks for having me.
Kol Peterson: And I'm super excited to talk with you about the work that you've done. I've been a fan of your research for a number of years and never had a chance to really talk with you directly.
I've read your work because you put some of that content on AccessoryDwellings.Org initially, and that's kind of how I first learned about it. So let's dive right in. So tell us about yourself and where Edmonton is for those who aren't familiar with Edmonton.
Ashley Salvador: Sure. So first of all, I've been tended in Alberta. Some of you may notice the Texas of the north. It's not necessarily that I would say, Hmm. Conservative. We, we actually have a lot of progressive policies here, a lot of really young folks who are looking to push the policies in a really good direction.
On the, on the ADU front, things have moved quite quickly over the last couple of years to allow for, the diversity of sizes, sizes of ADUs basically across the entire [00:01:00] city at this point as a permitted use. Yeah. And. Just for a bit of context, we're looking at getting rid of our parking minimums entirely.
The ADU Hour w/guest Susan Brown
Saison 1 · Épisode 9
mardi 29 juin 2021 • Durée 01:05:09
[00:02:33] Kol Peterson: [00:02:33] Susan, come on out. Good morning.
[00:02:37] Susan Brown: [00:02:37] Good morning. Good morning, Kelsey. Thank you.
[00:02:40]Kol Peterson: [00:02:40] Thanks so much for joining us today. Susan, I'm really excited for this conversation. There's so much good stuff to talk about and I know that there's going to be a lot of good questions from attendees.
[00:02:51]I've known Susan for a few years and have collaborated she's also attended the ADU academy. She's very knowledgeable about a lot of things in the [00:03:00] financing world, but, especially knowledgeable about ADU financing. She and I are both in this coalition called the Build Small Coalition here in the Portland Metro area.
[00:03:09]I'm just going to ask you to introduce yourself a little bit more.
[00:03:13] Susan Brown: [00:03:13] Sure. Thanks, Kol. Appreciate it, and welcome everybody, this has been a great resource for the last couple of weeks. Good way to spend some time and learn as much as we can from our colleagues and peers in this space.
[00:03:24]I'm Susan Brown, Senior Vice President for Umpqua Bank. I run our construction and renovation loan production for residential lending. I've been in the banking space for quite some time. I don't even want to admit how long, but a long time and got an interest in the ADU space before it was a thing.
[00:03:47] I was just talking with Kol a little earlier about this little home where my husband and I live is the garage space of what was going to be a 5,000 square foot chalet. And we ended up just building the [00:04:00] garage and that's where we live. That was kind of my introduction to simplified life, less expensive living, and it's manifested now into bringing financing to Umpqua Bank and a little bit bigger way. So I kind of walk the talk, I guess you'd say, and have a deep passion for this kind of building.
[00:04:23] Great.
[00:04:24] Kol Peterson: [00:04:24] Thanks, Susan. And I keep on forgetting to mention this just program note. There's roughly 150 people on right now, just so people know, because I think only we can see that I just wanted to let you guys know how many people were on the webinar.
The ADU Hour w/guest Joe Robertson
Saison 1 · Épisode 8
mardi 22 juin 2021 • Durée 47:54
Kol:
Joe Robertson and I have known each other for about a decade or so. And I learned about Joe because he was, you know, pretty involved with some ADU related conversations with the SDC waiver, which we'll talk about in a little bit more detail later. But he's also just notably the, one of the more prolific builders in the U.S. and definitely the most, or the most prolific builder in Portland. So, and the most experienced builder in Portland in terms of ADU development he corrected my marketing literature, which said he'd been building an ADU for a decade he's been building an ADU for two decades, which is very impressive given that it is, we're not really a phenomena two decades ago, at least in, in Portland. So so thank you for that correction. And it just goes to show how much Joe brings to the table. So we'll be fielding a number of questions from you guys that are just kind of all over the map in terms of design and build questions at the end today. So, and [00:03:00] Joe can answer any of these things jointly. All right. So Joe, please introduce yourself a little bit for the audience.
Joe Robertson: Hi everybody. I'm Joe Robertson, owner of shelter solutions been a builder residential construction for about 42 years and Portland for 29 years and building ADUs for about 22 years.
So I'm experienced in all different types of residential construction from custom homes to production, and then of course, ADUs and other accessory structures for other reasons. So now the ADUs are pretty much all we do.
Kol: How many ADUs have you built roughly in how many jurisdictions?
Joe Robertson: We have someone ask us this question about well a month or two ago.
And so we went back and counted. So we're finishing one next week and it'll be number one sixty nine, a hundred sixty nine ADUs . And primarily building the City of Portland but built some in [00:04:00] Clackamas county, Washington County, Tigard, and Tualitin, but 98% in City of Portland.
Kol: Yeah. Yeah. And and there's some, you know, I've mentioned that there's some really specific reasons why that's been the case that most people who are building ADUs are primarily building in Portland, but we're going to see that change probably with House Bill 2001, we'll see more market adoption in neighboring jurisdictions.
We [00:04:00] were like, this is too much for this 1942 building. And we're gonna have to figure out some way to do it. And we decided that best way was for us to keep them whole while they built an ADU. And so we lived as tenants for several years. And it was great. It was a perfect setup for both of our kids to grow up together as best friends and the they had to move for a job recently.
So we've relocated since, but it was a really rewarding thing.
Kol Peterson: All right, so you have some direct personal experience with ADUs in particular, and we're going to talk about ADUs for sure, but we're also going to focus on this broader conversation of middle housing today. So let's start off with talking about Sightline Institute first. Tell us a little bit about what Sightline Institute is and what's the mission of Sightline Institute? How would you describe it to other people for those who are not familiar with it?
Michael Andersen: Sure. We're a sustainability think tank founded in 1993 based in Seattle, but covering the Pacific Northwest.
So my, my boss's big idea is that you can't get people to care about their planet. The evidence seems to suggest, but maybe you can get people to care about their [00:05:00] ecosystem. And so we focus on the Pacific Northwest as an ecosystem across the border states and nations, and write about the ways that we can make it the best, most welcoming, most sustainable version of itself as a model to other ecosystems.
Kol Peterson: Is there any other examples of similar Sightline Institute types of think tanks out there in other regions or comparable institutions that you can think of in the United States.
Michael Andersen: We're definitely weird, but Rocky Mountain Institute is a little bit similar. There are a lot bigger now founded in Colorado, I think.
And there's my my colleague Eric is trying to working on creating one for Appalachian actually. So there may be more.
Kol Peterson: Cool. All right. So how tell us about the scope of the material that you cover for the Sightline Institute.
Michael Andersen: I write mostly about housing, a little bit about transportation and that overlap, which is parking, which I love talking about parking, in the Portland and Oregon areas.
So mostly focusing on the statewide level and regional level and what we can do there, but also a little bit of Portland stuff to the extent that it's [00:06:00] like a model for other cities.
Kol Peterson: And how does the material that you cover for Sightline Institute fit into the institutes larger mission?
Michael Andersen: I think one of our niches is that we are a sort of environmental organization that is really into economics and harnessing the power and insights of economics for our progressive sustainability sort of vision.
And one of our insights, or one of our decisions, our perspective is that we desperately need to reduce the need for energy over the longterm without making it feel like we're giving anything up. And the way to do that is to allow urbanization, but we've banned urbanization because of zoning laws that have made it impossible for people to basically choose where they want to live, which is good for lots of reasons.
So we try to work to undo that while also not being blind to the other complications that creates for disruption and so on.
Kol Peterson: You previously wrote for a bike blog, local [00:07:00] bike blog. That's quite beloved, quite popular called Bike Portland. Can you talk about the material that you wrote for Bike Portland and how it relates to what you covered at the Sightline Institute?
Michael Andersen: Yeah. So when I came to Bike Portland, it was just 2013. Portland was sort of swinging into a big boom in home building was coming out of a four year, like plateau, like almost no home building. So like there was, it was obvious that there was going to be some sort of a rent crisis. We already had a rent shortage and then the rents were starting to climb.
And I was really interested in like, we should be solving this problem, but we should be solving it in a way that makes things more proximal. Like if you look at the greatest biking cities in Southeast Asia or Northern Europe, they're all full of these little close together homes. And that's the bedrock.
People are not biking that many miles, they're just biking a lot because there are a lot of short trips. And the only way we create short trips is by building ADUs and attached homes and apartment buildings that are all close to jobs and everything [00:08:00] else. So that was the case I was making. And I had a weekly column about that and got more and more obsessed with sort of that side of how to improve biking and by living in the places where biking is already good.
Instead of having to spend all our wheels, trying to make biking great in more and more places, which we should be doing both of.
Kol Peterson: This is off topic, but in South Asia, Southeast Asia, and I would imagine Europe electric, motor scooters are becoming more common, right? That's not really taking off in the US.
I mean, those little like ride on hop on scooters are really taking off, but not like the kind of ride on scooters that give you longer distances. And they're electric. What are your thoughts about electric scooters and their potential. Are those as good as bikes or what are the differences? What are the ways in which like electric scooters are?
Provided serving the same role that bikes could play. And how does that deal? How do you think about that in terms of urban form? Yeah, that's a good question. I don't really have a strong perspective, I guess. But they're better than cars. They're worse [00:09:00] than bikes. Bikes are better than scooters and worse than skateboards.
Michael Andersen: So yeah, I mean, I think it's like if a, if a tool is going to work, you should be able to use it. I'm pro transportation to the extent that it infringes on the other types of trends of more efficient transportation, that's a problem. So like when those, when like a motor vehicle is using a bike lane to the exclusion of it, being comfortable for people to bike or scoot in, then that's a problem.
But I don't know exactly where you draw that line.
Kol Peterson: Yeah. Okay. I've just been, I have an electric ride on scooter. I love it. And I'm just surprised that it's there's so few of them in the U S wherein, I would imagine they're that they're quite popular now.
Michael Andersen: Yeah. I don't know why. I mean, it's taken over in Northern Europe too, I think.
Yeah. Not taken over, but there's a lot of it
Kol Peterson: Anyway, that was a side topic, but I figured you'd have some thoughts about that. All right. So what sources do you rely upon for staying abreast of the latest legislative policy discourse related to [00:10:00] housing nationally?
Michael Andersen: My main filter is Twitter. So I use Tweet Deck as like a Twitter app that lets use like organize it all by, you know, most recent first.
And so it takes away some of the poisonous dunking fixation that the Twitter algorithm pushes you towards. So I highly endorsed that. And then it lets you segregate by topic. So I can have a column for housing people and a column for transportation people. If anybody's interested, you can look at my housing list on Twitter, it's a public list.
And I use that to constantly update that.
Kol Peterson: I bet you people are interested in that. Cause the fire hose is a real deal. I guess if you're not a reporter, it's like, it's just overwhelming. So I guess my, I guess my question is like following up on that, is there a primary source of like information source that TweetDeck tends to push you towards, or is it individual DIY blogs out there across the, across the internet?
Michael Andersen: Yeah, I used to, so I once heard, you know, [00:11:00] William Gibson, the William, but no, no, this was David Carr, the times, his old, New York times, his own media columnist. He said that like Twitter is like dipping a teacup into a glittering sea of information.
And that's how he likes to enjoy it. And you don't worry about the sea as it flows by you just dip your tea cup and you enjoy that information. So I knew I liked that, metaphor.
Kol Peterson: That it's apt. But does it do to my question, is it you're dodging the question young man. No , is there a primary news source that you tend to be directed towards?
Michael Andersen: No. No, it's just, it's just a painstakingly building, figuring out who's smart on this stuff.
Kol Peterson: All right. So you've recently written about a lot more recently about state level zoning standards. What do you believe are some appropriate frameworks for when states attempt to reform local zoning statewide?
It's evident to me based on my observation of the ADU market, that the legislation that has occurred [00:12:00] in Oregon and California has been extremely effective. Tell us your thoughts about that. Yeah.
Michael Andersen: So you're going to talk more about that this week, I know in Oregon. But the both in Oregon and California, and to some extent in a few other states, Washington, Connecticut, just recently Utah there've been laws that sort of set of basic standards for like you can, you have, you have control over a lot of your zoning, but you're not allowed to ban the following options.
And you know, the following options is a different list based on which state you are. In Oregon, we've had an accelerating pace of state level actions to set certain pro-housing standards at the local level. First with ADUs a few years ago then followed up with middle housing, duplexes, triplexes, fourplexes, cottage clusters and then just in the last session just weeks ago when that allows lot division for middle housing, which is as you were talking about yesterday with Jake, hugely useful to get it actually built.
So we've also passed some like statewide level affordable housing [00:13:00] mandates on a sweeping bipartisan basis that say that like, you're like you have to give extra space and unit count to projects that provide regulated affordability. So I think that essentially makes that possible, no matter the zone which is also great for building an integrated city.
So Yeah, I think I'm really bullish about this trend of using the state to solve this problem that we created piecemeal city by city, by city, but we create everywhere. So like, I've got like, I can, I can kind of go into like, sort of the game theory of it.
Kol Peterson: Yeah.
Michael Andersen: So it seems to me that the, you know, like it's, it's a prisoner's dilemma, right? So if you're familiar, like two people constantly lose if they are purely self interested, but if they can act together in concert, then they can win mutually compared to the constant losing. And that's essentially, I think how the vision for state zoning action works. You've got, so if you think about the county.
You've got. So if you look at all the cities around Puget sound, for [00:14:00] example. You've got a wide variety of different amounts of land zoned for attached housing and to the Seattle and Tukwila having about half of their land and a few cities like richer cities, almost none of that land. With various cities in the middle, if say, Tukwila decided we are going to try and relegalize cities, we're going to say, you can live wherever you want in our city.
You can build a home here. And we are gonna also, that's going to create a tax windfall and we'll use that property tax windfall to spend, to make sure that poor people can live here as well. And we'll build this wonderful situation. It would not solve the problem because Tukwilla would also need every other city around Puget sound to be doing something similar or else it's a drop in the housing bucket.
Like it could not solve the problem on its own. And so, as a result, if you're an elected official in Tukwilla, you're thinking, well, I could do this and I have an incentive to solve this regional housing shortage, but I don't have the means to do it. So why would I ever try? Like, why would I go through the political cost of doing so, and the state level, [00:15:00] the politicians have, not just the incentive, not just a motive, but they also have the opportunity, they have the means.
So that's the puzzle that state level action solves.
Yeah. Interesting way to frame it. Thank you for putting it in those like game theory terms. So in Connecticut they recently passed ADU legislation that allows cities to opt out. Maybe you can describe that a little bit for us before you answer the question I'm about to pose, but presumably this legislation was a form of political compromise in, in an idealistic, you know, ADU legislative bill.
Kol Peterson: How do you feel about this particular legislative political tactic?
Michael Andersen: Yeah. So I don't know a ton about Connecticut. My impression is, and I've seen some of the advocates work on this is one of the most zoning segregated states in the country. There's very few like either regulate affordable or market affordable homes in a lot of the state and especially where the jobs are rich and the fight -the bill that [00:16:00] was just passed a law legalizes ADUs up to, I think, a thousand square feet on almost any residential property.
And, but it says, and also does other good things like it removes like. You know, and it does on other, other more abstract, good things. But the, the key provisions on ADUs and parking, it says that if a city wants to opt out on the ADU legalization, it has to get a two thirds vote of its planning commission followed by a two thirds vote of its legislative body as town council or whatever by a certain date.
I think it's the first of 2023. And if they don't do it by then, then they lose their opportunity. So they have to like line it all up, but it also takes effect the first day of 2022. So unless cities are really Johnny on the spot on this, they're going to be theADUs. They're going to be legal. The sky will not fall.
Some people will hear about the fact that you can build them and get pissed off if they don't get to do it. So I think that is a clever way to structure a thing that lets people [00:17:00] sort of think about how, oh, this won't, we can still stop this if we need to. But then like creates the conditions in which we have these local discussions, which I think are sometimes the most important part of the thing is like forcing a discussion.
And then sometimes housing will win in those discussions. So I think it's clever. I it's also like, obviously, like if a city is built on economic segregation, as I think some municipalities in Connecticut are, they may indeed act on this and they may keep it out. And then like the game is if we want to solve that problem, we get every other city who has already opted in to be like, no, no, we're taking that away from you now you don't get to opt out anymore and that'll be easier once every other city has opted in.
Kol Peterson: So yeah, I, I think you're right about this notion that if you kind of get the gold level ADU regulations in place, the sky will not fall. And and that, that, that will effectively normalize lower barriers to [00:18:00] ADU development. And so I think you're right. That even if it's only in effect for one year, Serve a big role in kind of catalyzing more aggressive or easier adoption of, of higher level ADU standards in the future.
So what are some suggestions that you would have for policy makers and advocates if they're considering pursuing statewide legislative approaches to promote ADUs and middle housing?
Michael Andersen: One thing that so I've got all kinds of opinions, I'm mostly a language person. I'm not really a, like a technician in any way.
I'm a more of a blogger. So that's where my expertise is if anywhere, but I will say politically, some things we've noticed in Oregon, the core of the campaign to get this stuff done was affordable housing developers. So I think affordable housing developers this is an insight by my former colleague, Madeline Kovacs andEli Spevak, who's been a shaker you've worked with on all this stuff, I think and used to work in affordable housing himself. I think [00:19:00] the formula they hit on was that the affordable housing developers have expertise, they've got the incentive. They've got the sort of moral authority and credibility just to like try and get good zoning laws passed.
In some cases like they actually would prefer this to also apply to market rate because they want to work in the market rate system sometimes because of this last paperwork they don't need any more constraints in their deeply regulated careers. And and in some cases, the people who do this stuff, they just understand the need for a broader set of solutions to a housing shortage.
So building on the sort of political support of affordable housing developers and sort of going outward from there to a broad coalition of in for private developers, environmental groups justice groups all sorts of folks. We've been able to sort of communicate to elected officials that this is not a narrow issue.
This is a very, very broad issue. And you may hear from near the narrow interest of the small minority of homeowners who are deeply opposed to this, but they [00:20:00] are like not anywhere close in scale to the benefits that you will get from all these different spectrums. If you can allow more housing where people want it in urban areas.
So that's been like, I think probably the key to it. We also, and I'm talking mostly about the democratic side, really important thing. I think about Oregon and California and Washington. What we've seen is that a fair number of Republicans are also on this. And in fact, in Oregon, and I think in California, what we've needed, we, if we didn't have the Republican votes on the bills, they wouldn't have passed.
There were too many Democrats from the suburbs in general that were voting against these bills even in these democratic super majority states. So like building. Purely partisan argument, which you could totally do for legalizing housing, you know, fighting economic segregation. The that's like unimportant part of it.
But if that's the only argument you're making, if you're not also making a property rights, people [00:21:00] should get to do what they want. Sort of you know, this is a market-based way to advance, you know, material benefits of many, many people, all that's also true. If you're not also making that, then you are less likely to succeed I think
Kol Peterson: What legislative bills are you tracking that excites you? I should say state the state level bills of any.
Michael Andersen: Sure. Yeah. Well, I'm, I'm very eager to see if California finally posts a win with the parking reform, they proposed near transit, I think removing parking requirement mandates near transit.
Also I think it SB 9 in California is a middle housing legalization that allows duplexes on any lot and also a lot of split. So theoretically four units. And also if you want to do a duplex, you can split it. So that's great, or, you know, narrow house. Those are both great bills.
And then in North Carolina, there's an exciting middle housing legalization bill that also [00:22:00] includes ADU. And is similarly bipartisan. It would be really great to get something I think on the east coast or the Southeast that sort of is on the same lines because it's a whole different media universe there.
Kol Peterson: So let's move away from state level legislation at the moment and focus in on where, you know, for practical reasons, a lot of the kind of housing politics are going to play out at a local level. Is there any suggestions that you would have for local level policy makers and advocates, if they're considering trying to pursue better municipal regulations to promote ADU and middle housing?.
Michael Andersen: Yeah. I think Portland, like, so I was, as part of, I was like the several hours a week content person for Portland for Everyone, which was a campaign is, is a campaign is a program of Thousand Friends of Oregon, which is an anti sprawl sort of environmental organization. Former colleague Madeline was the political mastermind of that.
And I think. [00:23:00] Like, she just spent a ton of time. She, she first won the funding and Thousand Friends committed their own funding to like get her to meet thousands of people face to face and like build a gradual alliance of folks. One of her cool things that I've been trying to spread the word about was that when she was building the coalition, she didn't let anyone sort of brand take over.
So she didn't want it to be all affordable housing developers are all market rate housing developers are all environmental groups. She would say, I'm going to meter admission to this club. I'm going to say, we'll take one of these, one of these, one of these. And when you do that, nobody feels excluded.
Nobody feels like it's not their group. It's not for them. So if you have a really like bespoke coalition early on, you can build yourself a really longterm coalition, a hopefully a big tent which is what you need to defeat the people who flip out about this stuff.
Kol Peterson: Outside of the city of Portland, where there's been this really effective mobilization of these [00:24:00] interests to kind of get the Residential Infill Project passed, which we will focus on a lot this week and, and today also. But what other particular local bills are you seeing outside of Portland?
Michael Andersen: Like other municipal stuff.
Kol Peterson: Yeah. Municipal bills. Yeah,
Michael Andersen: Sure. The I mean, I've been really impressed by the wave of California cities that are talking about middle housing legalization. I think it's like seven of them, including San Jose and San Diego and Oakland like Sacramento. And I think that's caused by a combination of like this rhetorical battle happening in the national discourse and the state mandates that are saying you need to come up with locations for actual homes. And it turns out that like middle housing is one of the less controversial ways to increase the supply. So, okay. The dumb, I think Seattle's ADU legalization is sort of underrated.
Like it goes up to a thousand square feet. You can have two of them on any lot [00:25:00] and it doesn't end there. It doesn't apply at the, the floor area ratio cap doesn't apply. So it's basically free space. So there's a huge incentive to put an ADUs anytime a lot turns over. And in fact, the ADU like production has gone way up.
So it's like, it was a stealth triplex legalization in many ways. And I feel like it hasn't gotten the credit deserves for that.
Kol Peterson: What are some federal rules or laws or other national policies that you and or aSightline are supporting to help bolster small infill?
Michael Andersen: I think I, I'm not super optimistic about the payoff of federal efforts in this.
Like, I think it's really hard to write a law that is going to redound in the right ways down to the local stuff. If you like, you can lead a city to water, but you can't make it drink. The, but the and it's easier for states just because the conditions are more similar. I am sort of, I wish that there were more conversation at [00:26:00] the federal level about incentivizing state legislation.
Like I right now the federal things in the, the Biden ministration has put out on this. They're great. It's like here's some money to do a planning process. Okay. If you don't wanna do a planning process or use. Get you to do a planning process, make it cheaper. And then there's a sort of proposal to tie.
I think some transportation, like here's some additional transportation money you get, if you reform your zoning and their correct direction, you know, in a more inclusive direction. And there some nuances there. I don't think either of those is the total game changer. I, like I said, I wish that the, there were only 50 states there, I don't know, 20,000 cities.
So like, it would be much more efficient to incentivize the states to take action along the lines of Oregon's for example. But the I do really like the idea of tying it specifically to transportation dollars because that's something I think every, for my time, as a suburban reporter, every local municipality desperately wants to add turn lanes, whether or not that's [00:27:00] good, that's going to get their attention if they aren't getting where if they could get federal money for that.
So that's better than most ways to incentivize the stuff at the federal level. I think then there's also like the affordable affordable or sorry affirmatively furthering fair housing. Which looks more specifically at affordable housing and where, how that's well, that is distributed and as well as with the, the underlying zoning and that is a process we could be using a lot more than we are.
I'm not sure it's ever going to scale up, like is essentially a punitive way to get cities to do stuff which is effective when it works, but like, it needs to be applied a lot before cities actually changed their behavior. Instead of just asking for apology rather than (transcription ends here)
Kol Peterson: [00:02:30] Thanks for being here. Morgan, the Residential Infill Project is familiar to those of us who are in Portland, obviously, let's assume that people are not familiar with it, but they're fairly sophisticated in this general urban infill topic, very familiar with ADUs. Can you describe for us what RIP is for somebody who might be unfamiliar with it from outside of the city of Portland?
Morgan Tracy: [00:02:52] Yeah. It's a bit, it's a bit challenging to do this in a condensed form cause it took five years of work. So boiling that down, I can [00:03:00] concise.
As a big challenge, but here, here we go. I would say that the Residential Infill Project was the city's first major overhaul of the single dwelling zoning since corner lot duplexes were allowed in 1991. So it had been about 25 years when we got started. Now, these changes expand the types of housing allowed on most lots to include duplexes, triplexes, fourplexes, and options to create additional ADUs in nearly 90% of the single dwellings zone neighborhoods, simultaneously new tools to limit building sizes will ensure that this development maintains the look and feel of those neighborhoods.
And together, these changes allow a broader range of compatible housing types that are comparatively less expensive than new single family homes, making neighborhoods more accessible, more inclusive, and more sustainable over time.
Kol Peterson: [00:03:45] All right. I should have asked you this , but I'm gonna ask you, now, what is a good title for you to give some framework for what your role was within the residential input project?
Morgan Tracy: [00:03:56] So my, my official title with the city is a City Planner II, which [00:04:00] doesn't mean much to many people. So, but extensively, the work that I'm doing is, is managing the project.
I coordinate our team, our staff, our consultant work, work on the project timelines and make sure that we deliver a project on schedule when we can. Generally, I go by the title of project manager.
Kol Peterson: [00:04:18] So this project running five years, how did the history of Residential Infill Project come to be and why in the world did it take so long to get there?
Morgan Tracy: [00:04:29] Well, as you can imagine, it's a bit of a complicated project, a little bit of, a little bit of controversy involved. But let's, let's start with the history.
So the project began in 2015 and in 2015, we are hearing a lot of calls about concerns resulting from outcomes from infill development. So we were seeing lots of small homes being demolished and replaced by big, expensive new homes. We, we're seeing about more than a house per day being demolished on average.
And we're also seeing the housing prices in 2015 were beginning to price out families earning a hundred percent of the Median [00:05:00] Family Income. So that essentially translates to about half of the families in Portland would be unable to afford to purchase a house in the city. So recognizing the city could not prohibit tear downs and simply applying stricter limits to new development would tighten the supply of new housing, which exacerbates housing costs.
We brought together two objectives, which was addressing the scale of new development and increasing housing options in neighborhoods. And part of the, I think the real challenge in this project were these are two almost at-odd objectives that we had to balance and bet with the public in multiple scenarios, multiple occasions So you know, you, you asked why it took so long.
There were several steps along the way, either fortunate or unfortunate. But first off we started under a different administration under Charlie Hale as mayor, and he had decided towards the end of his term that he wasn't gonna run again, but he wanted to see some product.
And we weren't at a point where we can deliver a new code and new maps and all that stuff. So, [00:06:00] we 'd agreed to bring forward a concept plan, which essentially lays out the basic trajectory that the project is going to follow. And the positive side of that is it's good to take the temperature of your decision makers to see if you're going in the right direction before you really invest a lot of time and effort.
The downside of that is the project took so long that by the time we got back to city council, four years later, it was an almost entirely new council. We just had one city council left. So that was a bit of a fruitless exercise. We also spent 14 interesting, exhilarating months with the planning and sustainability commission.
We went through almost every single detail of that project, point by point by point by point in a series of monthly meetings. And about two thirds through that process, the planning and sustainability commission, after hearing public testimony and considering the objectives, and then the proposals, gave us some rather very different direction, which caused us to go back to the drawing board and start over on our code.
[00:07:00] Not entirely, but it really changed the fundamental building blocks that we come to them with. So we had to redo our analysis, redo the code, and that took some more time. Unfortunate outcome of that was we were also about to lose two of our planning commissioners, they were terming out.
And so by the time we got back to them, we were really in a rush to get a decision from them. And so we came back to them with this revised proposal and said, here it is, here are the stats, the data, and the analysis, what do you think? And we'd unveiled a displacement risk report and didn't really spend a lot of time going through that report. Understanding the implications, what the data was really telling us.
And so they felt rushed to a decision and they had a rather split decision. It was a five to four decision. And so that created a little uncertainty at city council. We had to take time to work with the council offices, go through these reports, help people understand what they were telling us. We started the city council process and right before we were about to finish, COVID struck and that's through another five months [00:08:00] on the end.
So now a little bit of that's me, but a lot of that's just the circumstances of the project.
Kol Peterson: [00:08:05] Just as an observer slash public participant, I could tell this was an extreme, highly engaged public process and there was so much commentary from the public on this.
And I, I couldn't imagine having to balance all of those different inputs that you guys had to manage. So we're going to talk a little bit more about that, but just to give people some context for that, how many public comments would you say the City of Portland received on the residential infill project?
Morgan Tracy: [00:08:33] Close to 15,000. We also were, at one point we sent out 123,000 notices to property owners.
Kol Peterson: [00:08:41] Yeah. So this would be on the scale of a very highly, both engaging and engaged topic in terms of the impact that it was going to have on people and the level of input that they wanted to provide, relative to most public processes. Would you say that?
Morgan Tracy: [00:08:58] Yeah, it was [00:09:00] both super engaging, everybody had an opinion, no matter where you were what, what sort of venue you were at. Just about everybody you talk to either lives in, or has lived in a single family home or single family neighborhood and has opinions about that.
So there's that, and then the geography was city-wide. So that's you know, that's a lot of area, a lot of peoples that are involved.
Kol Peterson: [00:09:19] Can you talk about Bureau of Planning and Sustainability's role in developing policies and regulations for RIP, and maybe talk about, just as a general 101 for those of us who aren't familiar with the process, the Planning and Sustainability Commission's role relative to the Bureau of Planning and Sustainability its role, and then the City Council's role. How does a policy become law at a local level?
Morgan Tracy: [00:09:44] You're asking for the version of, "I'm Just a Bill."
Kol Peterson: [00:09:46] Yep, "I'm Just the RIP". Yeah.
Morgan Tracy: [00:09:49] So BPS, the Bureau of Planning and Sustainability is in charge of legislative projects to change the city's zoning and development regulations. So we have the Bureau of Development Services which [00:10:00] does the implementation. They do the over-the-counter permit review and development review.
Our role is really to go through the legislative process to make those changes happen. We make those decisions based on statewide planning goals. So the state has a statewide planning framework, and they might hear a little bit more about that in tomorrow's session. But we also have our own comprehensive plan and our comprehensive plan identifies 700 plus policies that relate to housing, economic development, environment. And really it lays out the city's trajectory for its growth and development over the 20 year period.
The Planning and Sustainability Commission is our advisory body. So we would, as staff, we develop these projects based on public concerns, public calls for change, and we'll bring projects to the Planning and Sustainability Commission and others that they are the recommending body to the City Council on these projects.
The city council is the formal decision making body.
Kol Peterson: [00:10:54] Got it. So as a staff project [00:11:00] manager working on this project with so much public input and the interests of not only the city council members, but also the Sustainability Commission. What are some general guidelines that you had in mind for incorporating all these different inputs of public ideas and suggestions?
Morgan Tracy: [00:11:19] It's tough. Right? So like I mentioned how these are sort of two competing objectives that we're trying to balance and not surprisingly, we heard testimony on both of those ends of the fulcrum.
But I think just sort of taking a step back, planning is really a reflection of the community's values carried into the future. So we take the input of a lot of public when we developed a comprehensive plan, those translate into policy objectives for what we want our future to look like.
But when we're translating those values, one thing that can be a little bit dangerous is people are resistant to change, right? So if a community is resistant to change, understanding that change is inevitable and understanding of the thriving city is one that adapts and embraces and is prepared for that change.
You kind of [00:12:00] need to look beyond some of the immediacy of the concerns that are being expressed and think about the bigger picture and who's benefiting and who's burdened by these decisions.
We heard a lot of arguments that the solution to our housing affordability problem was just making sure that those small, less expensive homes weren't being demolished.
As long as no one's having children and people aren't moving here, that solution might work, but that's also not realistic. Just ask the real old timers in Carmel, California. Very precious little homes that are $2 million and up.
And land use matters. We also carry this history of not hearing from, or actually some might suggest listening to the underserved and underrepresented communities like communities of color, renters, and the youth.
So we really had to apply an equity lens to our wayfinding on this project to carry forward proposals that were honoring the best parts of our community values, while also keeping an eye on a more prosperous future for all Portlanders.
So in this topic about single family zoning, we heard from a lot of single family homeowners that already had houses. That really [00:13:00] wasn't the crux of the problem we were trying to solve. Compatibility of neighborhoods, the longevity and the livability of neighborhoods certainly was a concern, but to address the housing crisis, it was really about the people that weren't in those homes.
Fortunately, we also completed this eight year planning process to complete the comprehensive plan, so we had a lot of policy guidance that we could rely on it to give us direction on that.
Kol Peterson: [00:13:22] That's really interesting point that I hadn't thought about that from a planning perspective, given these like policy overlays, that the fundamental audience that you were trying to draw inputs from wasn't necessarily those who are currently living in single family homes, but those who might be able to in the future, which exists right now, it's just that that's not the audience that you would necessarily directly go to, generally speaking, for that kind of information. You're rather you're looking for everybody else who isn't in those single-family homes almost.
Morgan Tracy: [00:13:53] Yeah. Yeah. Even more confounding as the generations that aren't born yet. Right. So we're looking at population trends and what [00:14:00] household composition trends are looking like to project what that future need might be.
One of the stats that we repeated and in our outreach was about the dwindling size of households. Fewer people per house, but the buildings themselves were getting larger and larger. So there was this disconnect between the demographic need and, and the development trend.
Kol Peterson: [00:14:20] Portland has somehow managed to put into place this Residential Infill Project Plan that enables for middle housing and two ADUs in a manner that hasn't been done elsewhere yet in the United States. And I'm curious if you have observation as to why it is that Portland was somehow able to get ahead of the curve on this particular topic while other cities who probably have people who are interested in similar ideas have not been able to get more inclusive infill housing regulations enacted.
Morgan Tracy: [00:14:57] Awesome project management! No. So this [00:15:00] is obviously a really hot button topic. And I mentioned, you know, every, every time we had conversations, somebody had an opinion about it. And it's also one of these topics that's sort of seen as counter to elected officials sense of self-preservation. I mean, most of their support, the people that are most politically engaged tend to live in single family zoning.
And the sanctity of the single dwelling zone runs deep in many people's minds. So every time we introduced the project to a group, we had to hold on embrace for what I would call the "Freak Out Curve". And it didn't matter if it was, I mean, the neighborhoods, yeah, obviously. But even other bureaus, other staff, even our own bureaus and honestly, ourselves. When we started this project, there was a moment where we're trying to just wrap our heads around, what does it mean to have four units in a single dwelling zone? What does that even mean? You know and it was, it was at this moment, I was at a neighborhood meeting and it was talking about the fundamentals of zoning, Euclidean zoning, separation of uses industrial, commercial, residential zones. And it struck me in that moment.
I was like, huh, I've never really [00:16:00] thought about why we separate residential uses in the multi-dwelling and single. Since, you know, extensively they're, they're the same use, they're just in different density levels. And if you dig into the history of single dwellings zoning, you start to learn about that. Even from its very inception, and I'll talk about that a little bit more later. But going back to how Portland is able to get ahead of the curve, I can pat ourselves on the back for putting together a great proposal. The planning commission certainly helped improve that. And it was most notably the courage of our city councilors who kind of acted in their own self-interest to approve this project.
But to that point it was our housing advocates who championed those other voices to come forward and give our council the confidence to act. So in terms of other jurisdictions that might be interested in tackling these matters, it's a multi-pronged approach that is needed to do it.
Kol Peterson: [00:16:55] Yeah, I think there's a unique coalescence of both passionate [00:17:00] people, smart people who care about their city here as well as a really competent planning staff at the city. I've long admired what the City of Portland and in Oregon at large have been doing with land use. This Residential Infill Project was a really significant landmark element or point in time in terms of doing something that was pretty cutting edge.
And it was interesting to be along for that ride as the code iterations change over those five years. And finally got to where they are, which was far beyond what really anybody at the outset thought might occur.
I guess following on that commentary, is there some kind of cultural element or the urban growth boundary, or I guess you kind of said, you kind of answered this question already.
You said advocates are maybe the key linchpin to this equation, but why isn't that happening in other cities where there's housing advocates, if that's the case? Is there something about [00:18:00] Oregon or Portland in particular that is the secret sauce that allowed for this type of thing to occur here?
Morgan Tracy: [00:18:07] I'm not totally sure. There's a bit of a secret sauce in terms of the level of sophistication of engagement in the general public. And when we're talking about planning issues, we already have an audience that well, sometimes out-wonk us. So we're not necessarily starting from a bare bones scratch we're already sort of actively engaged in a, in a deep planning conversation, which is, that's a little unique frankly, based on other places I've worked.
The other approach is to try and convince and educate the public to come along, to understand their own self-interest in these types of changes. And that's really challenging.
The messages that spoke most clearly to people that were on the fence were issues about where's your child going to live? If you want your children to be living close to you, where are they going to be able to afford a place to live? And as you grow older and you don't have children in your house anymore, where are you going to live as you want to downsize, [00:19:00] but you don't want to leave your neighborhood, look around your neighborhood and if it's all big houses, you don't have much choice there. So those kinds of messages are helpful.
But we were also in this watershed moment, frankly, and this is really erupted in the last year. But we're at this transition of racial justice and equity and equitable development, and a better understanding about the impacts of zoning and government regulations, that really highlighted the need for this change.
And so all of these things sort of all came together perfect moment and made that happen.
Kol Peterson: [00:19:32] Let's go right into that then. Early on in the Residential Infill Project code update process, there was intended to be some differentiation zoning entitlements based on a variety of geographic factors that more of a conventional kind of "smart growth" type of mentality in terms of thinking about zoning, which is "we will upzone areas, allow for more housing along transit corridors", which is great, best practice.
And there was also some concerns about [00:20:00] abating potential displacement issues that could occur for people who are low income or people of color. In the end, these elements were, as far as I could tell, effectively dropped as geographic overlay variables within the Residential Infill Project, so can you describe how these changes in the policy came to pass?
Morgan Tracy: [00:20:19] I think we're going to talk a little bit about public engagement and involvement, but this was one of those moments that really shifted our, our thinking. And like you said, we started with a more traditional focus around transit increasing density around transit.
But what we heard from this coalition of groups that was sort of the anti-displacement coalition and our housing partners and our advocates, they reminded us that while these areas were farther from frequent transit, they were still relatively close to other types of transit, less frequent transit.
So there's still transit available. It wasn't like there were in the, in the middle of the desert. They were also reminding us that these are still a lot closer to job centers, downtown, and [00:21:00] other commercial nodes than the suburbs that Portlanders were currently being displaced to. Even though they're a little farther from the action, they were still a lot closer than the suburbs or excerpts.
I think the one that really caught us was, with regard to holding back these housing choices in areas that we concerned about displacement risk, they said, aren't these the very areas where you'd want to allow for less expensive housing types to be realized? So it's a little bit of this false equivalency. If we didn't expand the housing options to those areas, in our minds, we were thinking that means no change, nothing's going to change there. Which, in terms of the zoning, that's true. But in terms of the status quo, that's also true. The status quo is these small, less expensive homes being demolished and big, expensive homes being replaced in their place.
So that's not helping the displacement picture. It's creating more expensive housing and doing nothing for the supply problem.
So, with that in mind, we sort of altered our course and said, [00:22:00] well, actually the planning, because this was one of the changes of the planning commission instituted was basically "go everywhere". Allow these in as broad, a place as you can, unless there's a, you know, some environmental or land hazard constraint that says you shouldn't. So that really altered our proposal.
Kol Peterson: [00:22:15] Let's go back to something you alluded to earlier which is a little bit of a history of Euclidean zoning in terms of single family zones.
Maybe you could speak to that a little bit? My reading of the case of Euclid v. Ambler indicated that at that point in time, there wasn't really a differentiation being offered that somehow duplexes shouldn't be allowed next to single family homes. In fact, it explicitly mentioned two family homes within that court ruling as being part of the residential zone.
I'm not sure if that's what you're talking about as far as the origin of single family zoning, but could you speak to this issue a little bit and the history of multifamily dwellings within single family zones?
Morgan Tracy: [00:22:55] Yeah, I mean a better speaker for you would be Richard Rothstein who wrote the Color of Law, [00:23:00] a tremendous book, highly recommended.
I keep bringing it up every time I'm talking about this topic, but essentially if you look at the history we had prior to zoning, we had restrictive covenants, racial covenants that were in place. And when those were struck down, well actually before that we had zoning that was race-based zoning.
We had zones for whites, not in Oregon necessarily, but in other states. Zones for whites and zones for other other races. And when that was struck down had restrictive covenants relied on CC&Rs. And as those started to be challenged and not enforceable by the state ,we shifted to more of this Euclidean zoning, which established larger lot sizes, which put things at a price point that made it, by proxy essentially excluded people of different races, kind of as a direct translation to income.
The Euclid V Ambler decision is interesting. You're right. I think it really is speaking about the differentiation between large multi-family development and smaller probably one and two family dwellings, but it makes some interesting assertions about how the single dwelling [00:24:00] zones need to be protected for the safety of children from the noise and disparities and the impacts of all that high active living in multi-dwelling zones.
But if you look at who's living where now, families with children are not necessarily able to get into a house and many are living in multi-family zoning. Maybe the demographics and the economics have changed a little bit, but if that's the premise for this differentiation and it's about, safety for our children, we really need to rethink that.
So one way we thought it in RIP in terms of providing for different types of housing that are for different size families. And there was a separate project, the Better Housing by Design, that was really looking at ways to improve living conditions in the multi-dwellng sense. So we tackle both of those things.
Kol Peterson: [00:24:46] This is a little bit of a riff here, Morgan.
So this trend that you've appointed to of smaller households is in fact, the reason that ADUs play such a prominent role right now in Portland, but that's also why they [00:25:00] pay prominent role everywhere in the United States. Similarly, you know, when I think about the public in urban development patterns, the same interests that people would have presumably in the city of Portland would probably apply elsewhere in the country.
So I think there's this notion that I hear from planners, like you've said, that you're trying to incorporate the interests of citizens, but wouldn't those interests be more or less the same in any city and therefore, why not just like apply the same principles that were used in RIP everywhere in the country or conversely, why wouldn't we just adopt all this using some common set of values in terms of urban planning?
Morgan Tracy: [00:25:42] I wish it was that simple. think there are a lot of commonalities the way people want to live, especially within the U S. The United States housing culture is not necessarily monoculture there's, there's distinctions between European living, right.
And how people arranged in a European cities and elsewhere. But, within [00:26:00] that, region wide or city by city, there's going to be just a bit of nuance about how development should occur that's reflective of the pattern and style of development that's already occurred in a place.
I think one of the fundamental things that we got to with RIP was let's not talk about architecture. The architecture changes, it's reflective of a time period, and that's a good thing. So we want to be able to see a period of development say, "Hey, I know when that was built" and it wasn't trying to mimic this other period, so we moved away from that. We're really focusing on the basic building blocks of what you see in a typical Portland inner 5,000 square foot lot was kind of the building block. So single primary structure, a detached accessory structure, and you know, maybe it's a detached garage in the back kind of thing.
With that sort of basic building block, we said, what does it really matter? And I think some of those team out in our ADU regulation c hanges, like, what does it really matter if that that building has a garage or it's an ADU unit? What does it really matter? If that [00:27:00] primary structure is a house duplex, triplex, or fourplex?
Now all those units are arranged within that basic form. Go, go nuts. We're just going to be more concerned about not over utilizing the land capacity and generally reflecting the historic pattern of development.
Kol Peterson: [00:27:16] For the planning/zoning wonks amongst us, is it accurate to say that we've kind of are shifting more towards a form-based code within Residential Infill Project?
Morgan Tracy: [00:27:26] Our code is resistant to the form-based label, but really is a hybrid. It has a lot of form based attributes .
Kol Peterson: [00:27:32] Okay.
Morgan Tracy: [00:27:33] Yeah, it's essentially here's your menu of entitlements and your development standards and they kind of prescribe an envelope that you can work within and the rest is up to you.
Kol Peterson: [00:27:42] So, not to get too far in the weeds here, but that's kind of what this show's all about. So HB 2001, Oregon House Bill 2001, we're going to discuss in greater detail tomorrow, passed into effect a couple of years ago. And that statewide rule making process is resulting in the City of Portland [00:28:00] having to do a cleanup bill to be house compliant with house bill 2001.
As a city that is now having its hand forced, effectively, by state legislation under House Bill 2001. What is your reaction to this? Does it come across as heavy handed policymaking by ivory tower electeds? Or do you see it more charitably? How do you perceive your role in terms of complying with these new statewide legislative directives as a city staff person?
Morgan Tracy: [00:28:29] I'm actually a bit split on this one. So you know, I, I think to start on the negative side on the negative side the bill is, is more broad than RIP applied to. So RIP was really focused on the higher density, single dwelling zones, the zones that are kind of closer in neighborhoods, have adequate infrastructure are not terribly constrained in terms of natural resources or land hazards. So we're, we're now looking at housing options for zones that are not centrally located, lack transit. I mean, not even [00:29:00] good transit for some transit, they lack transit and, and often lack infrastructure. And there's not a lot of properties in these really low density zones.
So middle housing in these areas is not really likely to be realized, and if it is realized it's going to cost a lot to build, which kind of runs counter our housing affordability objectives. So it's a bit of a fool's errand.
But, the counter-argument to that is the, what we heard in testimony was why us and not them? So this makes it more uniform. More universal, more equitable, and I don't object to that part.
On the more positive side. Another aspect of HB 2001 is a requirement that we come up with clear and objective standards for cottage clusters. And we took a run, a cottage clusters with RIP, there was already significant amount of work on our plate.
Oh, and for our audience, cottage clusters are essentially like multiple ADUs on a lot around a common open space, smaller units that are all detached and clustered around an open space. But addressing all the variables in that type of development and trying to fit within that sort of historical context [00:30:00] of patterns of development in neighborhoods, just, it seemed insurmountable without an excessive amount of prescriptive standards.
So we were just like, we're going to be creating a workbook of standards for these things to make them clear and objective and not the discretionary review. So this new mandate is making us take another look at that and facing the fact that we're not allowed to address many of those variables and basically says, "here's the things you can address and that's it".
So that takes pressure off a bit and that's pretty exciting, actually. And a lot of the resistance we're going to face where we were going to face internally from other bureaus. Primarily the infrastructure bureaus are, are most concerned about how this plays out. So now it's not a question about whether or not we're doing it, it's a question of how we're doing it. So that changes the conversation.
Kol Peterson: [00:30:44] Okay, let's talk about the Senate Bill 458 for a moment. This is a very brand new piece of legislation that is potentially very impactful. So I'm just going to briefly sketch it out. Basically, if people are on, on residential lots in Oregon that are under [00:31:00] House Bill 2001, if you're building quote unquote middle housing, which is duplexes, triplexes, fourplexes, and cottage clusters, and townhouses, incidentally, not ADUs, which is significant.
But in, any case leaving that aside for a second, this is brand new legislation that the city will have to comply with. If you build middle housing, you can do fee simple partitioning of that lot. So you could, if you build a cottage cluster, for example, on a 10,000 square foot lot, you could have eight, 1,250 square foot lots that you then can sell fee simple as opposed to doing condoization, which is achieving a similar outcome, but perhaps not as desirably from a consumer market perspective. Would the city have ever pursued this type of fee simple partitioning policy of its own accord? And what are some potential problems that you see with lot partitioning of middle housing and what are some opportunities that you see?
Morgan Tracy: [00:31:54] Yeah. So when we were at the Planning and Sustainability Commission, the fundamental challenge with the [00:32:00] RIP housing types is they are largely suited for condo ownership or rentals. So duplex, triplex, fourplex, or multiple units sharing a lot, so the only way to own those units independently is to condo them.
So in the, in the conversations with the Planning Commission, their recommendation to City Council as sort of a follow-up project, ,was a request to look at a streamlined land division process. Similar to our cottage cluster conversations was going to be challenging with our infrastructure bureaus.
Frankly, the concern about 4 58 is really about infrastructure, not necessarily the bureaus. Not to get too into the weeds, but things changed. The requirements for infrastructure change dramatically when you start dropping property lines. So the ability to share utilities versus separate utilites.
And the construction standards for those separate utilities and whether you need a public line or a private line, whether it's plumbing code or infrastructure code, all flips as soon as you start dropping property lines and they're vastly different.
So, Planning Commission had that recommendation to City Council, I think it was something [00:33:00] that the bureau was interested in creating fee simple ownership options. There was a hope that condos would picked up,and maybe there'll be some legislative changes that made the exposure for condo builders a little less and make them a little more palatable to build.
But you know, we'll see if that that still happens. But the fee simple option is just an easier thing for builders to build a structure, sell the unit, and move off and not be associated with the project anymore. They're not tied to that project for 10 years, like they would be with a condo.
From the consumer side, I think there's still going to be the need for some form of homeowners association to deal with the common elements in these middle housing land divisions, but it's not the same type of homeowner's association you would have with a condo, necessarily.
There's a little more consumer acceptance of a fee simple lot. I think what the challenge is the infrastructure, and we try and to develop standards that are feasible and don't lead you down a dead end in terms of your application. So if you can start with a [00:34:00] site plan and come up with your development proposal, come in the infrastructure requirements are generally synced really well with the zoning requirements that you don't necessarily run into problems. Not all the time, I'll hear that in the chat, but but generally they're synced up pretty well to work well together.
I think for the initial future after SB 458 goes into effect, and we see the first few middle housing land divisions happen, there may be a few that run into a brick wall, which will not make anybody happy.
Not going to make the developer happy, it's not gonna make the city staff happy, and it's going to be a little uncomfortable. We're going to work through what a good model plan looks like. And once people figure that out then I say taking off, but there's gonna be a little rough start, I think.
Kol Peterson: [00:34:42] I'll make one little policy note, which is from my vantage. In some ways I feel like it's unfortunate that ADUs were not included in the definition of middle housing in House Bill 2001, and as a result are not being captured by Senate Bill 4 58, which I see is almost an administrative oversight. We [00:35:00] won't focus on that particular topic unless you have any commentary about that.
In general, I see RIP and House Bill 2001 is having an intertwined policy history that is House Bill 2001 couldn't have occurred without the groundwork that RIP laid out in the city of Portland was kind of the biggest city in Oregon and RIP couldn't have perceived that as expeditiously in five years without state legislative law forcing its hand.
So in states that do not have a city like Portland that has pioneered middle housing strategies, which is most states. What roles do you think states
Morgan Tracy: [00:35:35] I think states can play a huge role and I think it's an important role. We realized as the City of Portland, we're a big player sort of a laboratory for the state.
And we can demonstrate that certain approaches are feasible and implementable and not the end of the world, sort of things. ADUs, I think we were on the forefront of that food carts on the forefront of that, not us, but, you know.
I would say, first of all, for those cities in states that don't [00:36:00] have state law dictating them to do these, now they have Portland, Seattle, Minneapolis soon, hopefully Austin to point to. And say, look, it's, it's doable. It's been done. And, and we have a model to follow. So there's that, but I think the role of the state is really an important one because housing is a regional issue.
It's a statewide issue and dealing with it at a really discreet city level puts you at risk, really. I mean, if you, if you look at what's happened in the Bay Area, those cities are gun shy to deal with their housing prices because it's a political hot button topic. And they take the heat for taking their fair share of the growth and other cities get off scot-free.
And so, you know, at a statewide level, it, it helps distribute that burden more equitably. I think that's super important if, if not at the state, at least at a region wide level.
Kol Peterson: [00:36:51] You know, Michael Anderson, the guests yesterday, framed it in terms of game theory, which was interesting way to think about it.
And I think it's more or less [00:37:00] echoing what you're saying, which is like state level legislation takes the game theory equation out of, out of play a little bit for all of them.
Morgan Tracy: [00:37:08] But the other part of it is if you're talking about local politicians making decisions, those decisions are immediate and in people's face and taking it to the statewide level, you can have policy debates on the merits of the policy and less about NIMBYs, and that's less about the opposition to change, you know?
Kol Peterson: [00:37:24] Correct. Yeah. Interesting. So what advice would you have for planning staff that are handed the task of ushering a controversial infill housing policy into being?
Morgan Tracy: [00:37:34] So I have a story to share here. When our new intern started back at the very beginning of our project. We were about to host our first open house, she was a little nervous about that.
I warned her it might be a bit cantankerous, but I told her to think of it like a trip to the dentist. It might be a bit painful, but it's for everyone's benefit. And most importantly, it will come to an end. And if you're thinking [00:38:00] about a project, it's overall, it's sort of the same thing, it's going to be a bit painful. It's for everyone's benefit and it will have a start and an end.
In some cases, you know, that end might not be the end you were hoping for, it might not be might not be a positive outcome but taking a run at it, if nothing else, its at least making a step in the right direction.
Kol Peterson: [00:38:21] What were some of the most unusual or awkward types of public comments that you received during the Residential Infill Project?
Morgan Tracy: [00:38:28] I told Kol earlier that all the points I'm saying today are my own opinion. I'm only expressing my own views. So these are not the official views of the city. So keep that in mind. Okay.
So at our first open house with our new intern she received a handwritten letter saying well, it was admonishing her for being part of this whole thing and that she should do herself a favor and quit.
And it was her second day on the job. No we had this one's a little more uncomfortable. We just pioneered an online platform for [00:39:00] submitting public comments and hadn't really worked through all of our publishing policies. So this is called the Map App and people can just submit letters or type in comments online, and they can be anonymous, but you have to add some basic information. We received one that was so overtly and patently racist.
It was just it was awful. And we're like, well, what do we do with this? You know, now we have to ask the question of freedom of speech versus civility, not something we had to do in mailed in comments. We can just put those in the file and pass them on to the decision makers, to read. Not something you have to deal with in person testimony because you deal with that directly as it's happening. But to have this thing lingering website, what do do with that? So that that create a little internal rethinking.
Another one was a piece of testimony that I found to be incredibly tone deaf. We had a large number of people talking about exclusionary, single family zoning and how I was keeping people out of neighborhoods.
And one neighborhood decided to submit a drawing of a castle with the [00:40:00] words, single dwelling zoning, complete with cards and ramparts, looking at a Trojan horse with RIP written on the side as though the lower income people were there to lay siege to the neighborhood.
More positively on the flip side, one of my favorite bits of testimony was a gentlemen who testified at council, came in with a two liter bottle of Coke and set it on the, on the table and said, you know, if I'm having a party and all I've got is this two liter bottle of Coke, that's not very helpful. And he reaches down and brings up the six pack. He's like, but if I break that two liters up into six pack, I can give everyone a Coke. So that's what, you know, that's what we're talking about with the single family house versus a fourplex.
Kol Peterson: [00:40:40] That was an epic public testimony. I witnessed that.
So on that note, from a project management perspective? What kind of public input do you find to be most helpful and useful? Like super technical technocratic input? Groups of stakeholders all saying the same things? "Hey, we want more affordable housing..." [00:41:00] Diverse opinions from, you know, a whole bunch of different people? Open-ended responses? Or is it more structured statistical data input that you find to be the most helpful?
Morgan Tracy: [00:41:11] Well, I'd say certainly don't ask the planning staff to quit. Don't be overtly racist but more seriously. So you know, planners have their own experiences, their own biases in place. And as policymakers, we challenge ourselves to think more broadly from multiple perspectives.
So general comments are good for expanding those horizons and those perspectives. Compelling anecdotes are good for decision makers, the two liter bottle and the six pack, you know, that was humorous, but there were other more heartfelt stories that spoke to decision makers.
I would say that's less so for planners. So if you're speaking to the decision makers the compelling anecdotes are good, but for planners I would consider constructive public input as something that identifies an issue, supports it with facts, and hopefully proposes a solution. The thing that gets a little challenging as planners to explain is we'll see the issue, we'll take into [00:42:00] consideration the facts. We might not adopt your, your proposed solution because there are other things that we're thinking about; legal, fiscal, political implementability, but it highlights issues that, that we'll start to analyze and come up with different solutions for.
I think a good example of this that's related to this topic about ADUs is, it was something that came up, actually, in an earlier project about ADU conversions in basements and how some basements were larger than 800 square feet. And so we were just not able to convert, we had to do weird, crazy things to meet that 800 square foot limitation. And why don't you just let the basement be converted?
That didn't get resolved in that first project. But when we were thinking about this project, we were like, well, that's a great idea for encouraging home retention. Why don't we make that an allowance for existing houses to do? You can't do it with the new home, but if the home's already there, why not? No harm, no foul. It's just a large basement that's now in ADU.
And then there's also the aspect of the hyper-local conditions. Planners have a good appreciation for the city as a whole, or if we're doing neighborhood scale planning, dive deeper, but a project like [00:43:00] RIP, which is citywide, there's a lot that gets lost in that averaging the city-wide data. Even down at the census tract level just the particularities of the different parts of the city that we're not going to spot that are going to get lost in the noise or in the data.
An example of that was conversations we'd been having about parking, parking was a huge issue in this project. But we were trying to make the point about the benefits of utilizing on-street parking and how that functioned better, is more efficient than requiring onsite parking. And one neighborhood was concerned about their narrow streets and filling up the narrow streets with cars. There were some benefits to that in terms of slowing traffic and some other the things, but they, they brought up a good point that actually hadn't occurred to us, which was well, if those narrow streets fill up entirely with cars and there's no gaps in that parking, when you have two cars approaching on a 200 foot long block, or longer, what happens?
I mean, now people can kind of pull aside and let the other person pass, but if it's all filled up, what happens? If there's no driveways, no [00:44:00] gaps in the parking, that's a problem. And so that really actually kind of changed our thinking about the limitations we had on garages and driveways. And so we sort of loosened up that a little bit and recognize that having some of those gaps is probably going to be necessary.
And ultimately it's going to be a PBOT, our transportation bureau, is going to have to manage those streets a little more actively as we see them filling up. But that's a problem for later.
Kol Peterson: [00:44:26] Problem for a hundred years from now.
All right. So we're going to skip right into some of the Q and A's from the audience . So Kelcy, take it away.
Kelcy King: [00:44:34] Yeah, great. We have a couple of really great questions Rena has been waiting for a little bit her question is, "we are looking to address housing affordability and the missing middle, as you know, relevant data can suede decision-makers and the general public. Where can municipalities obtain good and reliable real estate data, including housing cost, affordability, housing types, and vacancy rates?
Morgan Tracy: [00:44:54] So sales data is available through CoStar, but it's a subscription service you have to pay [00:45:00] for. And the reason I said, darn it is because I wasn't involved in the housing needs analysis that was conducted. So all the data research that went into looking at the distribution of the types of housing, the construction trends, the the general income levels by household, all that research was done by a different set of planners.
So I don't have a good answer for you on that.
Kelcy King: [00:45:20] Thank you. Sandra asks. So why is single family separate from multifamily if it is all residential category?
Morgan Tracy: [00:45:29] Yeah, that's, that's my perspective too. Going to the perspective of form-based codes, there are distinctions and where you want to focus your large-scale development, many unit type development, and the reasons for that are primarily driven by infrastructure and transit planning, so you don't want to disperse your residential densities so much that you don't have a the phrase critical mass. And for infrastructure planning, you kind of need to plan how big the pipes are going to be based on how many * are going to be realized on that area.
So [00:46:00] there's a little bit tied to that. I think that's not why these two zones were created initially, but I think there's still planning need for how you allocate how much growth is going to happen in the area. So you can put the right amount of resources and services there.
Kelcy King: [00:46:16] So that kind of goes into something that I I'm hoping to understand a little bit better because I live up north in Bellingham, Washington, and we're still working really hard advocating for density.
So what agencies are you working with and have you worked with, to identify the needs and solutions for how the RIP is addressing the needs of people of color and low wage earners.
Morgan Tracy: [00:46:40] So we, I, again, I'm going to lean on our advocates. We, we had the Anti-Displacement Coalition, which was comprised of the Portland African American Leadership Foundation, The Native American Youth Association, Hacienda, CDC, a few different other community development corporations that provide affordable housing and [00:47:00] are actively dealing with finding housing solutions for those populations. So we had a lot of input from those groups, which was really helpful.
I think one lesson learned from RIP is we didn't necessarily start with that equity lens that sort of evolved through the project and really started to gain traction around the time we were at the planning commission. So a lesson that I would share with other planners or other people getting started is start with that, start with that equity lens, bring those voices in early.
You're going to have a much different starting place than if you follow the more traditional Go to neighborhood associations and start down that path."
Kelcy King: [00:47:38] What is a cleanup bill?
Morgan Tracy: [00:47:41] When House Bill 2001 was adopted it largely followed the model that RIP was adopting, but it had some nuance changes and some things that were inconsistent with what we had adopted and some things that we hadn't necessarily tackled.
And so the cleanup bill is we still have to comply with those requirements. And so [00:48:00] even though RIP is adopted, we have to come back and make the changes to bring ourselves fully into compliance with the state.
Kelcy King: [00:48:05] I'm going to stick to this one just because I had one other person asked this. What studies were done in relation to the RIP to determine the effect of the capacity of utilities over time and is there any part of the RIP that considers promoting highly efficient homes and multifamily dwellings to keep that impact lower?
Morgan Tracy: [00:48:22] Hmm, that's a great question. So the on the analysis side, yeah, we did a lot of work with our infrastructure bureaus to look at the system citywide. I don't think it's really a surprise.
It's a surprise to people that live in neighborhoods that think that their infrastructure is crumbling, but you know, that the infrastructure in the city, in the higher density zones is over-built. So there's additional capacity that that is under utilized with single dwelling zoning.
So the amount and degree of development that we're expecting to see from these new housing types in the next 20 years is not huge. It's in the range of 3% of the housing types are going to be these different housing types. It's [00:49:00] not going to be every new house is going to be a four-plex. So that's one thing.
The interesting part of the question is the look at high efficiency homes to mitigate the impacts of some of those issues. So the things we looked at were stormwater, which really are related to impervious area and your ability to infiltrate.
And so we kept existing building coverage limits the same, and we reduced the total size of the buildings could be. So we actually reduce the potential impact in that regard. For water, I think there's a lot of conversation about what is a household with eight people versus a fourplex with two people in each unit.
You know, we can have those conversations all day. But metering is the first step of mitigating the usage. Sewer, it was an issue in certain locations, but there are projects on our CIP list to upgrade our treatment plants. So kind of had something already in mind for that.
The big thing really is transportation. And that was a bit of our rationale for trying to tie this to transit [00:50:00] initially. But again, the level of impact that we're anticipating from seeing this sort of shifting a reallocation of units in the city is pretty minimal it's on the, on the edges, it's like almost like a carrying a number error kind of thing.
In terms of the big picture of 123,000 units, we're talking about five to 10,000 units that are going to get these different types in a sort of spread throughout the city. So not a, not a major impact in one location.
Kelcy King: [00:50:26] Thank you. I think I'll tie that up.
Kol Peterson: [00:50:27] Thanks for joining us today, Morgan.
Alexis Stephens: We recently filmed in like three tiny houses with Alexas and they had to turn them off and yeah, it gets old and Alexa got creepy. I don't know if it was because I was there and she felt competition,
Kol Peterson: What a bummer, huh? [00:03:00] I mean, you can change for your own self. You can change the name of Alexa to somebody else, but like everybody else is still going to have the default Alexa. So it's going to pester you for the rest of your life.
Your bio was just read, but let's just hear a little bit about your personal endeavors with living in tiny homes. Some people have a little bit of context for your history, with the you know, living in one.
Alexis Stephens: Sure. Back in 2014 Christian and I ordered our, our trailer and built our tiny house over the next nine months.
And he was the main builder, but I helped, I learned a lot of new skills and we had a lot of great help for friends and family. And like so many people in tiny houses, we fell pretty hard down the rabbit hole. Before we decided to build and research like crazy for, you know, for personal choice to simplify.
It was a time in my life that where that just felt so right, [00:04:00] but I'm just an all or nothing person. And as I was researching, you know, I really fell in love with the movement and how creatively tiny homes are being used to address personal and community needs. And so I got the idea to travel around with our tiny house and document the movement.
And so I pitched Christian on both at the same time, I was like, let's build a house. Like I want to build a house and I have this documentary idea. Do you want to do it with me? Because we'd only been dating for a year at that time when I pitched it. Fortunately he was a really good sport and really loved the idea of it.
The rest is history. And after we finished our house at 2015, we ended up traveling for about four and a half years zigzagging across the United States, peaking into Canada. And it had just the most wonderful adventure. And most of that was around documenting as much as we could of the tiny house movement, the people, communities legal action that was happening.
And then of course we threw in some, some fun stuff [00:05:00] and some family visits, but I'm really happy to say that now we just traveled three months out of the year and have a home base in central Oregon.
Kol Peterson: Awesome. So this is not going to be so much focused on your personal experiences but rather the tiny house movement at large and specifically the regulatory things that are occurring in the U S so, and, you know, tying that into ADUs to some extent, but just more generally legalization of tiny homes on wheels.
We're going to talk about your specific documentary series on that later, but let's talk more about the nuts and bolts of it. So can you attempt to define tiny homes on wheels?
Alexis Stephens: Yeah, absolutely. You know, the term tiny house is a slippery one. That's for sure, especially in the media, but a tiny house on wheels, also known as a movable tiny house is built on a trailer using traditional housing materials and techniques for the most part, but at its core, it's a hybrid [00:06:00] structure that has a lot in common with like a travel trailer, as far as mobility, but with more durable materials construction, more kin to a traditional house than at RV, which makes it more suitable for a year round living, you know, think insulation, you know, is a big one.
The difference between an RV and a tiny house is night and day it's, it's a residential house versus a camper. It's, that's what we're talking about.
Kol Peterson: Would you say that there's a universally agreed upon definition of a tiny house on wheels in terms of size? Obviously it's on wheels. Aside from that, is there any other like core definitions that we should bear in mind or is it kind of all over the map?
Alexis Stephens: The term is, is still squishy, so to speak. And, but I will say that in tiny house, on wheels or movable tiny house zoning ordinances it is starting to get a little bit more formalized.
And in most of most of those you know, what I, a version of what I said and more formalized language [00:07:00] is, is becoming more widely accepted. Typically they'll say a chassis instead of a trailer. And, and in some areas, particularly California, they do like to distinguish a tiny house from an, a traditional RV, because, well, I'm sure we'll get into this word later.
They are trying to discourage, you know, RVs in backyards and, and want something that looks like a cottage that resembles an ADU.
Kol Peterson: So what roles do you see tiny homes on wheels playing in housing, a formal legal housing on residential properties?
Alexis Stephens: You know, I love a tiny house on a residential property because it's so, so flexible is great as a caretaker unit and not necessarily, you know, it could go either way. It could be like your mom, your mom, you know, comes to live in your backyard. Cause you've had a baby and she just can't stand to be away, but you maybe can't send, have her in the house.
You know, or vice versa where you, you or a [00:08:00] nurse comes and lives in a backyard in a temporary fashion to take care of someone. We just visited someone in Eldorado Hills, California doing just that. Her parents health is starting to wane and she lives on their property, but doesn't plan to be there forever.
So very, very flexible. Yeah. Besides this, the caretaking idea is just another housing option. A long-term more affordable housing option. That's very mutually beneficial for the homeowner and the tiny dweller. You know, I think sometimes people look down on tiny houses on wheels in this like temporary mobile fashion that they are as, you know, taking advantage not paying their fair share.
When in reality, the majority, I mean the majority of tiny houses in my personal experience on residential property are helping pay the mortgage, the property taxes. We just visited a great situation where a woman was divorced, a single income. [00:09:00] What is she going to do? Her whole life is there.
And so she welcomed a couple of tiny houses onto her property to pay her bills.
Kol Peterson: So sounds pretty similar to ADUs in that way. How would you differentiate the roles that tiny houses on wheels and ADUs can play in housing on residential properties?
Alexis Stephens: You know, it's, there's a lot of similarities, like you said. I think the main difference is the flexibility, you know, it's flexible infill housing that can be removed as needed, which is kind of, kind of great because you know, dedicating to an ADU is a very long-term permanent situation where, you know, this, the cost of it alone, you know, I mean, you're not going to want to take it down once it's up where a tiny house like it, you know, if you need it to back could be gone for when you need to sell the house or if your situation changes.
Kol Peterson: And I'll chime in with a couple of responses after my questions, because I have a lot of thoughts about this [00:10:00] too. So forgive me. So I would also say that tiny homes on wheels are vastly less expensive than ADUs in general. And B to your flexibility point. There, this opens up this whole other marketplace of potential things that don't yet exist, but marketplace actors such as third parties that could own the tiny houses and lease it to either the dweller or to the owner of the property could exist.
Whereas with with ADUs, you could theoretically come up with some way to do that, but it would be really challenging. Tiny homes on wheels definitely afford some really innovative new business models.
Alexis Stephens: Yeah, excellent points. You know, the cost is a big one. You know, it's, it's incredible how much money you can save when you, when you skip the foundation.
And the price range of tiny houses. This is so great. I know people complain about that, but you really can get something that's suitable to you. And the loans are just becoming more available all the time.
Kol Peterson: This wasn't one of my questions, but like how much does a tiny house costs, what is the range that you offer? And then can you briefly [00:11:00] speak to this financing option?
Alexis Stephens: Sure the range is tricky because it varies greatly on size customization. The materials used. Also, we got the pandemic factor, you know, with prices going up. So I'll try to be a little bit more generous you know, on the low end from a builder $50,000 and that, and that might be pre pandemic times, but we'll say low ends, $50,000 high-end it's $115,000.
The majority I would say would be probably between 65 and 90 from a builder. Now, if you have the time ability, ability to learn a place to build, you can build for much less by being resourceful. We certainly did. Of course I was many years ago, but we use a lot of salvage and reclaim materials that we got for free or low cost. Oftentimes the cost was our sweat equity into like tearing down the walls off an old farmhouse. [00:12:00] Those opportunities still exist, but it's just not accessible or realistic for everyone
Kol Peterson: And financing?
Alexis Stephens: So financing. So there are a number of credit unions who will lend for a tiny house. They're the biggest player.
And then a number of personal loan. Oh, what's the word I'm looking for? That you can get personal loans from a lot of like online sources now. I would say the most, well-known right now is Liberty Bank of Utah. Even though the Utah bit, they service the nation and they work with a number of builders, they require certification.
There's still feasibility, I think, for a DIYer, but they have very reasonable, reasonable terms. They do 15 to 20 year loans. So something that could be paid off much quicker maybe than a 30 year loan and I'm blanking on the, on the exact rates or whatnot, but they're lending all the time, which is fantastic.
Now I'm like, oh, yay. [00:13:00] There's like a couple of handfuls, you know, I know this is a, a big country, but that's a big difference from a few years ago.
Kol Peterson: Yeah. And I mean, there's both financing opportunities emerging as well as like insurance opportunities emerging. And we don't go into too many details on that, but one point I'll just make for people on the call and maybe you can respond to this.
It's like ADU construction, loan financing is based on like GSE sponsored you know Fannie Mae, Freddie Mac sponsored Types of loans, whereas this type of loan is not secured against a property, is that correct?
Alexis Stephens: Exactly. Yep. These are unsecured loans you know, personal loan. So, you know, there's ups and downsides with that.
Oh, I also have to give a shout out to one of my favorite nonprofits is Operation Tiny Home. They have a fantastic grant program as a down payment assistance grant program. And what, you know, you think, well, what's the down payment on a tiny house, you know, for some people it's a drop in the hat, but for a lot of people who really do need to get into affordable housing and can't [00:14:00] afford a monthly, tiny house payment. And you know, probably a lot lease too, they, they struggle with the upfront money and that's where operation tiny home comes in. They're also launching a secondary grant program. If you haven't heard of them, I highly recommend you check it out.
Kol Peterson: People sometimes ask me like how many people would actually want to really want to live in an ADU. And I'm like pretty much any one and two person household could definitely live in ADU. It's not, it's not that big of a deal to downsize to 800 square feet or 1000 square feet or whatever.
And, you know, that might seem like a weird concept to downsize to an ADU, but once you've been in an ADU, you see that they're actually just like, you know, decent, a good size, comfortable, luxurious. Tiny homes on wheels are a little bit different. They're significantly smaller, oftentimes 200 square feet.
So with that factor in mind, but other factors as well, what percentage of the US population would realistically consider living in a tiny house on wheels if they were just as [00:15:00] legitimate as a single family house in terms of the legal structure for doing so?
Alexis Stephens: Yeah, those are really good question. You know, for, I like to preface by saying, I often find that tiny houses on wheels work really well for a number of people for a season of their life: starter home, retirement home, transition out of divorce. Raise my hand here. There's a lot of ways that tiny house would fit, but not forever. For most people. Fortunately, there was a study done at the end of 2020 by a Fidelity National Financial affiliate and it's not a huge sampling, I think only 3000, but nonetheless 56% said that they would consider living in a tiny home.
That's huge. I think. And I mean, and more than that 86% said they were considering it as a first time home or as a retirement option. And I do feel like that reflects where we are awareness wise of tiny houses, [00:16:00] say from 2014 to 2021, you know, the shows helped make it cool, you know, with a lot of unrealistic expectations, but now people, you know, it's, it's rough out there.
And I think, you know, a lot of people living in a room for most of their adult life, you know, in a shared housing situation, you know, if you think about it in that context, all the single people out there, there's more single people than ever people without children. And if you're used to having your roommate.
What's that difference between a room in a tiny house, really at the end of the day, except that you get a kitchen and a bathroom?
Can you review some of the common regulatory barriers that tiny houses on wheels suffer from in terms of placing them on residential? Yeah. So I mean, very generically building code requirements zoning, you know, but you know, I'll dig into that more. I think really what I've heard the most [00:17:00] is cities just saying, "I don't know how to deal with the tiny house. Like where does it fit? Is it an RV?" And there's a lot of communities that are very opposed to having RVs around. And so I think, and there's a reluctance to. There's a reluctance to go outside of the box, you know, because it requires more work and a lot of aggravation from maybe say some NIMBY groups who don't want, you know, poverty, you know, poor people, housing, as some people see it close to them, because it really what's amazing to me is that you can create a tiny house zoning ordinance overnight.
I mean, it doesn't take long. I mean, in the, the ones that exist out there, it can happen in two months. It can happen in two years. You know what the difference is is people, I'll just be frank, bitching and moaning about it, because it's not that hard, especially now where you have templates for big cities, small cities you know, it's really easy to [00:18:00] copy and paste.
I think it's important to note, which, you know, this is pretty elementary, but you know, there are still a minimum square footage requirements. And, you know, in certain areas that especially who work on outdated versions of, of building code you know, I, I really love seeing the California and I think we might get into this later, California is embracing like some RV standards because building departments are overloaded.
And so I can't understand that this is a real challenge because figuring out how to use the residential building code to apply to a movable structure is really tricky. You know, the IRC, appendix Q can address a movable tiny house from the trailer up, and then really you can use alternative means and methods to address the trailer.
But it, it just is something that requires a lot of extra work that I, I don't think cities are that willing to do.
Kol Peterson: Some of the common barriers , going into the building codes a little bit, from my vantage are things like minimum headroom [00:19:00] requirements. Like you have to have six foot eight inches of headroom on the lower level, not to mention the upper level and tiny house. And the wheels are 13 and a half feet high because they have to be road legal in order to be pulled down the highway once in their life or twice in their life or whatever.
And it's almost impossible, therefore, to fit a legal second story, which is by default where most sleeping areas are in tiny homes on wheels, because you don't want to put it on the ground level because there isn't enough space because it's such a small structure because it can only be eight and a half feet wide.
And that's just one example of a building code regulation that doesn't really mesh well
Alexis Stephens: Yeah, and actually I'm such a tiny nerd that I realize maybe not everyone knows what appendix Q is. So appendix Q was created for houses 400 square feet and, and below to address some of those exact things like head height, emergency egress alternative.
Vertical access to the loft, you know, allowing for ship's ladder, which take up much less floor space. Cause it's very hard to get a code compliance set of stairs [00:20:00] in a house that's under 300 square feet, you know, most times. And so it really looked at those pain points and, and addressed them and made it much easier.
There is a catch it's a fabulous step forward, the catch is, it doesn't encompass everything for instance, you know, in the code, which I find ridiculous there's things like how much room you got to have around your toilet or whatever for servicing purposes has nothing to do with safety. Why is that a requirement?
And then the law comes down to the inspector then, right? Having an inspector who looks at what you're doing, let me pause and say that in the Lake Dallas Tiny Home Village in Texas, this is the first community on a local level that adopted the appendix Q and then applied it to moveable tiny houses.
And what they did is they require a tie down requirement and that you have to be skirted and have your electrical connection inspected locally. The houses also have to be inspected by a third [00:21:00] party. Now, what I know is a third-party inspector. In this case, he will look at the tiny house. Does it meet the appendix Q? Does it meet the intent of the code? Not so much the letter of the code sometimes.
Kol Peterson: I think there's a, as you alluded to, there's a host of different building code barriers, aside from just leaving sleeping lofts, insulation requirements. If you have an eight and a half foot wide, tiny house, you can really only fit two by fours. Two by fours aren't you can't meet the insulation energy code requirements for a lot of jurisdictions.
You can't easily put in guardrails to get up to the front deck to get inside to the tiny house. There isn't, as you mentioned, you know, the minimum room sizes of 70 square feet. My opinion is we're trying to put like a square peg in a round hole with this stuff, and I'm really hesitant to try to formalize or squeeze tiny house on wheels, development regulations within conventional IRC codes for all of these reasons.
Alexis Stephens: I can really appreciate [00:22:00] that. It does feel that way. And I mean, it's just amazing how dense, you know, the IRC has become over the years and I think you nailed it. It just doesn't, it feels like apples and oranges sometimes. It shouldn't be that hard, but you know, stuff doesn't work on common sense, you know, unfortunately.
Kol Peterson: And yet to the average person, it seems very odd that tiny homes on wheels that look cute, look like adorable ADUs, are not allowed. What's your perspective on this in terms of common perception of, you know, 'Hey, why, why shouldn't I be allowed to live in this tiny house?'
Alexis Stephens: Yeah, great question. I'm wearing a home is where you park it shirt today. But oftentimes I wear, I have a legalized tiny shirt and I also have a bumper sticker that says that I can't tell you the number of people who stopped me to say, well, what do you mean by that?
It's a great conversation starter. So I don't wear it if I don't want to talk to people , I'll tell you that much, because I think people [00:23:00] are like, are very confused by the idea that it wouldn't be allowed. Why not? One, I see it on TV and it's like, I don't, it's like, I'm not trying to talk down to people about, you know, by saying I see it on TV.
Therefore it should be a thing, but, but really on a grassroots level, we don't get educated on building codes and zoning and land use and all this stuff. The average person that was very little about that. And I, I think because of that, you know, people miss out on opportunities that exist to them, especially in places where there are ADUs, for instance, because they're not aware of it.
If you're not a super nerd. I digress a little bit. You know, I think a lot of common sense kind of people say, well, it seems practical to me is a great idea. I could just stick it in my yard. And voila, , I got a place for the kid when he comes home for college or whatever, people, people understand more and more people understand the flexibility of the use.
And so it is kind of [00:24:00] befuddling is that a word that they're not allowed?
Kol Peterson: Maybe tell us a little bit about THIA. . And what is the mission of THIA with regard to legalization of tiny homes in residential zones?
Alexis Stephens: Cool. So THIA is the tiny home industry association is currently the leading advocacy organization in the United States that we also collaborate with folks in other countries, especially Canada.
So we are on a mission to advocate for regulation changes develop standards, promote best practices, basically for the wide spread use of tiny homes as permanent and permissible housing. We try many approaches towards making permanent and permissible housing happen and using different tools that are available, whether it be RV standards, residential standards you know, we focus a lot on the movable tiny house, but we also do, we are huge fans of, [00:25:00] of ADUs.
And so I mean, we often do tell people, like if you, if your town is having a meeting on ADUs, a hearing on it, show up, this is for you because the first step and a lot of, a lot of times is to get ADUs allowed. And then, and then that leads the way to having the, the movable tiny house conversation.
Kol Peterson: What are some of the current regulatory approaches that you've observed in terms of legalizing tiny homes on wheels on residential properties?
Alexis Stephens: The most common right now in the most places. And most of those are in California, but they are sprinkled in cities across the nation is allowing moveable tiny houses as ADUs. So I know I really love that Portland didn't classify them as ADUs so that people can have multiple structures on their property.
That makes a lot of sense to me, but where it has I think why the movable tiny houses ADU has really taken off [00:26:00] is, is because that it bypasses the way these ordinances are written, it bypasses the building department in that they require them to be built to RV standards. Oftentime requires a certification and this takes a pressure off of an overloaded building department and allows the permitting to be done on a much more expedited level to, to meet, you know, the.
The housing crisis, you know, just, this is, I love about the cities who've embraced this, it's like finally saying, 'Hey, we have a crisis. Maybe we should do something different. Maybe we should allow something and actually expedite it so that people can implement these on their properties much more quickly.' And I think that has a lot of appeal to communities are really struggling.
So we try to hit on that a lot at THIA is, you know, look how practical and easy this can be. And yeah, so I that's, that's probably the best approach right now on the whole. And it makes the most sense, especially with land costs, to really focus on getting them on [00:27:00] residential properties and people using the ADU is the best way for people to wrap their head around it.
Kol Peterson: The tiny house on wheels being built to as a movable tiny house under the ADU code. Is there other parts that you've seen elsewhere in the country aside from Portland, which we can talk about briefly?
Alexis Stephens: Sure. So I mean, there's not, that's not a ton. That's that's the primary one though. There are a few pocket neighborhoods and like I mentioned, Lake Dallas is great. There's another one and Durango, Colorado called Escalante village, both very, very similar where they use planned unit development ordinance they, they put it in an.
Not always the most desirable place. So Lake Dallas is just walking distance to downtown. And they use a residential code but amended locally for the, to apply for the trailer to get over that that hurdle. And in those instances, those are cities where the RV [00:28:00] code didn't seem attractive to them.
And they like having a place for tiny houses, right. They like, they need a place, they need a park. And part of me doesn't like that because it's like, we shouldn't be pushing them to the fringes, but on the other hand, I've stayed in a lot of tiny home communities and they could be a wonderful environment to live in.
So I'm okay. I'm okay with that idea, especially I love Lake Dallas and some of the others you know, they're set up very much like a traditional pocket neighborhood was shared green space and landscaped very nicely. So it does feel like a neighborhood and not like an RV park
Kol Peterson: As somebody who's developed like a RV park for tiny homes on wheels. When, you know, one of the issues with, with designating or historically with like both RVs and with tiny homes on wheels would be that you can only do that within commercial zones. Commercial zones are more expensive. And if you can afford to do it in the size lot that you need, it's going to be on the fringe the walkable bikeable area, if at all. And so [00:29:00] like, yeah, it's a problem, you know, from a zoning perspective, if you're designating it designating, you know, RVs or tiny homes solely to parks you're, you know, essentially relegating them out of existence because of the economic, or at least in desirable, walkable bikeable areas because of the nature of how cities are zoned and the cost of real estate.
Let's briefly talk about Portland's code innovations. Take a crack at spelling out what you think Portland did differently than other jurisdictions have done with, with in terms of legalizing tiny homes on wheels on residential properties
Portland is a fabulously progressive ordinance regarding tiny houses and RVs, which began with an emergency housing ordinance a handful of years ago where they temporarily allowed them on residential property with some minimal restrictions. And as it was getting the sunset this year, Great group of [00:30:00] advocates, including yourself you know, help to rally, to push the city, to create a permanent pathway for that.
And the city very gladly embraced that. And so now tiny houses and RVs are allowed on residential property with minimal restrictions and tools to help overcome hurdles like hookup fees like sewer hookup fees by providing a grant program. But what's special about this is why they're on residential property.
Alexis Stephens: They do not, they are not classified as ADUs. So a homeowner can still build an ADU and have an RV or a tiny house on their property. Which is really wonderful.
. I think those are, those are some of the big points. And, and, you know, importantly they're not required to be built to park model RV standards.
Kol Peterson: And so when you were really, when you were alluding to the movable tiny homes, you, you mentioned have to build, be built to RV standards. Isn't it true that they have to be built to park model RV standards. And are those the same as RV [00:31:00] standards or is that a category of RV standards?
Alexis Stephens: Oh, that's a great question.
Both, both are, in some cases, either one is utilized I mean an RVs and RVs, just either a park model, a travel trailer in the, and the main difference, you know, in abroad in broad strokes is size and and you know, just to keep it really simple, you really get in the weeds, but at the end of the day, they're, they're very similar.
Kol Peterson: Interesting. Okay. I didn't, I didn't realize that I thought there was maybe more differentiation between the two, but I mean, one, one difference that comes to mind is like motorized non-motorized isn't that? I mean, cause you can have like. A motorized RV, but that's not what we're talking.
Alexis Stephens: Yeah. Fair, fair point. In the United States, when we use the word RV, we are referring to motorized and non-motorized RVs and it's true in the, the park model category is never motorized.. Where the travel trailer side of it can be, we'll see, I say travel trailer, but it's [00:32:00] travel trailer, motor home because I had had enough coffee and I'm blanking on the exact names of the codes at this moment and I don't want to say the wrong thing. But when you're outside a park model, it can be motorized. But in any time where you have a tiny house on residential property, they specify a non-motorized RV. Even if they use park model code, they just go out of their way just to say, you know, we don't want a house truck, you know, we're talking about something, built on the chassis period.,
Kol Peterson: Of the approaches that you've seen, have you seen any evidence of which ones are actually working in terms of tiny houses on wheels being put on the ground in residential properties?
Alexis Stephens: I'll tell you what's widely successful in a range of small cities, large cities, rural counties more urban counties is making the pitch that a tiny house on wheels is no different than an ADU except for the chassis.
And of course, we just talked about all the, the various nuances, but let's face it. The world doesn't run on nuance, [00:33:00] unfortunately, as much as we'd like it to. But Dan Fitzpatrick, who's the president of THIA, is an incredible advocate and we're so lucky to have him. And he, he created this wonderful presentation that all our members have access to and can customize for their local area.
But we have seen it's incredible. We have seen how showing how the, the numbers make sense how it could be a really great investment for a primary homeowner to create a spot for a tiny house in the backyard.
It really it's really seems to hit home. The key is to change some of the details. So that you're not talking, you're not talking about LA. when you're in a small Texas town, you got to, you got to make it in a way that feels relatable to them. And that's the benefit of where we are today is that so many different size places have accepted it, that you can slightly change the wording to be more appealing. I know this is oversimplified, but like it's incredibly effective.
Kol Peterson: Tiny houses on wheels have an embedded DIY [00:34:00] ethos. It's really stemming from the figurative godfather of the tiny house movement, Jay Shafer. What are your thoughts about the differentiation of RVs or similarities to RVs in terms of the development of tiny homes on wheels?
Alexis Stephens: Okay. So I guess there's two, two bits here on the differences. You know, a tiny house on wheels, you know, for the most part is highly insulated, sturdy, customizable, huge difference. Okay. This is not really possible in an RV. That's mostly stapled together. I mean, let's face it. That's how most RVs are.
Of course you can renovate an RV and it can look beautiful, but it's not going to change the bones of the structure. And a tiny house on wheels can hold up more like the life of a residential structure, unlike an RV that after 10, 15 years is looking pretty rough. Especially without proper upkeep. Now even though they can be moved most only move a tiny house one to three times ever in their ownership of that tiny [00:35:00] house, and that's typically for big life changes. And that's a big thing to point out because unlike an RV, a tiny house does tend to be a little taller and heavier. Though there has been innovation in steel framing kits to help reduce weight of some tiny houses on wheels.
But in RV as much more can be much more agile on the road. Not always, there's some beast out there. So that's that really boils it down. There's a very similar footprint, you know, between 16 to 40 foot long, typically eight and a half feet wide. Now I do want to let people know you can build a tiny house that's 10 foot wide with a very low cost wide load permit. It's when you get wider than that, where it gets complicated with moving where you might need to have a follow car and that sort of thing.
And the DIY aspect of it. Yeah. So of course, small homes, tiny homes really have been around since forever in its truest sense of just like square footage. And the RV in the 20th century really led the [00:36:00] way to tiny houses as, as artisan and, and creative tinkers started playing around with building different custom things that could, that could be mobile.
I think that's really like, that's a really where I think the movable tiny house came from was from totally from the RV world. Just so happens that Jay Schaffer who built a residential style house on a trailer in 1999, really popular, popularized it. Course he was on Oprah. She's a big tastemaker. So, you know, word gets out.
But what I love about Jay's roots and, and the creative RV folks is that there's something very American about it, very very much bootstrapping people getting creative and that's like, Jay he's like, 'Wow, okay. Building codes are really restrictive. I dunno where I wanna live. You know, I want to do something that [00:37:00] fits me.
That's not available in the market. So he built himself, the teeniest tiniest house on a trailer that he could move around to try to skirt these rules. And you know, on one day you can say, you know, he's rule breaking, but on the other hand, you can say, no, this guy is bootstrapping something that works for him.
And that's something that I love about the DIY aspect of the movement. And as it's become more popular, there's less people building their own home, but that's a good thing. And the reason why it's a good thing is not because I don't think you can build a safe home yourself. It's because more people have access to tiny homes than they used to, which means that we're doing something right, because not everyone realistically can build their own home.
Kol Peterson: Tell us about the third party certification process that DIY builders can use to build the park model RV standards.
Alexis Stephens: Sure. So the real quick, the quick thing about certification, is it certifies that [00:38:00] you're an RV and that just gives you flexibility for, for parking.
So you could park an RV park without any problems you can park and cities that have a certification requirement, which is more and more all the time. The main benefit of it is it's accountability, making sure some key things are done correctly. It's definitely not as stringent as building code, but there are third party certifiers like Pacific West Tiny Homes that do a remote certification process for both professionals and DIYers.
Kol Peterson: What order of magnitude would you guess there are people actually living full time in tiny homes on wheels and in RVs in the U.S. And I'm not, you know, you might not know the exact answer, but order of magnitude, are we talking a hundred, a thousand, 10,000 or a million
Alexis Stephens: Good question. That's a tricky one.
RVs is easier because of the RVIA and the way they track things. According [00:39:00] to them, there's maybe more than a million Americans living in RVs full time. I could totally believe that tiny houses on wheels, there are so many people under the radar. We don't have a registration system, but I would say more in the like tens of thousands you know, to be on the safe side,
Kol Peterson: What are some aspirations that you have for the tiny house movement in the coming years?
Alexis Stephens: I would love to see a cascading ripple effect from what's already been started, which is more local, tiny house ADU ordinances. I love that Oakland is following suit in Portland's footsteps, doing something very similar.
I would love to see more people do that because if we want more housing and shelter options, now the way to do it is to make it as easy as possible. And that's what Portland has done. Maine just passed the tiny house state law that says, 'Hey, tiny houses on wheels can be primary and accessory dwellings' .That doesn't solve local [00:40:00] issues.
It still has to get, have local approvals. But what it does is it takes away the question we hear all the time. How do I deal with it? Well, the state just told you how you can deal with it now, write it in, get it over with, I mean, so, you know, what's exciting is now having more east coast and west coast examples.
There's something for everyone. And so if we can really just get more officials to take this housing crisis, seriously, we can say here's a menu. Which one do you like the best let's let's get this party started.
Kol Peterson: Tell us about your new book and your documentary series on legalizing tiny homes and your YouTube channel.
Alexis Stephens: So we wrote a book it's coming out September. It's the beginner's guide to tiny houses what you need to know about 400 square foot living or under. It's a really fantastic, thorough overview of all the various aspects of the tiny house world. Useful for people who are complete beginners, but even if you have dipped your toes into the water, I know you're going to learn something new from this book and our [00:41:00] documentary series.
So we have a YouTube channel, tiny house expedition, where we cover the, the diverse and dynamic aspects of the tiny house world. And we're now working on third part of our documentary series, living tiny legally. And this one is really going to focus on the implementation of the most exciting tiny house ordinances and laws that exist out there from LA, Portland, Lake Dallas, which is a very small community and to show people what, what does it look like?
Because it was, is charming and there's nothing like a charming visual to influence it, but then what are the particulars like? How does the permitting work in the infrastructure?
.
Kelcy King: That wraps up the interview portion of this episode of the ADU hour. As a reminder, these episodes are the edited audio version of interviews that we conducted via a webinar series. Good news. You can access the full video series via Kol's website, [00:42:00] BuildinganADU.com. Now for the second half of the show I curate questions from the audience that gives our guests the opportunity to dive deeper into a topic or address new ideas and questions.
Alexis Stephens: So from Joseph, how has title or deed regarding to tiny homes versus ADUs?
Very different, I guess, cause it's personal property bringing personal property. So it's not really associated with those at all.
Kol Peterson: And, and, and by extension it's also generally speaking, not going to be taxed as real estate, which is a nice, nice advantage of a mobile dwelling versus fixed dwelling such as and ADU. .
Kelcy King: Do you have any experience to share on prefab in tiny houses?
Alexis Stephens: Not a lot, but I will say that some of the biggest, tiny house builders or manufacturers out there can, can do multiple kinds of tiny homes like California Tiny House is a great example. And the modular code is very friendly to the tiny house world that they don't call it that, but it can, it can be used to easily build a [00:43:00] movable structure, which is great.
Kelcy King: I think this is from Gary and it was from earlier in the show. So I think that you guys touched on it. But just to reiterate, can you recommend a good, tiny home ordinance that might be a good starting point.
Alexis Stephens: Good question. It might, to me, it's going to depend on what size community you live in but I will look at what's happening in California. And if you go to the tinyhomeindustryassociation.org, search California on the blog, you're going to see a variety of different size communities. And they're all very similar, but there's some, some nuances, so that's a good place to start.
Kol Peterson: And I'm going to give a shout out to Portland's code.. I think it's a different approach. And I think, I think this is one of those areas where there's room for experimentation there isn't, you know, it's not evident yet to me that there's any one best approach yet. And I think we really need more experience with this and more data to support ideas of what is actually going to be the, you know, the best or most effective set of [00:44:00] regulations.
But, but that, that not withstanding, I think Alexis suggestion and needing on the T H I is content is, is a good suggestion for now..
Alexis Stephens: Great. Yeah, I agree. It's an all of the above approaches so we can see what sticks
Kelcy King: Where do you recommend people get started with figuring out what zoning and permitting requirements are for their area?
Alexis Stephens: You want to call your city planning department and ask them you can, a lot of times there's information on the website I've learned. I know people have learned the hard way is that sometimes things don't get updated from the website. So research ahead of time and then verify in person or on by the phone.
Kelcy King: Do you know of any tiny houses going into traditional mobile home parks?
Alexis Stephens: I do. And Durango, Colorado. Again, this is just one of my great examples because they're so traditional mobile home park and they have Tiny Town. They have a section for movable, tiny houses in it. This is one of, of numerous [00:45:00] examples of this happening.
It's one of those grandfathered in old mobile home parks. So I don't think they have any requirements or certification. So it's pretty lax, which is great.
Kelcy King: Are there any third-party inspectors who inspect IRC rather than ANSI?
Alexis Stephens: Yes. The one-off, I mean, you could probably find them everywhere. I would say if you, if you want Lake Dallas, tiny home village, you go to their website. They, I think they have a link. The third party inspector they use. And they've had a really great experience with him. Really gets tiny homes. Yeah.
Kelcy King: For the places that are allowing tiny houses, what requirements are put on the landowners such as concrete pads, what kind of hookups are required?
Alexis Stephens: Great question. I know this, this can vary. Sometimes the pad is required. It could be gravel.
Doesn't have to be concrete. Sometimes not, but often they are required to hook up to the primary homeowner's sewer. Sometimes they have to go to the street. It depends on the community. It's not always required to have a separate electrical [00:46:00] hookup, like a 30 amp or 50 amp. In some cases you can run directly like extension cord style from the main house.
Go cold. You want to,
Kol Peterson: Yeah, I'll speak to the utility connection protocols in Portland briefly. Number one, you do not have to have a parking pad at all. You could put it. Grass grass. I wouldn't recommend that recommend hard tap gravel or concrete, but you could do it on grass. You do not have to have plumbing, connections if there's no internal plumbing within the tiny house on wheels or RV. But if there is internal plumbing, then you do have to have a hose connection, which could be the primary house or a dedicated hose bib. For sewer, you would have to do it, a sewer clean out that it is compliant with however they're going to spec out the regulations for that, probably just a clean-out or perhaps a proper RV sewer cleanout.
And then you do have to have a dedicated circuit, 30 amp or 50 amp circuit for the mobile dwelling.
Kelcy King: Practically speaking, how do you prepare the electric and water [00:47:00] sewer and hookups for a tiny home?
Alexis Stephens: Well, I think we discovered a little bit of that. You know, typically a tiny house is going to be like 30 amp or 50 amp.
And so I mean, that's, that's very typical. They'll have a water inlet a lot like an RV. So it's really, I dunno, that's about it on that. Yeah.
Kol Peterson: Part of the elegance of this is it's so easy and so inexpensive to do the setup for these types of homes. It's going to be, you know, roughly $10,000 to get up, to get the infrastructure and parking pad put in.
So again, this is like vastly less expensive than an ADU.. And, and what I'm telling people in Portland now that it's legal is when you're putting in an ADU , you put in a parking pad or put in the connections for water, sewer, and electrical connection for an RV/tiny house. You don't have to use it. It's going to cost almost nothing. And then you can have an ADU and a tiny house on wheels if, and when you want it, but you don't have to put the tiny house on wheels there ever, if you don't want to, because [00:48:00] it's just, it's a marginal cost addition to that type of infrastructural improvement to your property.
Kelcy King: Could it be helpful in extending uptake of movable tiny houses to develop ways to make them attachable detachable to foundation?
Alexis Stephens: Yes. And that's something that has been explored and you know, is interesting thing. I think it could really be, I mean, you can make it complicated or you can make a really simple, a really simple way I'd say is like, if you had a pad and you had tie downs and then you skirted it and I mean, that's as simple as you can get, you could get more complicated where you're taking off the axles and that sort of thing, but kind of like why.
But that is something I, a lot of folks have, have explored to, to overcome that. And it does make a lot of sense if you built to appendix Q standards from the trailer up and you can have affix to some kind of foundation system, it'd be great if they, if a community accepted a mobile home foundation system. Cause that would also keep it very simple. [00:49:00]
Kol Peterson: I baulk a little bit at,at tying to concrete pads in that at least in Portland, like there, we don't have hurricanes tornadoes, like, do we really need to do that? I've never seen a need for that. Do you actually think there's a need for that or is that just a way to comply with IRC essentially?
Alexis Stephens: I think that's just a comply. It's like a, it's a thing it's like, sure. You want that? Sure. You know, there's a tiny community and North Texas, they have tie-downs because it's high winds in tornado alley, you know, of course you're not going to survive a tornado, but the high winds that come sweeping through there, it makes sense for them.
Otherwise it doesn't make a lot of sense in that the trailer the axles and the wheels, you know, are meant to, to hold the weight actually quite nice. When there's a little bit of, of, of wind, you know, it's very sturdy. You don't feel like you're in a boat or anything, but I'm willing to make little compromises to, to make it legal in more places.
The thing is like we've parked in so many places. We don't worry about being legally permitted permitted. It doesn't mean we don't want [00:50:00] to, but like, we're just okay with the risk, because at the end of the day, it's a neighbor complaints where we currently are all the neighbors like us, we've proven to be responsible and respectful neighbors.
And that works for us.
Kol Peterson: Yeah. And you know, part of the elegance of the tiny house movement is it's inherently like a flexible way that if you get busted, you can move, you know, like, and that's, that's part of the beauty of this, the way this whole movement
Kelcy King: Betsy would like to know where we can link to the Portland code and any progress in tiny home village ordinances, small camps, parks, or urban infill?
Kol Peterson: I'll I'll take the first one you take the second one. The tiny house on wheels regulations for the City of Portland have not yet been posted, but they will be posted by August 1st, 2021, which is when they will be legalized. So that's when you can start to find the real regulations that will be enacted on Portland's website.
So you'll just have to Google it. Alexis?
Alexis Stephens: In regards to villages and developments a couple favorite examples again, Lake [00:51:00] Dallas Tiny Home village- that's just a killer one. Very different would be Tiny Tranquility, which is on the Oregon coast where they use like a campground ordinance. And he weaved a really fine line with those guys is where he had approved that our tiny house was an RV, but then also how to make the case for them being attractive as a community.
So really, really odd. He's a lawyer and he's really good. And his name is Josh Palmer - the developer there, and he'd be a great person to talk to.
Kelcy King: Any experience with composting toilets permitted in tiny homes rather than sewer or septic hookups?
Alexis Stephens: Composting toilets are allowed in very few places. You know, there is an Oregon you can technically, I don't know, not even a tiny house it's complicated. I think more likely is if you really want one, like you feel passionate about it is that you just have to plumb it and then switch it out. Or go under the radar.
How do landlord tenant enforcement situations come into play or also, are there a two-part question? So [00:52:00] we'll, let's start there and then we'll come back to that one. Well, that's a tricky one. If it's an under the radar situation, like so many of us, they, they don't it's just an informal agreement and I think it'd be very hard to have anything legally binding, but you know what, I haven't really explored that topic too much in places where it has been allowed officially and that I would love to Kol, do you have anything on that?
Kol Peterson: It's an extremely interesting and complicated question. So I, I think landlord tenant law is going to apply in Portland. But I am not certain how all that's going to play out. I think it's going to be a really interesting process as we go through the formal codification of legalization of mobile dwellings on residential properties. I think it's going to open up a whole new set of questions about that particular issue, because the owner of the residential property might not own the tiny house on wheels. Right? And so are they, you know, so who's, who's responsible for [00:53:00] a roof issue that causes mold in the walls or whatever. Well, it's obviously not the owner of the property if they're not on the tiny house. So anyway, I don't know the answer to that question yet, but it will be litigated over time I'm sure. .
Kelcy King: And then last question, are people using any tiny house models for people with disabilities? You know?
Alexis Stephens: Yes. Typically more foundation-based is used for that though. I have seen a couple interesting proof of concepts on a movable chassis for that involving ramps and typically a wider, tiny house.
But there's some really great non-profit groups, including some habitat for humanity affiliates in this great group in North Carolina, Tiny Houses on Penny Lane is the name of their village. I can't remember the nonprofit name, but they're specifically developing a proof of concept village for tiny homes for people with disabilities.
Kol Peterson: I just want to mention that we have a tiny house on wheels that is built to ADA's actual ADA standards. [00:54:00] So it's been done because we did it. 10 feet wide.
Kelcy King: What type of vehicle is needed to move a tiny house?
Alexis Stephens: Typically, you're going to need a half ton or one ton truck pickup truck. We tow, we through our partnership with U haul. We towed our house for many years with a U- Haul box truck. And it's a great option.
If your house is 10,000 pounds or under and bumper pool, I'd like to share that because I think in this day and age of, of fires being so common that if you needed something in a pinch and you don't own a truck, because remember most people don't move. So they hire a professional or typically to do it.
But if you're stuck in a situation, you don't know anyone with a pickup truck, U Haul could be an option. If you're not a gooseneck.
[00:55:00]
Kelcy, just to be clear here. So the question is if you're aware of the best practices, as far as what regulation should be, how should you go about making those changes?
Correct, yes.
Kol Peterson: So, this ties into a later point that we'll get into, but I think there's so many different things that need to be changed in local regulations to make the regulations for ADUs good. It's not as though, if you are able to [00:04:00] address, say off street parking requirements that you will have a good ADU code.
Rather, there's like 20 or 30 different little things that will all significantly impact whether or not a code is good. So let me just pick on one example, California has an incredibly good state code. However, they have one element of their state code that says by right you can build a 16 foot ADU. Well, that is a big poison pill, in my opinion, that isn't a good policy. They have this incredibly good ADU regulations statewide, except they have this one thing that makes a whole lot of ADUs is not possible, which is you can only build a one story ADU. Which is a killer, that doesn't work. ADUs will not pencil if you have that in place.
And that's a minor thing, but that's very major in a lot of ways, like sure. A lot of people will still want to build ADUs in California and some jurisdictions will have liberalized height standards, but statewide, most jurisdictions will not. And therefore they're killing [00:05:00] 20% of their market without one bad regulation.
Having visited several hundred ADUs in Portland, where that isn't in place, most of the ADUs that are built, the majority of them are two story detached ADUs. Why, because they're being built on small lots because they want more square footage in those ADUs.
And so if you're requiring people to build an 800 square foot, one story ADU, they're not, they're going to lose their backyard and that isn't going to work for a lot of people. That one little example, it doesn't doesn't really matter that much, but I guess the point is there's so many different things that need to be worked on that.
I think there's a need for a group of people to be working collectively. Slowly improve their regulations over time.
Kelcy King: Is there a certain place where you would start? Like, would you start with zoning? Would you start with owner occupancy or is it just chisel away as you can?
Kol Peterson: Yeah. So I think that depends on what level you're working on. Right? If you're working at the state level, really, if you're working at any level, I think the [00:06:00] way to go about this is understanding from an advocacy point of view. This is a hard one for people to swallow, but your code needs to be A-plus bomber for people to actually want to build an ADU. So if you have the 16 foot poison pill in your regs, it's not good enough. It needs to be much better. And that, and like that doesn't, that means that everywhere in the country has bad codes except for Portland, Seattle, and a few jurisdictions in California.
So there's a lot of room for improvement. And then you can get to these kinds of like next level ADU codes that are like two ADUs and allowing two detached ADUs. My vantage on this is you have to aim really high, and hopefully they'll get most of that because if you incrementally chip away at these regulations over time, it's going to take a long time.
For example, the entire east coast of the United States doesn't have a single city with what I would classify as a halfway decent set of ADU regulations. I would not build an ADU in any city on the entire east coast.
So, a city [00:07:00] could work on chipping away at those regulations over time, but it's really challenging. It takes decades to pass good code. Rip off the band-aid and pass a really good code once. That's the approach that I'm in favor of.
And as a result of kind of working on this for the last decade is advocacy changing regulations, because I've now come around to thinking, you know what? This is too painful at the jurisdictional level there's too much nimbyism too many, too much local politics to deal with. We have to do this at the state level because it's taking too long and we don't have the time to wait, this is not a tenable approach to improving your ADU regulations, bit by bit at the local level, across 128,000 jurisdictions and not at the pace at which we really need this form of housing to actually take hold.
Kelcy King: So this is a great segue because I'm moving into the state regulations here.
So in order to advocate at the state level and have that be the most effective, first, who are the target legislators and representatives you would target?
Kol Peterson: I don't know the political scene [00:08:00] necessarily at any state let alone every state, but I would say what I've seen, what did a little bit knowledge I have about this as what I've seen as lobbyists, so to speak whether that's the Home Builders Association or AARP or an affordable housing group working with an elected state legislator, House or Senate, putting forward a proposal and then working that through the sausage making process. There's been a couple examples of statewide legislation now in Oregon, in California, in New Hampshire in I'm sure a few other places. A lot of these have not been particularly effective in the sense that they are not getting rid of any of the poison pills, they're simply enabling ADUs to be built.
That's what happened in California prior to the latest two years of legislation. That's what had happened in Oregon. That's what had happened elsewhere. you might as well not allow you to use if you're not going to have really good ADU regulations, it's the same thing.
So just saying we allow ADUs, that's pointless. Don't even bother. Go do something else. [00:09:00] If you're going to get serious about enabling ADUs, you have to have excellent ADU regulations. So. Getting back to this idea of work with the state legislator, who's going to be open to pushing the envelope really far, making people uncomfortable.
And hopefully you'll be able to build a coalition of stakeholders that really support that policy measure. And that's what it's going to take to actually set environment where hopefully at that point, maybe we'll start to see some ADUs built, don't count on that. Even if you have the best ADU regulations, it doesn't make it easy to build an ADU at scale. They're not going to just take off overnight. You will get a pathetic, pitiful number, ADUs being built, even in the best conditions. Like what we'll see in California, we'll see many more times ADUs being built, but it's still a very small number of ADUs overall.
So I think that's kind of the good and the bad side of this stuff is it's going to take a long time for ADUs to make a substantive dent and the kind of housing crisis that we have. But we can only start to get there if we have really good ADU regulations.
I would say working [00:10:00] on approaching it really aggressive ask using a lot of data that I point out in the book and that's available elsewhere. As far as going for the gold standard kind of default model zoning code for your whole state is the way to go. And if you can't get that, work on it on the, at the local level.
The most controversial things to work on are owner-occupancy and off-street parking. I'd say those are the ones that, if anything, I would work on those at the state level, because locally it's really politically challenging to get rid of those two poison pills.
Kelcy King: How do you show up as an advocate? You personally, are you showing up in person? Who are you showing up to see? And are you, are you like writing letters, gathering signatures on petition? How do you show up?
Kol Peterson: Yeah, I do all the above. I write letters when there's draft proposed regulations at local jurisdictions.
I write letters to state level policymaking efforts. And it's surprising, these letters are actually meaningful. I think, you know, [00:11:00] little, one sentence letters that say I support this bill are fine, but I, at least as, as a subject matter expert, I weigh in with specific critiques and criticisms and suggestions of how to improve policies.
And that is actually surprisingly meaningful. I think those things do get adopted. So that's, that's really helpful. I guess the other thing to note, is at least in my experience, With trying to inform policy using data is far more powerful than just using your opinion. A lot of people will use their opinion in rule making and it doesn't, at least in my experience in the different advocacy work I've done, that hasn't held as much sway as providing evidence.
Kelcy King: How do you find out this has just been a challenge, but I've found and have read all over, but how do you find out the information who is meeting when and how to meet them? So as far as policy makers, [00:12:00] like when policy makers are meeting and how to show up for that?
Kol Peterson: That's a great question. I wish I had a better answer for you. It's a little bit opaque, isn't it?
I think if this is again where having a coalition is helpful.
Kelcy King: You are a part of a number of advocacy groups and teams. So could you explain what those different teams are, how they got formed and advice for attendees who are interested in forming their own?
Kol Peterson: Yeah. There is several coalitions now that I'm aware of happening in different jurisdictions and at the state level in California, there's coalitions. And having been a part of these different coalitions at the local level now for a decade, I'm convinced that they are critical and a best practice for improving ADU regulations.
So if we go back to this question you had posed about how do you find out about an upcoming meeting that pertains to ADUs you don't because websites for government stink and I used to be a government web manager and it's terrible.
So, sure. You find out about one thing, [00:13:00] but you don't find out about another meeting and you don't find out about the state level meaning. So the state level website is even worse than the local level website. So That's a problem, but the way that you address that is to get a coalition of people who have their boots on the ground and are working in these different organizations or associations or entities that have some knowledge about what's going on with regulations, et cetera.
So in terms of that best practice concept, I say that people, the entities that are important to include in a coalition and ADU coalition, so to speak would be, these are just some examples, AARP, a local university that has say an architecture department. The municipality itself I'd say is maybe the most key stakeholder, because that's where you'd start to get tips about what things are coming up in from a regulatory point of view. State level environmental or land planning agencies. Utility providers, affordable housing [00:14:00] advocates, green builders, architects, urban planners, tiny house advocates, realtors, all those different stakeholder could be part of a coalition and should be part of a coalition, ideally that meets on a regular basis, maybe once a month for an hour or two forever, basically.
And that's I think what needs to happen to actually enable the type of change that is meaningful from getting to this gold standard model policy level, but also doing the non-regulatory things that I've been heavily involved with. And I tapped into that coalition to help do so for example, classes, or ADU tours all those kinds of events that involve getting the word out.
So this huge group of homeowners. It's hard to reach homeowners when you're doing marketing. And that's your market audiences like homeowners, you might want to build an ADU. How do you find them? It's not easy. So I think having a coalition that can reach out to their own constituencies using their own email list is a good good technique.
Anyway, [00:15:00] I think there's a lot of different ways that an ongoing coalition can support. Improving the environment for ADUs, if they meet on a regular basis and work on these issues together. It doesn't have to be a super formal structure, but just checking in regularly to hear what's going on.
And and then strategically working on things on a case-by-case basis as needed.
Kelcy King: So I'm gonna move into a couple of questions that were from previous interviews. So this one was from Karen bank. When we were talking to Robert Liberty, What are the best ways to educate elected decision makers on ADU policies that are working in other places? They're busy. They often don't watch webinars like this. What did you do that was successful?
Kol Peterson: Yeah. I think that the policy makers, elected officials , I think they're going to be open to hearing ideas from people who are on this webinar. Like I think people who are aware of what's going on and clued in and understand what the best practices are and are strategic about getting those changes [00:16:00] made can make a difference. Every single person on this webinar can make a difference in their local jurisdiction by being smart and strategic.
Your influence in your capacity to write a good email to the right people. So that's what I would say. They don't have to watch these webinars, but you do, and you can be smart about how you utilize the information that you get from here. You can pull quotes from my book. So pull quotes from my book and send them. Then you have quotes from "the book about ADUs, the definitive guide". I mean, I use that title strategically, right? So it's like, this is from the definitive guide about ADU development, it says our regulations suck. Here's what we should do differently according to the definitive guide about ADU development, do that.
Kelcy King: What is an example of something that policymakers have asked you to bring to the table when searching for ways to work together?
Kol Peterson: Oh yeah. So this gets back to the data question. I think To the extent that you're able to supply evidence, as opposed to just your visceral instinctual [00:17:00] reaction to questions, I think that's far more powerful.
Examples of the types of advocacy that I've done that have been successful, have been fighting a taxation debacle that occurred Multnomah county in 2016, where I provided evidence of how much the tax increase had been for all subsequent years for ADUs. Analyze that data, showed what the new taxation bump increased was and said, "Hey, you've doubled, or tripled, or quadrupled the taxation impact of ADUs in the last year, here's evidence of that, here's some quotes from homeowners who've been adversely impacted. So that's an example of taxation. I've worked on the SDC waiver extension, providing information about how many permanent ADUS there were prior to the SDC waiver, then after the ADU waiver. That's a pretty easy data set to get, but I had to work with the city planning staff to get the number, to get the data set of permitted ADUs. I've been involved with state-level rulemaking and been successful in putting changes into the state level rule making process for house bill 2001, by talking about [00:18:00] off-street parking requirements and giving some evidence about the cost impacts associated with that.
So as a result of a state model code that will allow for missing middle housing statewide, will not require off-street parking in the model code because of that advocacy.
California had owner occupancy requirements, that's a tough one to give evidence for, but I provided some documentation from banks to state level legislators.
The bank documents said, "I will not carry this mortgage for this homeowner if they put an ADU on their property, because that would put a deed restriction on their property. And we, as the mortgage holders of that note, do not wish to give a mortgage for that property." And that that's kind of powerful evidence for a state level legislator.
Kelcy King: I'm switching gears a little bit. It's still an advocacy. How do you personally address neighbors or neighborhood associations about an ADU that's being developed in their neighborhood?
Kol Peterson: So even if ADU regulations are good and you can build ADUs, sometimes [00:19:00] neighbors don't like, well, oftentimes neighbors, don't like new housing development going up near them.
And so on, let's say 10% of ADUs that I've heard about, neighbors have issues with the people building in ADU, and that's just the nature of development. By becoming a developer, which you are, if you're building an ADU, you are all of a sudden taking on the bogeyman hat of developer, even though it's at a a really small level.
And and then you get to start to sympathize and experience what it's like to be a developer where everybody doesn't like change, doesn't want more housing, doesn't want more parking issues near them. And so this comes up again and again and again, and I don't have any really good advice for you other than thank goodness you can do it by right.
And if you can't do it by right, that's a problem, right? Because then you have to go through the permission process of getting a conditional land use review permit. And that's the case in a lot of east coast jurisdictions, where you can only build an ADU if you get permission from the city. And that requires a [00:20:00] public notification where all the neighbors will inevitably say, we don't want more housing near us, we want the sanctity of our single family, residential neighborhood. We don't want a parking problem. We don't want a slum in our neighborhood. You hear the same stuff everywhere.
Kelcy King: This is, this is pretty Portland specific, but Kevin asked this when we were talking to Joe Robertson, Kevin Johnson, sorry. Given your experience that about half the ADUs have family in them at various points, do you think the limitation that Portland sets on the short-term rental and SDC fees limits new ADU?
Kol Peterson: Yeah. So just to summarize this topic a little bit for people, Portland put a system development charge waiver in effect where you didn't have to pay the SDC. The residential impact fee is $10,000 to $20,000 . If you build an ADU But then they changed the policy a couple of years to go to say, if you want to use a property for a short term rental, either the primary house or the ADU, then you do have to pay the SDCs. What this did was [00:21:00] dramatically impact the number of ADUs being built in Portland, number of eighties being permitted this change.
So in a, in a bad way. Meaning the number of ADUs being built up through from 2016 to 2018 was 600 a year. When this new policy went into effect where they said no more short term rentals, unless you pay the SDC. The number of ADUs permitted went down by 50 percent, that's bad, right? Arguable. I don't know if those additional.
50% of ADUs were built if, and only if they could do a short term rental, what are they doing in terms of providing additional housing for the housing stock? Nothing. Right. Does that mean maybe a little bit, but in some cases, for example, a lot of people are building to use with multiple motivations to have additional living space for a visiting family member at points, but then also several months of the year, they use it for short-term rental. And that's good. That's a good use of a short term rental, but if it's going to be a full-time short-term rental, it's not really doing anything, in my mind ,from an economic, or social, or environmental point of view that's [00:22:00] positive. Doing anything negative, really, but it's not doing anything great. So I don't think the city should be necessarily subsidizing that type of development. And I, I agree with that. So though the number went down by roughly 50%, I think it's the right call for the city to have made.
Other jurisdictions have outright banned short term rentals in ADUs, I guess my take on this is as a general matter, is if you, as an advocate can get better ADU regulations in place and throw short-term rentals under the bus as a horse trade, I think that's a worthwhile trade to make.
Whereas if it's just yet another thing that you cannot do with an ADU and you don't get anything out of it from an advocacy point of view, then it's not a great horse trade, but if you're going to be able to eliminate off street parking and owner occupancy, if, and only if ADUs can't be used as short-term rental. Go for it. That's a good trade.
Kelcy King: Okay, great. You approach ADU development from a perspective of how infill can address a city's impact on climate change.
Can you tell us more about how you [00:23:00] use this perspective to advocate and how others might be able to offer this to more areas.
Kol Peterson: Greenhouse gas emissions reduction is my driver. That's like my interest in all this. That's why I'm interested in ADUs, but not everybody is. So in the coalition that I was referring to previously, greenhouse gas emissions reduction was the primary motivation of the people who are most intimately involved in that coalition at initially that included Oregon Department of Environmental Quality, the City of Portland Planning and Sustainability, and Eli Spevak, myself you know, people with a green building kind of orientation, but not everybody cares about that stuff. And I think it's important to be pragmatic about that. I want a lot of ADUs built, but I don't focus on the greenhouse gas emissions aspect of things so much.
For the people who do care about climate change significantly it's very meaningful. And surprisingly, in the California context, greenhouse gas emissions, wasn't part of that conversation in terms of reducing the barriers to ADU development was all about affordable housing. [00:24:00] Wheras in Oregon, it was all about that greenhouse gas emissions stuff, the affordable housing crisis. Wasn't really a factor in the SDC waiver or anything else. So. It's interesting to see how the local motivation, advocacy drivers for improving ADU regulations can vary depending on where you are and what the predisposition of the populous there is.
In California, it's an affordable housing crisis, dammit. Here, it's we want to have the best, you know, greenhouse gas emissions, land use planning, housing development policy out there 'cause we, we really are working on reducing greenhouse gas emissions in Portland.
Kelcy King: I'm going to switch gears into ADUs as they relate to affordability. And I'm going to start with Brian O'Connell's question back when we were talking that Eli's Spevak and he asked, "what can we do to help affordable housing non-profits increase the density of the properties they already have that were developed a single family.
And do you have any examples of projects that are working?
Kol Peterson: Yeah. So I'll start by saying, [00:25:00] this is a topic that a lot of nonprofits are working on is to try to figure out how to build ADUs in general. I think it's a good idea, tactically, for nonprofits to potentially focus on partnering up with CDCs community development corporations that already own rental housing stock in the single family residential zone, and then targeting ADUs to be added to those particular properties. That makes a lot of sense. So I'd say that that is a worthwhile endeavor. I haven't seen a lot of people focus on that.
There's one organization in Portland. That's kind of starting to think about that. Hacienda CDC, and then in Monterey, California, they're the local Habitat for Humanity chapter has been doing that and they've had limited success.
The alley flat initiative has also done some of that in Austin, Texas, but none of these have deployed so to speak a lot of ADUs yet, it's still, we're talking fewer than five ADUs.
Kelcy King: Gabrielle Campana asks again, you're speaking with Eli Spevak. What innovations [00:26:00] are you seeing in the market to lower costs to build ADUs as an affordable housing solution?
Kol Peterson: Great question. Everybody wants to know how do you reduce the cost of ADUS. There isn't really a simple answer to it. The only answers I have to share are, yes, prefab modular does hold promise. I have a little bit of internal bias and skepticism about that industry in that I've seen a lot of companies not work in this space.
But I think there is a potential now that I've seen a few real life successful examples of that. I think that there is a potential for that to become much more broadly used method to reduce the cost of ADUs. So that's one. The other one that I think is just important to always focus on is conversions.
Whether it's conversions of pre-existing habitable space in your house, or convergence of garage or conversions of non habitable space, like your basement or attic, those are the other low hanging pieces of fruit. Aside from that, there is no magic bullet to [00:27:00] reducing costs of ADUs.
I know that there's a lot of ideas and a lot of things that people have banter about predesigned, standardized plan sets, you'd have to pay for architectural fees and so on. I just I'm skeptical because I've seen a lot of ideas. Every novel idea that people have has been thought about before and tried. And so what really works is conversions and what really works, potentially, is prefab modular, for the few companies who have a lot of experience with large scale manufactured housing in factories and know how to do that.
Kelcy King: You're moving into advocacy for tiny houses on wheels being recognized and utilized for alternative housing options in particular as it pertains to affordability. So can you tell us how you're working with policymakers and other interests for adjusting codes to permit these kinds of dwellings?
Kol Peterson: Yeah, tiny house on wheels is something that I have one foot firmly planted in that world with a tiny house hotel. And I have a tiny house on wheels on my residential property for all the same reasons that ADUS are good, tiny house on wheels are good, but I've always kind of put it [00:28:00] in the kind of not invested that much political capital in that idea because it was so not viable not legal anywhere. But I've always been a fan of it. Just kind of put it in the civil disobedience category that is, you know, people who are really willing to become radically downsized or people who are willing to break the law and have an tiny house on wheels on their property. Awesome. Great. For my vantage, it's solving all the same issues at ADU solve.
But now that it's becoming a legal option in a few places, I think that the door has been cracked open to actually start to look at tiny houses as a viable alternative to ADUs. And in fact, that's happened now in five jurisdictions in California.
So we're talking San Luis Obispo, Los Angeles, the second biggest city in the United States now allows tiny houses on wheels to be a form of ADU. That's amazing. And so they have their methodology of how you go about achieving that it can be connected legally to utilities, et cetera, but it's classified as a form of ADU.
That is a big deal. That's a [00:29:00] population 10 million people and tiny houses costs $50,000. Whereas an ADU there might cost $200,000 minimum for detached, a new construction for a garage conversion might cost $80,000 to $100,000. So tiny houses on wheels are going to kill it in terms of the cost.
Now, does everybody want to live in a tiny house on wheels? No, but 5% of people might, 10% of people might. So it can be a substantial and very viable if and when tiny houses become a legal form of ADU or just a legal, acceptable form of living space on a residential property, which is the approach that Portland has taken.
We're not classifying them is ADUs we're just saying you can live in any mobile dwelling on a residential property for the time being during the housing crisis. And that's another regulatory experiment towards legalizing informal dwellings for residential use that address all the same issues as ADUs address that is greenhouse gas emissions reductions, less expensive housing and building a social infrastructure that [00:30:00] infill housing provides.
Kelcy King: Are you working with policy makers on anything for the future?
Kol Peterson: With tiny houses?
Kelcy King: Yeah.
Yeah, I'm hopefully in the city of Portland, there's going to be a rulemaking process for looking at the next iteration of how the tiny houses on wheels will be classified from a residential dwelling perspective and also how they'll be used in like pods and kind of encampments in commercial zones, which is personally of less interest to me than the residential question.
So that's one thing. And then statewide, I think I'm kind of keeping an eye on California to see whether they might actually pass a statewide code. I'm not involved with it though, but I wouldn't be surprised if that does occur, which would be really cool to see that change. And I think that's going to be a huge new, if that happens, that'll be a huge new market for less expensive ADUs than what we have now.
Great. I want to ask you just one last question, because [00:31:00] we are curious just your strategies for how you place and design your personal ADUs what you've done maximize privacy. And then maximizing the lot usage for both to primary and secondary drawing.
Kol Peterson: Okay. Yeah. So in terms of internal design best practices, there's a lot of ideas in the book, but some of the things that I'll just mention that I've done, that I think are really good, that are not talked about too much are trophic variation, so to speak within a dwelling.
So there's a variety of different heights of the ceiling, just makes it more visually interesting to look at. And so two tactics that that can be, you know, if you're doing a two-story ADU using a catwalk to get from say the bedroom to the bathroom or from one bedroom to another allows for there to be a lot of volume from the first story looking up 'cause you're looking past this catwalk and one's it's kind of interesting visually makes the downstairs feel huge, makes the upstairs feel interesting 'cause you can look down. I think that's a really fun little tactic [00:32:00] also that catwalk counts as habitable space, but the space outside that catwalk where it's vaulted does not, at least in Portland's code where you're counting habitable square footage based on the spaces that you can use. You don't count that vaulted volume of air, so I think catwalks are a good trick.
I think exposed wood beams is another good trick in that you can put exposed wood beams in the ceiling, the holdup car decking above and the car deck and serves as the flooring for the bedroom upstairs. Those exposed wood beams are visually interesting, they're beautiful to look at much prettier than say drywall, which is what everybody uses. And then you get above that. You see car decking, which is attractive, visually interesting gives you some trophic variation in the height of the space. And then it's also giving you an additional foot of headroom by having exposed wood beams. Exposed wood beam is where you get this whole shaft of volume here. You'd have dry wall going beneath it typically. And so you're losing a foot of height. So instead of having a [00:33:00] seven foot ceiling, you can have an eight foot ceiling. So I think that's a good little trick that can be used.
Another really big one that I think is a best practice is a covered outdoor space. I think a covered outdoor space pretty much anywhere in the country is going to be valuable and advantageous on an ADU in that it's not counted against you for square footage, but that it can actually add usable square footage anytime of the year. You can even put a heater out there and use it in the winter or in the summer you can make it shaded if you're in a hot climate. So I think having covered out doors space and big, not like a three foot, six foot wide awning, make it like 10 feet wide, make it 10 feet deep, something significant you put a dining table under their chairs, a bench. That's the scale, the size that I'm talking about that actually makes your 800 square footADU 900 square feet without counting against you. And I think everybody should be considering covered outdoor spaces when they're designing ADUs. Whether that covered outdoor space is on a porch or a [00:34:00] deck or leading out to the backyard, that's the best practice I would consider. So I'll leave it at that.
Kelcy King: Okay. Thank you.
So this first one, I'm just going to ask because we can quickly address this, is there a resource for appraisals for properties with ADUs and how are ADU additions impacting the value of homes?
Kol Peterson: Yeah. So there's a presentation that Abdur gave that's available right now. That's the one and only valid research that's being done on this very question. As far as an additional resource, there was a study done back in 2013, you can find that study and the document, the two page best practices document that's for appraisers on AccessoryDwellings.Org, it's called the practitioner's guide to appraising ADUs. It basically is suggesting consider the income-based evaluation method.
In light of the research in what I've learned from Abdur, recently, I can't honestly say that that's necessarily going to be the best practice anymore to use the [00:35:00] income-based valuation method, because I just don't think it's a realistic approach for appraisers. I do think that it's worth reading it and providing it, but understanding that Abdur's presentation about looking at actual sales comps is probably the better approach to looking at how to go about improving the answers to these questions about contributory value, which is still plexing to everybody. Nobody has an answer to this question quite yet, but we're working on it. Abdur is,specifically.
Kelcy King: From NJ Ericsson, is Oregon's new building code allow auxillary housing override neighborhood is CCR Oregon's house bill 2001 doesn't allow new CCNRs to preclude ADUs, but it doesn't override pre-existing CCNRs for HOAs . That's how Oregon's dealing with it.
Kol Peterson: In California, their legislation does override HOA CCNRs. So they're doing it differently. I don't know which way is better. It's new terrain for ADU. [00:36:00] So we'll see what happens.
Kelcy King: From Bernard Matterson. Do you know of any ADU that has been built to the standards of the International Living Futures Institute?
Kol Peterson: I don't I wouldn't be surprised if there has been one. But I, I'm not, not that familiar with that particular standard. So I don't know if any, have been built to that standard.
Kelcy King: Gabrielle Campana, in areas that do not have good city code for ADU, like south Florida. Could a first step, the building accessory dwellings with no kitchen instead.
Kol Peterson: Yeah. I, I totally, I think, I think that's I think right now in a lot of jurisdictions where ADA codes are bad. I mean, this is what I go over in chapter 12 of this book, right?
This is Accessory Dwellings and Civil Disobedience. And my vantage is, if your city has bad codes or your status, bad codes are the entire state of the entire east coast has bad codes and you want to help individually solve all the same problems that ADUs solve, just build an ADU without a kitchen, and you're good to [00:37:00] go.
It's called a detached bedroom or alternatively build an addition to your house or an internal conversion of a portion of your house and just don't put in a legal, full kitchen. You can legally wash dishes in your bathroom sink and you can legally put everything except for the oven and the second sink in any space.
So I think there is interesting workarounds that are totally realistic, viable things that you can do right now, anywhere in the country. You'll run into the same development challenges that you would run into building an ADU in some cases. But I think those are viable things to consider even in Portland there's times where I recommend those options instead of an ADU for one reason or another.
Kelcy King: Okay. Thanks. From Karen, how do I find out about existing coalitions anywhere in her specific areas, LA, but how would you find out about an existing coalition in your local jurisdiction?
Kol Peterson: You know, I know that Southern California has some form of a ADU coalition.
I couldn't tell you the name, but just Google ADU coalition, [00:38:00] California, Southern California, Los Angeles. You'll find it. Just Google. That's it there isn't like, there isn't that many of these out there. And They can happen at the very local level. Like I know Greg is on the call from Berkeley.
There's a coalition in Berkeley that's an example of this. There's statewide coalitions. I'm in a regional coalition. So these can happen at various levels and they're all good. I think they're all, they're all helpful. I'd say maybe one additional point I'll make on the coalition thing is ideally the coalition involves a government person who is convening the meeting because they have some degree of responsibility to enable anybody to attend, perhaps, in a little bit more legitimacy than just an advocate running a group. So that might be one thing to consider. But these coailtions don't necessarily exist everywhere, but you can start one yourself at some small level and try to make this thing a regular occurrence. I think that's a good, good strategy for anybody to be [00:39:00] thinking about it anyway. Like one person can start this or a group of people can start this at a local level to a state level.
So thanks Kelcy, that was fun.
Willie Dean: For ADUs. Yes. I've only done ADUs in Portland. I've done a couple of remodels in Vancouver, I've done a single family house [00:04:00] out in rural Wasco county. But as far as ADUs are concerned, actually only the east side.
Kol Peterson: I just point that out to say that I know a lot of people who work in the ADU space in Oregon and when I say Oregon, it's really just Portland because there's not a lot of activity, even five miles away from where we are in Portland, because the regulations haven't been the same. In any event. So California, which jurisdictions have you worked in?
Willie Dean: So San Jose, Campbell, Mountain View, Los Gatos. The interesting thing about that environment is that every few miles you're in a new town, right. And that's pretty different than Portland where we at and sort of the urban growth boundary and the rules are pretty similar for miles in any direction. Whereas down there, I mean, it's a way bigger space. There's way, way more people. And there's all of these little enclaves that all have their own specific zoning rules. So, that's one of the huge differences working down there. You have every town you go to, [00:05:00] you have to learn a whole new set of rules.
And some of them base their rules on the same stuff. And some of them are just different. And then the way that the permitting offices work is always different, too.
Kol Peterson: So tell us about some of the substantial differences between the ADU design work that you've done in these two markets, Portland and the San Jose zone in terms of a number of different things. So process wise, things like Title 24, net zero solar requirements, designing for dry versus wet conditions, culture wise in terms of players, actors and costs.
Willie Dean: Yeah. I know that there's a new set of rules in California in 2020, and I haven't done anything this year within the context of the new rules. So everything that I'm saying is, is a tiny bit dated in that respect. But my experiences was that the rules in that part of California, where I was working were a little bit more restrictive. In Portland, you're [00:06:00] allowed to do 800 square feet or 75% of the existing house, whichever is smaller.
And that's just across the board. Down there the lots are a lot bigger and it's based on a FAR, but a normal lot down there is 7,500 square feet and you can only do a 600 square foot ADU. So, for my experience, we could only do single story one floor, one bedroom, one bath, which if that's the context or the constraints of the project that you're working in and it simplifies things drastically. So it was, I suppose, easier because you didn't have as many tricks that you could pull out of your hat. But also limiting in that, I felt like it's the most expensive housing market in the country and we're limiting it to these one bedroom apartments that we're building where there really is huge, huge, huge opportunities for infill, and we could be doing bigger projects.
From a zoning perspective, it seemed it was smaller and therefore simpler [00:07:00] projects then into like Title 24, that's just an interesting different way of doing things. In Oregon, we have the energy code and it's just a part of the design review and there is no third party verification, which I mean on some level is maybe a better thing, that there is third party verification and it makes it, it maybe adds a little bit more rigor to the process, but it also makes it more expensive.
You usually have to work with a specific Title 24 consultants and then you become sort of a middleman. You're asking somebody else to verify your designs. So it's a little different. And then it's also interesting because while we just have the code here, our code is actually stricter in a lot of ways as well.
So because it doesn't get cold down there, you can still just do a two by four wall with R- 21 insulation. You do slab on grade construction, you don't have to insulate under the slab. So these are things that outward just like standard [00:08:00] designs in my kit when I went and we ended up changing a lot of those things, 'cause when I started two by six walls and under slab insulation and all these things that even with the, the added rigor of T 24, weren't necessary because of the climate.
Kol Peterson: What about drive versus wet, that change anything?
Willie Dean: I still designed it as if it was going to get rained on because it does still rain and when it happens, it's the same .
I guess one big difference is up here, we have to mitigate for storm water. And down there you don't, for the most part. If you're in a low land area where you're not going to have good drainage, then they might specifically single you out to do something about it, but we weren't putting in dry wells and every single project. It rains everywhere, but here because it rains so much, we have these onsite water mitigation systems that you don't have to do that down there.
Kol Peterson: Right. Just, as a side note, Portland's always been a little bit on the bleeding edge of stormwater management and we have a really good [00:09:00] climate for that. This really light rain that falls a lot of the year, so it can absorb storm water on site. And I've always liked that, but it can't, you can't do that there as much because of the rainfall patterns.
So costs talk about cost-wise some of the differences between the Portland market and the San Jose area.
Willie Dean: Yeah. It's a lot more expensive, it's most expensive housing market in the country and so that just makes everything more expensive.
Because the cost for the people that work down there. It's one of the reasons that I was hired. I know what I'm doing with ADUs and so the people that I was working with met me, and thought that I was a good fit, but also I didn't live there.
It was it was hard because people that are living there are already busy working in the housing market and they were having a hard time finding people because of how busy it is. And then in terms of cost for building, it's just a lot more expensive. And you know, being a designer, I wasn't bidding and building all of the projects, so I don't have the exact number of where and why, but just if a climate's more expensive than it's going to be more expensive to build [00:10:00] down there.
Kol Peterson: Just to dive into that, cause I had to figure this theory out for myself, and I'm sure other like economists have written about this, but if you were to go to a Home Depot, a stick, a lumber down, there would be roughly the same cost as a stick of lumber in Oregon as an Alaska as in Florida.
But it's that I'm guessing it's private, primarily the labor costs that escalate significantly. I would imagine a direct correlation between land values and labor costs and therefore construction costs. How does that mesh with what you had hypothesized about that?
Willie Dean: That's right. I think that it's in the building, not in the material. It's possible that there's a slight increase in material and there's a lot of people from California on the chat here, maybe somebody else that has bought material in both places regularly could answer these questions better than me because I'm primarily drawing the designs.
But I think that that idea that the labor is for sure the most expensive part, because those people need to be able [00:11:00] to afford to live at least somewhere near there. And even if you're not living in San Jose, but you're living a half hour away, it's still expensive.
I would assume that it's just a more expensive climate to operate in. Yeah.
Kol Peterson: Let's get into a more nuanced element of that question I posed. You were one part of an ADU development process, so you might not be able to speak to all of this, but can you talk about some of the cultural differences and I'll give some context for this, my experience in the Portland market, your experience in the Portland market is we've had the benefit of having this kind of tight knit community of people who kind of all know each other and to some extent, or a lot of people do.
And we've kind of been working in this small cottage industry sector. Cause it's kind of been a slow growing, well, not slow growing, but it's been a fairly modest number of ADUs being developed in a concentrated geography, but California: different situation, rapid fire, huge explosion of ADU development, so I'm just curious if you could speak to any [00:12:00] observations you have about the cultural differences of ADU development, professionally speaking in Portland versus the Bay Area.
Willie Dean: Yeah. It's just coming on very fast and very strong in California. I mean, Portland has been a sort of slow burn process where it's been growing, but not exponentially, or maybe not as exponentially and therefore a lot of us know each other, other, we visit each other's projects when there's tours, but yet it's still a pretty niche industry.
You're not producing huge numbers of projects every year. Where down there, there's the possibility of like really exponential growth as these huge swaths of land with ranch houses on 7,500 square foot lots that have flat backyards.
You'd have to do a GIS sort of query to figure it out, but it's a huge percentage of the way that the land is developed down there is, is it's all primed for it. And then when you take, that would be the most high cost housing market. Like the [00:13:00] market forces are strong. I mean, Portland's a popular place to live, but the market forces are way stronger down there.
And therefore that does change people's motivations for, for doing it. That said when I was down there, it was still a lot of people that were looking to downsize and stay in their house. The same flexible space ideas. It's the most expensive housing market and so if you want your kids to be able to stay there, you might have to build them a house because they can't rent anything, they can't buy anything. So you're going to pool your money and build an ADU, or it's so expensive for your parents to have an apartment that they're going to move into the ADU in the backyard, and you're going to keep things closer.
So a lot of the forces were very similar. I'm sure there's people building them as rentals, but we still experienced a huge amount of the people were building them for ways to be flexible and accommodate family members or friends. The other part of it is there's not huge incentives the way there have been in Portland.
So I think that who sees [00:14:00] it as an opportunity as a little bit of a different group of people, because in Portland, the way that it's been incentivized for a long time and continues to be, helps open the door to a wider range of people. It's so expensive to own a house down there and then because there aren't incentives to get you to build an ADU, you're trending to a little bit more affluent group of people that would be building them in that area versus how they can get done here.
Kol Peterson: Another difference that I've touched on last week with other guests, and I want to talk about with you for a minute here is prefab, modular aid use and also, you know, standardized designs. It's an interesting topic and I've historically been kind of skeptical of standardized designs and prefab development in general because these companies have not generally gotten a lot of market adoption here in Portland, but I think that is ephemeral in the sense that things are changing with ADUs, they're becoming much more popular now and a lot more jurisdictions. And so [00:15:00] prefab does potentially play a different role or a significant role. Standardized designs might play a different role. And I was hoping you could talk to me about your thoughts about standardized designs in the Portland market versus the California market and prefab modular to some extent.
Willie Dean: Sure. So the short answer is I think I alluded to this earlier, we're a niche market still with ADUs, in particular in Portland, I think it's going to pick up quicker. And then also Portland, especially inner Portland, the lot sizes and typography and layout is very diverse and so it makes it hard to do anything besides a very small standardized design, which most of my experience is a lot of people want to do the biggest thing they can do. And so here, if you're trying to fit the biggest thing you can do into any weird space backyard that you find yourself in, a standard solution is not going to work very well. Where if you had a 300 square foot design, you probably [00:16:00] could still get away with that, but that's not what everybody wants.
In other places my experience down in the south Bay Area, the houses just naturally bigger yards because of the way that they were laid out years ago when they did that. And there is more flat space. There's definitely Hills. When you get to the perimeters of towns, but down in the basin where San Jose is built, there's not a lot of Hills. And so I think that just from a construction standpoint, places with more homogeneous typography and site layout would lend themselves better to that. And also down there the market, especially prefab and modular, you need a big market to make factory building houses to make sense.
In that respect, you need a big market share before that can really get traction. Whereas I think standardized designs could come first because I could have four designs in my pocket that would work in most lots. It's a more affordable route for me to [00:17:00] give you an option of what we can do a custom design, but we could also do an unbuilt model home idea. It's not the most attractive thing to me as a custom home designer, but if I'm just putting on my market glasses and thinking, how could this work? I think that it'd be more affordable way to get people into the market. That said the design is usually the least expensive part of the equation, anyway. I think as the markets grow and in particular, in places like California, where they had standardized housing development when the neighborhoods were built, that it might be a little easier to implement a plan or a design that would work in 60% of the properties or something like that.
Kol Peterson: Can you give us a quick numeric cost range of what you would charge for an average client in Portland for custom detached new construction and ADU without construction administration services, just for the design through the permit?
Willie Dean: It's different every time it depends I don't have standardized designs, but if somebody comes to me and says, I saw this design that you did [00:18:00] before, and I liked it and we want to use it, then obviously that cuts a big chunk out of the schematic design phase.
If we can start with that and modify it to meet the needs. I would say it's anywhere in $8,000 to $15,000. And then if you need to do a zoning adjustment, so variance ,or there's lots of neighborhoods where a historic review or historical resource is necessary , things add cost up above and beyond.
Kol Peterson: We're going to transition into design best practices.
So I cover ADU design best practices in my book in chapter five. For those of you who want to see my take on this question, but I want to hear from Willie who actually does this day in and day out. I'm going to share a presentation and Willie's going to walk us through quickly some of the ADU designed best practices that he tries to incorporate.
Willie Dean: So these are pretty simple. Access to natural light. I just think it's hugely important, no matter what you're designing and in particular when you're designing small spaces. Opening up the building, making it so that you can walk around [00:19:00] without flipping light switches and just the access to natural light also means access to views. And connection to the outside is really important because it makes a small space feel bigger and feel, my opinion, more comfortable.
So these images you can see a little backyard cabin with eight windows and two skylights. It's got a lot of light coming into it. This is a great room in a two-story ADU that we did in Southeast Portland.
And even though it's in a heavily wooded area, the lights aren't on, and you can totally see what you're doing, you feel a connection to the outside space and it makes it feel like a really comfortable space. So access to natural light is probably number one.
The smaller the space gets the more important these ideas become. So creative storage, just storage in general with ADUs. We're up against square footage, regulations wherever we are and people frequently want to get rid of the storage.
I'm not an advocate of being super materialistic, but I will say that people have stuff and you need a place to put it For a place to be functional, you really do need storage. And [00:20:00] then in an ADU specifically, these are like some just creative ideas of where you can find extra storage.
So not only closets, but on the left, we have drawers that are built in the stair risers middle. This is a niche space above the door and that's like, so it's a vaulted area. And then outside of that is a flat ceiling, little hallway and little niches just to would have been a void just in a little attic space, but we carved it out to make it storage.
And then on the right you have the classic Harry Potter door. So those spaces are always important and fun and romantic little storage areas, especially if you have kids around. Built-in storage under a built-in desk. This is a studio ADU that we did. It's really, really tight, and so having storage pretty much everywhere we could sneak in was important in this one.
Kol Peterson: Incidentally, this is a, how big is this ADU? 200 something, 240.
Willie Dean: It's got a murphy bed, it's got built [00:21:00] in storage. It's built like a little sailboat.
So the long view is an idea that basically from opening up views through the space and out of the space so that it's allows you to see through the space. So putting openings in the space and interesting places.so that your eye can go all the way through the building and that makes the building feel bigger. And again, in a little space that just goes a long way and making it feel bigger than it really is. This, this project in particular, people never believe that it's 800 square feet.
Kol Peterson: I want to pause on this one and say, w you know, in this case we have what I'll classify as a catwalk, and maybe there's another word for it. And in Portland, the code , you only count the habitable living space. You can't include that catwalk, but you wouldn't include this vacant space right here that doesn't have a floor.
So in the Portland context, within the planning zoning code, this might even be classified as a best practice because it expands that upper level so much and gives you so much architectural interest, but that might vary depending on how [00:22:00] they classify a square footage in your jurisdiction.
Willie Dean: Correct, yeah. And this is actually a trick I learned from the ADU that's in the background of Kol right there, and then his house call has a pretty sweet catwalk and a big open vaulted space that's pretty great. So interestingly interior spaces, this is another just giving vaulted spaces and sort of dynamic staircases, skylights, dormers, just things that make the space feel unique, go a long way.
Again, you can just imagine if this space was just a regular flat ceiling rectangular room, it would not feel as big and open as it does. And another one that I added was just flipping the plan. So this project and another project, this is, this is an ADU where the bedroom is downstairs.
And then the common area is actually up on the second floor and there's reasons pro and con for this, but what it does. Where you will be hanging out with people and spending time gets tons of daylight, it feels like Treehouse. You can see much further. Most of the [00:23:00] time in backyards, if you're on stuck on the ground floor, you're looking into the setback or you're looking 15 feet over to the back of the house.
You can get up 12 feet off the ground. You can actually see out into the neighborhood in a way that's a lot more interesting.
Kol Peterson: I I'll refer to that as a reverse floor plan. I don't know if that's the right term for it. Flip flopping the floor plan. I'm going to do my next project like that. There's a lot of rational reasons to do it for the reasons you mentioned a lot more natural light, but it also feels incredibly not normal.
I'm not sure I'm gonna really like living in it, but I want to try it out. You know what I mean? It's like, you always want to walk into the great room and here, all of a sudden you're walking into the bedroom. You have to go upstairs with your groceries, It seems kind of clunky.
Willie Dean: Yeah. That's the downside is that you walk into like a front hall and then it's a front hall with stairs and you have to always go up the stairs or just walk into a bedroom,
This is one that's not done that way. I really like using stairs in a dynamic way to accentuate people moving [00:24:00] through the space. It's one of the only places in the building where you are moving in the Z axis, if you will, so calling that out and making it a fun thing.
So this project is exactly what we were just talking about, the plan is flipped. So the upper right side of the second floor is the kitchen, living, dining. So that allows us to have the common area it's up in the vault in space, which makes it feel really neat. This project is built on an alley and it looks out over like a great big intersection. So if you're in the backyard, it's really very heavily planted and wooded and fenced, but once you're up on that second floor, you can actually see out and see over to a big intersection in the city and give some like nice dynamic stuff to look at and connections to the bigger area.
Again, we've got built in storage and the bench by the window, sort of a real interesting vaulted ceiling that has a dormer in it. The long view, this one actually is built [00:25:00] on the Willamette Bl uff so this looks out over the trains switching yard and then out to the river and forest park on the other side.
So when you combine a few of those ideas into one space. It really starts to make the space punch above its weight class, I guess .
Kol Peterson: All right, so one core question I have for you is, if you're working with a homeowner, what information are you seeking from a homeowner to help inform the design for a detached ADU ?
Willie Dean: Usually I just say, what are your goals? A lot of times, people that are ready to hire a designer have a pretty solid idea of what they want and often, just asking one question is enough to get 80% of the information that you're going to need.
Is it going to be owner occupied or rented? Is a good one to start with. Although I find that even when people design them to be a rental, they usually design it around themselves mentally, just cause that first person design ideas is the way most people are going to do things. How big do they want it to be?
Do they [00:26:00] understand the zoning and sizing regulations? In Portland in particular, there's sort of two paths you can go, you can 800 square foot. There's still regulations and limits, but, do you want to do a big almost house size ADU or there's you can do these 24 by 24 single story ADUs that you're allowed to build in the setbacks How important is privacy? Because that sort of gets to some of those ideas with the flipping the plan.
In general, these are often really, really close to the existing house and the neighbors. How you orient windows, where the views, even though the views and the daylighting is super important, you do need to be sensitive about where windows are looking. Are you looking straight into your next door neighbors bathroom? Things like that. So both how you feel about privacy and then how does the privacy impact the place that you're putting the building? Do you need extra storage? Getting rid of a shed or garage and replacing it with an ADU, so do you need to accommodate that storage? Do you need a garage? You need just some external storage or even be okay [00:27:00] without it? That's sort of a topic, I've had people that have a full garage and they hadn't thought about that.
Do you have a particular style in mind?
Cause I can do lots of different styles , I'm pretty flexible. Also the code, it limits you into a certain level of traditional design, but there's a lot of wiggle room within that now. Again, speaking about Portland in particular.
Do you want it to look just like your house? Do you want it to look like the craftsman across the street, or do you want it to look kind of modern? What are your interests?
Then budget conversation.
Kol Peterson: Thanks Willie. I have a couple more questions, but I'm going to hold them because I want to see what audience questions there are.
Kelcy King: That wraps up the interview portion of this episode of the ADU hour. As a reminder, these episodes are the edited audio version of interviews that we conducted via a webinar series. Good news. You can access the full video series via Kol's website, BuildinganADU.com. Now for the second half of the show I curate [00:28:00] questions from the audience that gives our guests the opportunity to dive deeper into a topic or address new ideas and questions.
We've had some good ones . First, municipalities are hoping to address ADA and the accessibility of ADUs.
I'm wondering if you can address the costs and how those change when you are trying to accommodate the ADA requirements.
Willie Dean: It's not hugely more expensive to build that way. It's just, it takes more space in general is my experience, and so I guess in so far as space costs money it can be more expensive, but in an ADU, the idea of the cost per square foot metrics don't really work anyways.
I like the idea of giving some sort of square footage premium if you're going to build an accessible unit or maybe allowing a little bit bigger footprint, because so in Portland you're allowed to do an 800 square foot ADU, but most lots can only accommodate a 650 square foot footprint.
[00:29:00] So it means to do a full 800 square foot ADU, you have to do a two story building. And obviously that means you can't have an 800 square foot ADA unit on most normal lots. So, doing something to accommodate for the extra space on a single floor and maybe even allowing a little bit of extra square footage beyond the 800. I would think that those things are more important.
It's a little bit more expensive to build a curbless shower because it's custom, you can't just buy a fiberglass insert and it's a little bit more expensive to build the cabinetry and the storage and the kitchen in a way that allows for, accessible. So you can't have really high stuff above the counters. Some of the storage, you can't put stuff as high.
And so therefore you need more space down low. I think allowing for more space would be a good solution. Then you got to have good access. In a lot of ADUS, you're in a backyard and you have to go upstairs. So, there are hurdles, I guess, almost literal hurdles to [00:30:00] getting into certain places that can make it more expensive.
If you have to build an ADA ramp from the street all the way to the backyard, that could add some fee to the project.
Building costs are really high right now. So do you need design tips that can lower the prices and to kind of address that cost?
One story versus two story is a big one because building the second floor and all of the structure that it takes, That's a big, additional cost.
I would say a big one is trusses. If you can come up with a design that you can do with trusses and you can still do vaulted ceilings with trusses. That's a little bit of a pretty fab solution it's just a prefab roof. In a custom build that can save a lot of money both from the material standpoint and from the labor to put it together.
You know, I like sort of wacky structural tricks where stuff is hanging off in a certain direction, but keeping the loads all coming through the walls. A nice, neat rectangle with a triangle on top, [00:31:00] that's gonna be less expensive and easier to build and less big engineered pieces to go into it. Not putting windows right in the corners. Simplifying the structural design. And then window and door packages are usually pretty expensive. And so using affordable windows and doors is a big one. Siding can be expensive.
If you have to run a big trench because you're putting the unit really far away from the existing house or the existing sewer lines. So some of that infrastructural stuff that needs to be considered early so that you don't end up having to do weird plumbing gymnastics, or building a sewage ejector pump room . So making sure that you have that worked out at the beginning, is important. And then simple finishes and you can do simple finishes and still have really beautiful product.
Keeping affordable materials solutions on the table and not creating design that's predicated on material. So I try to design so whatever material. As often, the stuff changes when the clients and contractors get involved and I don't really have a way [00:32:00] to hold their feet to the fire about the material solutions.
The affordable thing gets picked very often. And so trying to make designs that look good, no matter kind of what the material you pick is a important thing. Yeah.
Kelcy King: Thank you. Can you give us an idea of design costs per Oregon and your California experience for 650 square foot.
Willie Dean: Yeah, it's, it's every project's different, so just painting design costs is always tricky. So design costs, it's going to vary, like, I mean, I'm sure any designers watching this right now are going to say, like, don't say.
I don't say it. I won't say any specific numbers, but it's like you know, I'm, I'm a one man shop. My overhead's low, I'm able to keep things affordable for certain reasons. There's other company and it's, that's not to say that you should use a one man shop versus design firm, design firms [00:33:00] have a lot more resources that they can pull from than I do and maybe they can get things done faster or meet higher quality control.
Kol Peterson: Yeah. I've seen ranges the in the Portland market from like for detached new construction $1,250 to like $20,000. And I'd say the average that I see out there is $8000 to $12,000 for a detached new construction.
But you know, I would imagine it's a little bit more expensive in California maybe, but we'll see.
Willie Dean: My experience in California was a little bit different because most of the work that I did was through a single design build company, so that was all for the whole project. So we didn't break out what the design fees were. I think Kol's range is pretty accurate.
That low range is definitely if your little brother's doing the design for you and that higher range, I mean, that could be totally normal. It just depends on how many bells and whistles you're looking for in your project.
Kelcy King: I have one more. What municipal regulations do you find to be the most prohibitive?
Willie Dean: Parking's pretty rough. Adding another car plus a [00:34:00] house is really hard to any single family lot.
Owner occupancy. It's just gonna limit the amount of people that can do it. Obviously landlords are gonna want to build rental units and I don't think there's anything wrong with that. Those are two big ones.
Kelcy King: Do you, do you run into any like exterior feature design regulations that you find prohibitive?
Willie Dean: Yeah. I mean, I think they're all prohibitive. I'd way rather not have my hands tied, but they're not prohibitive in the respect , it doesn't stop you from getting projects done. So we're able to do really awesome, beautiful work, even within the constraints of the subjective ADU design code that exists.
Those constraints aren't as bad as like the real poison pill ones.
Kol Peterson: I've got a couple. Willy, I guess I was curious, I, you have done projects other than just detached you construction ,correct?.
You've done garage conversions and you've done basement conversions.
Willie Dean: Yup.
Kol Peterson: Okay. From purely from a design perspective and I want a subjective answer. Are you just as happy doing a garage or basement conversion or do you [00:35:00] prefer detached new construction ?
Willie Dean: I prefer detached new construction because I like designing buildings. You know, a single building from the ground up. But I'm very happy to work on garages and basements and additions and anything else. I guess it's sort of egocentric, but I think a lot of architects would feel that way, that it's more fun to design a whole building.
Kol Peterson: As a policy matter, I think you're right. I think architects probably prefer it and I think builders probably prefer it. And that's why I encourage professionals to focus on the conversions because I think there's so much good work that can be done from a housing perspective.
That's where we can bring costs down, at least in the Portland market, you know, LA there's a lot of garage conversion specialists, but in the Portland market, there is not. And and I think that's a great niche for more people to consider because a lot of builders don't want to work on conversions and designers don't want to work on conversions either.
So, but thanks, thanks for your answer.
Willie Dean: I would say that I'm very focused on conversion projects. I know a lot about how to do them. I've [00:36:00] done a bunch of them. It's just there's a lot more technical weeds that you get into with them. So it's more complicated and sometimes you don't get to stretch your design chops as much, but I totally agree that that from a housing stock perspective, we really need to be doing.
So if that gives you a sense of kind of where we sit as a city and where our city councilors are at that's that's Edmonton.
Kol Peterson: Yeah. Cool. So how did you get involved in doing ADU research and work?
Ashley Salvador: Yeah. So it actually started in my undergrad. I have a degree in sustainability and sociology from Dalhousie University.
And I started to get really interested in basically cities as human habitats and the ways that our cities are helping us thrive, but also the ways that they're kind of detrimental to So from a sustainability lens, I was always interested in the ways that we can help our cities grow, grow inward as opposed to outwards forever endlessly.
And at some point along the way, I came across ADUs as a way for everyday homeowners to participate [00:02:00] in kind of the remaking and rebuilding of their cities. So that's, that's where it started.
Kol Peterson: And can you tell us about some of the key findings of your undergrad and master's degree research in of garden suites and secondary suites, and actually, maybe take a second to define garden suites for people since that's a different term.
Ashley Salvador: Absolutely. So garden suites would be a detached accessory dwelling unit. Most folks will know them as that. Also known as laneway homes, granny flats. The list goes on in Edmonton attached, ADUs. So ones that are typically located in a basement, those are considered secondary suites.
So most of my research focuses on detached accessory dwelling units, so independent from the main house. And I've done two studies at this point. One was in 2016 to 2017 and one I'm currently doing right now. So I, in terms of key findings just reflecting back on the study done in 2016, one of the big findings coming out of [00:03:00] that and Kol, you know all about this is voluntary, affordable.
There was a really good study actually out in Portland that did a full sample or a full survey of owners at that time. And similar findings were, were discovered there around the affordability benefits.
Kol Peterson: Let's just dive into voluntary affordability and then we'll go back to other findings.
Ashley Salvador: Yeah. So basically what I wanted to look at from my research was whether or not it user functioning as a form of affordable housing and what the relationship between the owner and attending.
Has to do with that affordability conversation. So in Edmonton, it was found that close to half of the people who are building these gardens suites are doing so for family or friends to live in. The other half are doing it for a traditional rental income. And when you bring affordability into that conversation it was found that the folks who are renting to family and friends are charging ultra low, sometimes zero rent. [00:04:00] And I mean, it, it seems pretty intuitive. You're not going to charge grandma a bunch of money, the same way you would just a, an unknown tenant. But being able to put that, that finding on paper and actually have similar findings popping up in other cities like Portland, it shows that there is a trend and it shows that ADUs in some capacity are functioning differently in a traditional rental property.
And part of that has to do with the fact that these are homeowner developers, right? They're not, these big wig professional developers who are just trying to do it for a money-making opportunity. There's social reasons in there as well.
Kol Peterson: Let's go back to the original research. Aside from the, just generally speaking that voluntary affordability is one of the things that happens with ADUs, what are some other key findings from your original research?
Ashley Salvador: Yeah. So from the original study I also looked at barriers to development. And one of the biggest [00:05:00] barriers at that time was cost and financing. So it turns out that around 70% of the folks who were building ADUs had a household income of over a hundred thousand dollars annually. So that also brings into question who is able to even benefit from ADUs.. And it was looking like at that time it was really reserved for folks who are in that higher income bracket..
So that was, that was a big finding. One that I like is folks who are building and living in ADUs don't own as many cars. So it is just that they are trying to. Either by choice or just by the location they live in, in the city live a more sustainable, less auto dependence lifestyle.
Kol Peterson: So regarding voluntary affordability, I think you've found some interesting things. Can you go into a little bit more depth about some of the data that you were able to derive from your research?
Ashley Salvador: Yeah, absolutely. And I'll, I'll bring in the current research as well. Cause there was also some findings around [00:06:00] voluntary affordability there. And so if we break down the numbers if you're looking at kind of a typical rent or comparable unit in Edmonton, you'd be looking at around, $1,100, maybe $1,200.
Whereas an ADU who is rented to not a family member---the owner does not know the tenants. It would be comparable, sometimes slightly higher. Whereas if you renting to a family member you're looking between that $500, maybe $700 range. So there's a pretty significant gap between those two and that's not accounting for the people who are discharging zero rent at all.
And I think one of the interesting things is on top of that affordability benefit, there's also some, some sharing of services. So in exchange for, living rent-free in an ADU, maybe your friends or your grandma is helping with childcare, maybe really helping with yard maintenance, things like that.
So there's some kind of informal economies [00:07:00] that are happening around ADUs as well.
Kol Peterson: Can you tell us briefly about the objectives and the model of the Cornerstone Grant Program and what your findings were about that incentive program to induce more deliberately affordable ADUs?
Ashley Salvador: Sure. So. First of all the two, the two main objectives of the study were to look at affordability from both the renter's perspective and the owners and the city of Edmonton has a program that is meant to incentivize the development of ADUs. It's called Cornerstones and the Cornerstones Grant basically we'll give up to $20,000 towards the development of an ADU in exchange for renting that ADU for five years, to someone who is within a defined lower income bracket and the city sets that. When Cornerstones first came out, everyone was really excited because they're like, oh my gosh, $20,000. That's awesome. Like, that's a big chunk of change towards a project.
And throughout my study, I actually found [00:08:00] that not a lot of people are using Cornerstones. They had the opportunity to apply and 75% of people chose not to. And, reflecting on that. And crunching the numbers, I think is what makes it seem like a pretty logical choice to step away from Cornerstones.
So ADUs in Edmonton due to function as a bit of a luxury rental, so you can pull in a pretty penny on a monthly basis. So if you are locked into a Cornerstones Program for five years, where you are forced to rent for a lower rate, It doesn't actually equal out. So you're actually, you could potentially be losing money in exchange for that about opportunity costs to not rent at typical rates for the five-year period.
So we were seeing the cost benefit analysis that people were doing in their heads play out in that research. So Cornerstones isn't that attractive for detached accessory dwelling units. For secondary [00:09:00] suites however, it does make a lot of sense so that it also comes into play the cost of being at your building.
So in Edmonton, a detached accessory dwelling unit averages around $180,000 to $200,000. Whereas the secondary suite, typically $60,000 to $80,000 to have a functional secondary suite. So as you can see, even from the sheer cost perspective, $20,000 towards a secondary suite can make a lot of sense. And they don't function as that luxury rent as well.
Kol Peterson: Another fascinating tidbit that you uncovered are that costs and financing are a perceived barrier, but not, maybe not an actual barrier. So what led you to that conclusion? Tell us some, some of the data behind that.
Ashley Salvador: Sure. So one of the big questions I wanted to go into my current research with was really attacking the question around, for homeowners is, is cost and financing a barrier.
And one of the things coming out of this was, it might just be a perceived [00:10:00] barrier. The people who are reporting the cost and financing is a barrier, have, the same household incomes sometimes higher assessed property values than people who have already built. So that was a little confounding.
Digging a little bit deeper into that, the lack of mADUre financing product from banks seems to be a barrier. So people are kind of getting sticker shock. They hear the price of a typical detached ADU. And they're just like, "Okay, that's clear. I clearly can't afford that." They just assume that they can't afford it. And the people who are saying that ADUs are too expensive, I can't afford it.
Only 10% of them actually spoke with a financial institution. So getting people in the door of a financial institution. That's a bit of a gap right now because people are getting scared upfront and not actually making it in the door. And once, once you get in the door, there are a number of options.
I mean, in [00:11:00] Canada, in Alberta, in particular, the most common way of financing an ADU is you can get up to 80% of the equity of your home. And then up to 80% of the pre appraised value of your ADU. And in most cases, you can piece together a project using that mechanism. But again, when people don't have a financial product that they see as built for ADUs it scares them.
And there's really only one financial institution in Canada and that's Van City that offers that type of product.
Kol Peterson: Let's dive right into that set of questions right now. Cause I think that's worth investigating more. So I've seen that. So the CMHC, which stands for--- Ashley help me out. .
Ashley Salvador: Canadian Mortgage and Housing Association
Kol Peterson: Corporation, maybe?
Ashley Salvador: Corporation yeah.
Kol Peterson: It seems on paper that the CMHC so this is the equivalent to the [00:12:00] GSEs, which are Fannie Mae and Freddie Mac and FHA in the U S so it seems as though the underwriting standards for CMHC for ADU construction loan financing are very good.
For example, at least. On the document that I've seen, they allow for up to a hundred percent of rental earnings to be added to income, and they explicitly endorse secondary suites. And they, so they allow for, if I understand correctly, future rental income to be class, not for detached ADUs. For internal ADUs, you can classify a future rental income potential towards your debt to income?
So secondary suites have been around for a lot longer than detached ADUs. So the regulations are a lot more mature. There's still a ton of confusion around how to handle detached ADUs. And I mean, even, even things in our tax code, like there's still uncertainty around how to deal with them.
Ashley Salvador: So at this point All the [00:13:00] suites that we've seen built, there is no consideration of the future rental potential of that detached unit
Kol Peterson: For secondary suites also?
Ashley Salvador: For secondary suites, I believe. So we've seen up to 50% of the rental income counted towards it, but not, I, I haven't yet to see a hundred percent.
Kol Peterson: So if these underwriting standards are fairly good why is it that there's only one bank, Van City Credit Union, that's doing this type of loan product?
Ashley Salvador: Yeah. So I'm sure as everyone knows, Vancouver is a leader in the ADU space. And I think, honestly, it's just a matter of recognizing that there's a market there.
Obviously it's happened in Vancouver. Van City was pretty quick to jump on it. I mean, we're trying to push institutions here. Local credit unions, ATB is a big one that we're trying to work with to, to get a product together that is specifically for ADUs. And even if it's a branding exercise that would go [00:14:00] a long ways in helping people see that there, there is a specific product, there's a niche for them and this bank can help fill that..
Kol Peterson: Okay. So shifting back to your organization helped me pronounce it, but Y E Garden Suites, is that correct?
Ashley Salvador: Yeah. So YEG is the flight code for Edmonton. So it's YEG gardens suites, or YEGgarden suites, whatever you like.
Kol Peterson: Okay. So tell us about YEG garden suites mission and work?
Sure. So, YEG Gardens Suites was founded about three and a half years ago now. Actually just at the tail end of my first study. So it was funny. I did that study and I spoke with around 150 suite owners at that time. And then, AccessoryDwellings.org published a little article with the media, picked up on my, my research and then people started coming to us. Because building an ADU is confusing and they're, they're looking for anyone who can help them through that process. And they're like, you [00:15:00] seem to know, can you help us? And at that time we're like, okay, we'll hold a little workshop or something. Didn't think that it would go really anywhere beyond that.
So yeah, we, we founded this little organization started pulling small workshops. I started collaborating with the City of Edmonton, local builders, designers, financial institutions, other industry members, and started holding tours and things just kind of grew from there. We, we now regularly have usually around 200 people out to our workshops.
Ashley Salvador: They're day long sessions. We do a lot of advocacy as well. So on the policy side of things, working closely with city planners, to both identify barriers, but also opportunities to improve the regulatory landscape so that more people can build ADUs. But we're also involved in just the infill space in general and are big proponents of courtyard housing. Any form of densification that's gonna help build better neighborhoods.
Kol Peterson: Specifically in Edmonton or throughout [00:16:00] the whole province. So we started out in Edmonton. We actually recently expanded to Calgary as well about a year ago. It's interesting to see the contrast between the two cities as well. And we do have intentions of spreading for now across Western Canada, yeah and we're in conversations with a couple of cities right now about that.
Great. So like, give us an example of the type of regulatory changes that you organizationally are advocating for in other jurisdictions, like Calgary or elsewhere.
Ashley Salvador: Sure. So the biggest one is moving ADUs from a discretionary to a permitted use. So that has been a game changer in Edmonton. And we want to see that in Calgary.
We want to see that in a bunch of municipalities, so that move essentially gives more power and control to homeowners who want to build ADUs. So right now in Calgary, for example, where ADUs are a discretionary use, you can put out a couple thousand [00:17:00] dollars to get your drawings done. Submit your permit.
And then everything gets circulated to your neighbors and to your community. And they have a chance to appeal and say, "Hey, I don't want this put up next to me, or you're going to invade my privacy, or there's gonna be parking issues or X, Y, Z." And what that does. It creates a lot of uncertainty and adds an additional layer of risk for people who want to build ADUs, because they don't know if neighbor two doors down is going to shut down their project.
So being able to remove that risk factor and just make ADUs straight up a permitted use that's where we need to get to in cities like Calgary. And that's, that's where we've gotten to an Edmonton as of a year and a half ago. So we've seen a quite large uptick since then. I actually made a list of some of the regulations that we've had a hand in changing because I forget them all. But yeah, beyond the move from discretionary to permitted, one of the big ones here was size increases.
[00:18:00] So at this point, detached ADUs can be up to 1400 square feet. And you can have a full basement. So it's, it's really a house. Some sort of small little cute unit in the back, it can be, you can actually have a tiny home in Edmonton as long as it's on a permanent foundation. But there's a really broad spectrum of sizes to meet different people's needs.
So that was a really good change as well. And one of the most exciting ones that happened about six months ago, you're now allowed to have both a secondary suite and a detached ADU on the same lot. And that's, I believe Vancouver is the only other municipality in Canada that's allowing that at this point, but that just opens up a lot of doors for people who maybe they couldn't afford to build their detached ADU. But now that they have that additional passive income from that secondary suite, it's possible.
Kol Peterson: I want to talk about the tactics that you use to get that code changed. And then I also want [00:19:00] to go back to that thing that you mentioned briefly. So first of all, it's going to the advocacy approaches that you guys used specifically for allowing for that second unit on a single family lot. How did that go about that? What tactics did you use? Was it successful? In general, what approaches are you guys finding to be successful in terms of making changes to the code?
Ashley Salvador: We take a very, I would say very positive and collaborative approach to our advocacy. If anyone's ever, shown up to city hall or a public hearing and spoken, oftentimes it's a lot of people who are just yelling at counselors and they don't want change to happen and it's very kind of antagonistic.
So we have tried really hard over the last three years to to show up as a, as a partner to the city. As an organization that can tap into community members, tap into industry and operate in that space between city, community, and industry kind of bringing all of those different groups together and finding alignment and shared visions.
We've had a lot of [00:20:00] success with that. So for the basement suites and garden suite, change, it was funny. The city actually already allowed people to have a secondary suites in a duplex or semi detached house. Okay. So if you count that, you'd have the duplex and then so that's two units and then you have two units in the basement.
That's four units, right? So we came in saying, we're just asking for three, we just want a single family home, a secondary suite, and then a detach one in the back. You already allow four, like, this is just three. So being able to help them see the sense in some of these changes. That's that's what we like to do. We like to make it very, very plain and simple.
We're not asking for a lot and then having people show up. They get tired of hearing us speak. So we have a really big Rolodex of homeowners -- they don't show up at city hall typically. They just want to be able to build a house for the grandma in the back and having them share their direct [00:21:00] stories, it can be really, really powerful when you're up in front of legislators.
Kol Peterson: Awesome. We've had similar approaches and similar successes using that same approach. So that's great. So going, going back to the point you made about this provision that allows for detached ADUs to be up to 1400 square feet.
This is this is a novel thing. Usually ADUs are limited to less than that, even in California where it's very aggressive with this, they allow you to use to be up to 1200 square feet. And that is shocking for those of us who are limited to 800 square feet. And I guess this is more of a observational point than anything. But as we start to see regulations that allow for units that are bigger than the primary house as a secondary, or is it accessory dwelling unit. It really, it starts to open up our conception of [00:22:00] the fundamental goals here are. And in some ways I think you and I are in alignment on this, that ADUs are kind of just a way to bust open the door for allowing for creative infill housing typologies, ADUs is one way to do it. And then ultimately we're talking about middle housing in general and different allowances on those properties. Do you have any thoughts about that?
Ashley Salvador: Absolutely. We like to joke that ADUs are like the gateway drug for sort of the medium density, medium scale type developments that we ultimately need to see in a lot of these neighborhoods.
ADUs are very palatable. I don't know if you have a narrow lot homes down in Portland, but in Edmonton, most of our lots around 50 feet wide. And. Probably about 10 years ago at this point, the city allowed subdivision down the middle and everyone was just up in arms about these narrow lot skinny lot homes.
And there was a big rally against them. So when, when garden suites, and ADUs started to come on the scene and become a [00:23:00] bit more popular, they were seen as like this awesome alternative and, "oh, I'd much rather have that next to me". We've worked really hard to humanize ADUs as well. And make it not just about a building, but it's about the story behind it.
It's, it's about grandma. It's about allowing your university age children to, to age next to you, whatever. Right. And once people are okay with that, you can start to broach the conversation of, okay, well, what if that 1400 square foot, ADUs. What if it was a duplex? What if there was like a duplex in your backyard instead of one unit? Maybe there's two, maybe cause a basement suite in it ? Does it really matter?
And Edmonton's getting there actually. So we, we have a new use class that's just classified as multiunit housing and it allows for any configuration you like of units on a lot, as long as you're within the unit count. So you could have a duplex in the back, a duplex in the front you could have courtyard housing, so it's, it's getting really [00:24:00] creative here and that's ultimately what we love to see..
Kol Peterson: Yeah. Awesome. So secondary suites, for whatever reason, I've had more broad adoption in some, at least a handful of Canadian cities then internal ADUs have in the US. Can you give a understanding of why that has been the case in Canada?
Ashley Salvador: Yeah. I was, I was thinking about this one. I don't have a great answer other than we have allowed secondary suites since 2001 here.
So it's been almost 20 years. And right now in Edmonton, we have around the last time. I think around 5,500 internal ADUs. So it could just be a function of we've allowed them for a longer period of time. And I know like all homes here have basements. It's very unusual to see a house that's just built kind of on slab.
So that could be another factor people just trying to make use of that additional space. Yeah. What are your thoughts on that? Do you [00:25:00] have any ideas?
Kol Peterson: Yeah, I think, I think there your last point, there is probably the most relevant point, which has all the homes there have basements. And I think, like in DC, for example, All the row housing there has basements too. So while their ADU codes aren't necessarily very permissive, there's a lot of informal ADUs in, in basements. And so I think that, and I think it has to, it's a combination of the economy or the, the market demand for housing and the structural forms that are there. And then if the regulations allow for it, then yes, there'll be more legal permitted units.
So that's one theory. Okay. So in Canada, outside of your province in general what are some other like of the most common, and significant regulatory barriers that you're seeing that still needs to be addressed in, in Canadian cities for ADUs?
Ashley Salvador: Yeah. So beyond again, beyond the [00:26:00] discretion of your two permitted. I think any, any regulation that ties the built form of the ADU to the primary house, that has to go. So we used to have regulations that ties the height of the ADU to the main house. So you're ADU couldn't be higher than your principal dwelling. And there's a lot of bungalows here, so that would limit all the ADUs to bungalows and I mean, it, it kind of, it overlooks the fact that our cities are constantly evolving and being remade. So if you have like, like a 1950s bungalow on the front, that's half falling down and you're going to redevelop it in five years, then why should this new development be tied to the 1950s, right? So that that's problematic in a lot of jurisdictions.
Same thing goes for size. I don't think it's necessary to say that you're you're ADU needs to be smaller than your principal dwelling. Again, just ties things to the past. Parking [00:27:00] regulations are a big one. So in, in Calgary right now, you have to have two parking stalls for the main house. If you build an ADU, you need another, so that's three stalls on a lot, and that really limits what you're able to build.
So a lot of the ADUs that we see here in Alberta and in Canada, really, other than Vancouver are above a garage. So it's a box on box style, two car garage, and then your ADU or your living spaces above. So if we were to eliminate parking requirements or even reduce them and we're starting to see that like a number of municipalities will have TOD, transit oriented development zones, where if you're next to an LRT or high-frequency bus line, you don't have as as high parking requirements.
So you can actually get more livable space into these homes. It starts to make more financial sense because you're renting a two bedroom versus a studio. And it just feels more functional. One, [00:28:00] one of the findings I forgot to mention from my first study was that there were zero children living in ADUs.
Like it was, it was all single individuals or couples without kids. And if we're looking to integrate more family-friendly units into these neighborhoods, They can't be so small and they can't be kind of subsidiary to parking space. So that's, that's a big one. And I'm super excited that Edmonton next month is very, very likely going to be just a wiping all parking requirements.
Kol Peterson: Yeah. Yeah. Portland is doing that same thing too. I don't know how many other cities are doing that in either Canada or the US, but I'm pretty excited.
Ashley Salvador: There's only like eight or nine that have completely done it. Yeah.
Kol Peterson: So given your research on this topic, do you have any insights to share about who will actually build two ADUs views on their property?
Ashley Salvador: Yeah. So one group that we see as kind of the. I guess the front runners in wanting to do those two [00:29:00] units would be the investor types. So a lot of people who were, savvy real estate folks when secondary suites came out, they jumped on it. They're like absolutely passive rental income in my basement.
Let's go. And for the longest time they've been locked out of having the, the detached ADU as well. So there's like when this regulation came, came up, there was a long lineup of people just like waiting to build that. So they were definitely the early adopters. I mean, it could, it could also make sense for for young families who are looking to buy into a neighborhood that, maybe they can't can't afford it without those additional passive incomes.
So it, it helps people build or move into neighborhoods that, are pretty nice, pretty central, lots of amenities and desirable.
Kol Peterson: Lastly, I think people are going to be curious about your research. Can you tell people how they can go about finding it when it's going to be available?
Ashley Salvador: Yeah. So this is like the worst question to [00:30:00] ask a student, a master's student. When is it going to be done? It should be done August, September is what we're aiming for. It'll it'll be published on my university's website, but I'll be sharing it all over social media, I'm sure. And yeah, if, if we can do another AccessoryDwellings.org article, that would be great.
Kol Peterson: Yeah, so, so AccessoryDwellings.org, for those who want to see this research, and I think it'll be great. And you can find Ashley's previous research on AccessoryDwellings.org too, which I would encourage people to read through. It's really, insightful and a lot of good numbers and data, even though it's a small sample set. So that's what we have to work with. There's only been a few studies anywhere in the world of permitted ADUs. And so this is one of them.
Kelcy King: That wraps up the interview portion of this episode of the ADU hour. As a reminder, these episodes are the edited audio version of interviews that we conducted via a webinar series. Good news. You can access the full [00:31:00] video series via Kol's website, BuildinganADU.com. Now for the second half of the show I curate questions from the audience that gives our guests the opportunity to dive deeper into a topic or address new ideas and questions.
So we're gonna start with David Wade. David mentioned that the prices that you mentioned for building an ADU in Canada is quite a bit less than what we're working with here in the USand Portland and Bellingham and in California.
So he's wondering What evidence have you seen the construction costs less in Canada than US? What kind of cost figures can you give to compare those? Why Canada might be less cost less than the US?
Ashley Salvador: Yeah, that's a good question. So it's interesting. Cause we, we talk with folks in Vancouver quite a bit.
And if you're looking to build an ADU in Vancouver, It's like $300,000 which is almost double what the starting cost of an ADU here in Edmonton is for kind of a similar sized unit. So [00:32:00] I don't necessarily think it's Canada on the whole, that is just, more affordable. I think it really depends on what market you're in.
So Vancouver is obviously a very hot market. Edmonton, not so much so that that definitely could play into it. And I'm sure that things vary city by city in the U S as well.
Kol Peterson: Yeah. And the numbers aren't, I would say not are not dramatically less. Right. So the average, can you give some of those average figures again for the all-in cost for like an 800 square foot ADU?
Ashley Salvador: Yeah. For, for like a, 800 square foot detach ADU in Edmonton between like $190,000 and $200,000 is pretty typical. And that's, basic finishing nothing crazy.
Kol Peterson: Yeah. And that that's actually, it's a pretty comparable, Portland's like to $210,000 for 800 square foot ADU, according to my last year's data. So not that far off. Yeah.
Kelcy King: Moving on to another one to [00:33:00] David's question. So a few developer and families have successfully used the condominium ownership model in the U S to finance and build ADUs. Have you heard of anything similar occurring in Canada?
Ashley Salvador: Yeah. That's a great question. So we're actually looking at doing something like that here in Edmonton. There was a pilot project a couple of years ago that looked at actually subdividing the detached ADU from the main house.
It actually came out of an infill design competition. Someone suggested, Hey, there's a lot of seniors who would like to build an ADU, but they don't necessarily have the financial backing to do so without being able to sell part of their lot.. So that's where the idea came from. The pilot went through a couple of properties participated in that pilot.
And we're just in the phase now where we're kind of figuring out whether or not they're going to apply at citywide. Now that's one option. The other option is the condo or strata title route. And we think that the condo route is [00:34:00] probably the best option it has yet to be done in any cities in Canada that I know of.
But I think that there's just a ton of interest there. Like we meet, we do individual consultations as well, and we meet good people on a weekly basis who are like, I really, really, really want to do it, but it only makes sense if I can either separate via condo subdivision, strata, and that's kind of a deal breaker for a lot of folks. So I think that's the next step for, for a lot of cities and ADUs.
Kelcy King: Great. Thanks. Mary would like to know, does the city of Edmonton charge impact fees for ADUs and if so, what are the costs of those?
Ashley Salvador: Yeah. So, I mean, it really varies for the utility side of things on the development and building permit side around, $2,500 is pretty typical for utility connections. So we have a lot of lanes here. I'm not sure what the built form is like in everyone's city, but we have kind of a secondary street running behind everyone's house.
And that's where our [00:35:00] utilities are in most cases. So it's really easy. It's a short distance to connect utilities to a detached ADU. In those cases, it's $6,000 maybe $7,000 to, to get you hooked up to servicing. Sometimes utilities are in the front though. And in those cases, you either have to have our very, very long trench going all the way to the back.
Sometimes you can connect into the main house and then come up. If that's not an option, you have to directionally drill under and then push the utility lines up. And that can be, anywhere from $10,000 to $20,000.
Kelcy King: The only other one I had, and I'm not sure if you necessarily know. The, the difference between the rental rates of a detached and a secondary suite.
Yep. So detached units typically will run between, I mean, it really depends on your neighborhood and your location and this quality of the suite, but 30 to 50% higher for a detached unit.
You're not sharing a wall. It's basically a detached house, right? [00:36:00] Like it's, it's its own unit. It's the second best thing to owning in a neighborhood. Some people even prefer renting. So you get all the, all the same amenities, all the same benefits of living in the neighborhood. Just a, a rental option versus ownership.
Kol Peterson: And as you just for clarification since, since the Canadian dollar is. Different than what, it's a different amount than the U S are we talking to U S dollars or Canadian dollars when you've all been Canadian dollars? Okay. So $2,500 Canadian dollars is how much US, like $2,000 US or something?
Ashley Salvador: I believe so. I'd have to check- I should've said that off the bat -- yeah, all Canadian dollars.
Kol Peterson: Of course. Why wouldn't you be thinking that way? So that does mean that it is, less expensive there than here for building an ADU and for permitting any ADU.
But I think, I think it kind of more or less going to correlate with the cost of land there. I mean, that's more or less in the US too. Yeah?
[00:37:00] Ashley Salvador: Absolutely.
[00:04:35] Okay. So Susan, let's start by talking about the common ways that ADUs are financed to get that topic out of the way, because that's not the focus of today's conversation. So can you tell us a little bit about that ?
[00:04:46]Susan Brown: [00:04:46] Sure. I think it kind of starts with cash. A lot of people just dip into their own bank account and pay for the project as they go. Absent them, having [00:05:00] cash, a lot of people dip into the bank of mom and dad or other relatives who may be able to pitch into the project. Parent is going to be living in the ADU or another part of the house. It's not uncommon for that parent to contribute to the project as well. Some customers use a home equity line of credit where they can tap into the existing equity in their home and hopefully that provides enough cash to get to the finish line on building the new addition to their property. Moving into a brand new loan if it's a purchase transaction or a refinance loan, if they're trying to re-engineer their financing to use that project for financing.
[00:05:45]And we'll talk a little bit more about that in the construction space and how that all works, but there's a broad range of options available depending on the customer circumstances.
[00:05:56] Kol Peterson: [00:05:56] So let's talk in broad strokes about construction and [00:06:00] renovation loans. Most homeowners haven't used them before, so what are they and how do they work?
[00:06:07]Susan Brown: [00:06:07] A construction loan is a very different kind of an animal and what a lot of people don't recognize. It's a, there are specialty products available for doing renovations in particular, those renovations potentially including adding an ADU to the property.
[00:06:25] So the loan part of it, a lot of people are already really familiar with. You apply for a loan, the lender looks at your credit, your income, the collateral that you're offering for the project, and they get approved and get their loan. What's added in a construction element is that we also look at the project and the builder to make sure a couple of things are happening. We want to make sure we've got a builder who is familiar with and has great experience doing the [00:07:00] kind of project where we're being asked to finance. And we also want to make sure that there's somebody who has managed their credit responsibly, paid their trades, their suppliers so that there doesn't end up being any liens against that property.
[00:07:16] And then we also take a look at the full project and I'll add this is where there's the impression that it's difficult to work with a bank because we do look at a lot of those details up front and get the project very solidified before we ever start. And, and so that can be a little bit of a frustration where we're collecting plans and specifications and description of materials.
[00:07:41] But all of that documentation is used for a couple of reasons. One, we want to make sure that we have a fully funded project when we get the loan in place. Is there enough money to build what you're trying to build? We also want to make sure that we have all of the materials accounted for. If you leave off [00:08:00] the cost of a foundation that can leave you a little frustrated without enough money.
[00:08:04]And then we use those documents when we order the appraisal, because that appraisal is going to be based on an as complete value of the project. That's where, if there's not quite enough equity before the project, we're going to take into account the value that's added. And Abdur talked about some of those issues a couple of days ago.
[00:08:26]But we do get to add whatever value that ADU brings, which allows us in some cases, to loan more money to get the project done. So all of those things we assume are going to be in place. Who've got credit, we've got a project, we've got a builder, an appraisal that comes in, we fund the loan and then the construction begins.
[00:08:46] Over time we're going to do inspections and draws to pay the builder and trades for the work that they've done. That'll go through until the project is complete. And for our particular products that loan rolls [00:09:00] over to permanent financing without a new loan and the customer enjoys their home and lives happily ever after.
[00:09:07]Kol Peterson: [00:09:07] The thing that I want to focus on today are the as completed value types of construction loans, as opposed to just being able to tap into what you currently have. I might have a disproportionate interest in that particular topic relative to the number of loans that are actually done that way. Is that nomenclature for as completed value loans that rely upon the competed value of the ADU, is that called something different than using current value than relying upon what your current market value of the real of the house is?
[00:09:40]Susan Brown: [00:09:40] So I think what you're asking is what's that called in our world. We call it "As Complete Value". Some people would say finished value. The point for folks to take away. Is that we're going to ask an appraiser to look at that project as if it was already [00:10:00] complete. So when they're looking at the plans that may include that new ADU, we're asking them to compare that to other properties that also have an ADU. Hopefully we're going to get those comparables included in that report. So whatever contributory value from a market perspective is added to the property, we're going to be able to add that to the value to loan against. As Abdur talked about a couple of days ago, We coined it as cost does not always equal value.
[00:10:33] So if an ADU costs $200,000, it may only contribute let's just say a $100,000 to the as complete value. But we would be able to then use that additional hundred thousand as we're calculating the maximum amount of loan that's available to the customer.
[00:10:54] Kol Peterson: [00:10:54] So the next question was going to be how many ADU construction loans has Umpqua done, [00:11:00] but I want to be clear if you could at least try your best to tease apart what percentage of loans or how many loans have been resting upon that as complete value, if it's possible to do that, versus just, you know, HELOCS or other kind of conventional financing options that Umpqua might do for ADU construction.
[00:11:17] Susan Brown: [00:11:17] Got it in my world. I only deal with the as complete product. Our division doesn't work with the HELOCs, so I don't have any data on that.
[00:11:29] Kol Peterson: [00:11:29] That's great.
[00:11:29]Susan Brown: [00:11:29] I wish that I did, because I think I know that there's a lot of customers who really do go out and get from a HELOC, but that's not, that's not my space.
[00:11:38]My best estimate Kol is that we've done somewhere around a hundred, 125 of these loans in the last couple of years. And they're done as an as complete appraisal, always. We've done them from brand new projects where there are subdivisions being built, where those [00:12:00] subdivisions include an ADU with the property.
[00:12:03] We do renovation loans where customers are adding either an internal, an attached, or a detached ADU we've financed all of those. Additionally we've done some projects where the ADU is a modular ADU, not just site-built. Those are a little trickier because they have to be craned into the property as opposed to going through the setbacks or whatever access there might be. But all of those projects that we've done, all of them are on an as complete basis.
[00:12:37] Kol Peterson: [00:12:37] I should get this one out of the way too, though, it was in my list of questions, which is what jurisdictions does Umpqua serve?
[00:12:44] Great
[00:12:44] Susan Brown: [00:12:44] question. We're very fortunate. We are in the market all the way from Bellingham, Washington, to San Diego, California, and all of Idaho and Nevada.
[00:12:54] So we've got the five states that we lend in. We particularly see the ADU [00:13:00] construction in the more populated areas, but not always, there are some more suburban kind of areas and a little bit more outlying too, but we've had an opportunity to finance ADUs in all of those places.
[00:13:15]Kol Peterson: [00:13:15] For Umpqua, ADUs fall squarely within the realm of viable construction loan, financing options.
[00:13:22] Is that true for all banks and all credit unions? If not, why not?
[00:13:28]Susan Brown: [00:13:28] Yes. ADUs fall squarely in our wheelhouse. We have a high comfort level. We work with whatever is defined as
[00:13:38] an DU in a jurisdiction. That's our definition of an ADU there long ago, we got out of trying to dictate what an ADU was, you know, a number of years ago when it was in commonplace, we had these artificial definitions, but now we've got jurisdictions that permit specifically for an ADU.
[00:13:58] So if it's an ADU by their [00:14:00] definition, it is by ours in almost every case. I think when you talk about construction financing for ADUs, it gets to be a little bit of a broader issue where lenders have to decide if they want to be involved in construction first, and then if they want to be involved in something that is not as widespread yet as ADU financing.
[00:14:25] Construction is challenging and I think we're going to talk about that a little bit more in a bit. So not every bank or credit union will be able to offer construction financing and more specifically ADU financing. The things that tend to keep them away from that, probably the biggest thing, is access to capital. During this COVID time, there's been a suspension of availability of credit to some types of lenders.
[00:14:55] If you're a broker who sends your loan to [00:15:00] another lender, they underwrite it and close it for you. Many of those brokers have lost access to construction lending. And also if you're what's called an independent mortgage banker, they operate off of a warehouse lines of credit. They're giant credit lines that fund their loan production until those loans are purchased by the investor.
[00:15:24] A lot of the lines of credit, the companies that offer those lines of credit have suspended the use of their lines of credit for construction lending. So it comes down to financial institutions of whatever type that have access either to their own portfolio or are direct sellers to Fannie Mae, Freddie Mac, Ginnie Mae, et cetera.
[00:15:47]So it it's kind of shrunk the world of possibilities for who's offering construction loans more broadly.
[00:15:56]Kol Peterson: [00:15:56] Thanks. That's really helpful. I've noticed that a lot of the banks that are willing to do construction [00:16:00] loan financing for ADUs, tend to be local banks and credit unions, not as many national banks.
[00:16:04] For example, Bank of America would not be a bank I'd recommend for somebody to even pursue asking about whether doing an ADU construction. Can you talk about that a little bit?
[00:16:14] Susan Brown: [00:16:14] Yes. I think I, I see it the same way that you do the big national lenders tend to be a little less agile.
[00:16:23] They're trying to do things that are probably a little more mainstream because they need consistent processes from location to location, for lots of reasons, policy reasons, process reasons, fair lending reasons. There's all kinds of reasons that larger companies might have flexibility to offer kind of niche.
[00:16:46] I'll call it niche. I don't really like to consider it that way, but based on the fact that it's a smaller percent, we'll call it niche. So when you get down to more regional or local lenders, they have a familiarity [00:17:00] with those marketplaces and they feel very comfortable and confident about how trends are developing, what market acceptance is of new types of products.
[00:17:11] And so I think those types of lending institutions lend themselves to a little bit more agility, flexibility, and. Not really more risk-taking because we certainly need to make sure that it's very sound, you know, we're in the loan making business, but we're also in the getting paid back business.
[00:17:29] Both of those things are equally important. So a more local lender would be a more probable place to find financing for an ADU.
[00:17:38] Kol Peterson: [00:17:38] Does Umpqua do portfolio lending for ADU construction loans or only loans that are securitized by government sponsored entities? And that's kind of an advanced question. I'll just let you clarify what does portfolio lending and what are government sponsored entities.
[00:17:56] Susan Brown: [00:17:56] Very good. So first some definitions. [00:18:00] Portfolio is when a bank is using it own deposits to lend. So if you have it checking account or a savings account, an IRA, any deposit that are at a bank, those deposits are then used to loan to people in the community, kind of getting back to the basics of how banks work.
[00:18:22] And so not all banks use their portfolio to lend, some invest in securities with those deposits. There might be a variety of ways that those deposits are deployed or assets are deployed, but Umpqua does have a robust portfolio. And I'm very happy to say that we have access to that for our ADU lending.
[00:18:43] And we'll talk a little bit about jumbo loans and that kind of thing, and just a little. The GFCs or government sponsored enterprise government sponsored entities. That's Fannie Mae and Freddie Mac. We have access to Ginnie Mae funds as well. [00:19:00] And we are fortunate that we're able to do ADU financing with all of those products as well.
[00:19:05]We have a broad suite available to us, which is pretty unusual. We've been able to bring our underwriters along and bring, create a pretty high level of understanding and the expertise of the folks in our organization. Everybody's specially trained. They go through a year worth of certification, underwriters, our specialty.
[00:19:27] So we're really lucky that we have folks with long experience and that experience is part of what makes construction lending possible. It is not for the faint of heart or inexperienced. You can get yourself in a lot of trouble pretty quickly. So we use all of those products to finance ADUs.
[00:19:46]Kol Peterson: [00:19:46] What are some of the remaining internal and external policy barriers that still stymie clause or any other lenders ability to do ADU construction loans?
[00:19:58] Susan Brown: [00:19:58] Right. [00:20:00] You know, Kol, I think the one that's talked about most often is rental income that's derived from an ADU. All of us practitioners know that ADUs have a wide range of use from my mom and dad are going to live there. My teenage kids will live there. It'll be my art studio to a short-term rental to a long-term rental and anything in between. When customers are looking at the business feasibility of making that ADU in to a rental, obviously they're considering their cash flows from that property. They're considering expenses.
[00:20:39]All of that. As a lender, there are regulations in place and this can get pretty wonky, so I won't go into too much detail, but if people want to ask more, they can certainly do so in the chat, but there are some regulations related to Dodd-Frank called qualified mortgage and the ability to [00:21:00] repay and those pieces of the regulation prevent banks from being able to recognize rental income when we're calculating the income that will be used to repay the loan, and that has been probably the biggest hurdle in all of this.
[00:21:22]Whether somebody is going to take out a loan and not do a construction loan. Or be able to use the as complete value. In any case, the income that we can consider doesn't include that rental income. That's the number one biggest challenge. And there are lots of conversations happening everywhere, including at the GSEs.
[00:21:48]In fact, I just had a phone call yesterday afternoon with some folks at Fannie Mae about ADUs and the broader accommodations that us lenders would like to [00:22:00] see. So that's the top one.
[00:22:01]I think. For Umpqua, because we have such a comfort level with the ADU that's all good for us. But I think for other lenders who are trying to get this incorporated into their offerings, really getting people who are engaged in the conversations nationwide and in their communities, at the planning departments to really understand what is it, how is it contributing to the communities?
[00:22:27] What's the market acceptance in your community that would make it not the risky endeavor that some underwriters and credit folks might think that it is.
[00:22:38] Kol Peterson: [00:22:38] So since you brought up Fannie and Freddie, I'm going to jump ahead to that question. So can you talk about, to the extent that you're able to share some policy or regulatory matters related to ADU financing on the horizon with Fannie and Freddie?
[00:22:53] Susan Brown: [00:22:53] Yes. Both of those organizations [00:23:00] have a high interest in ADUs, they recognize that it's an up and coming product type property type. Where the GSEs have a responsibility they're government sponsored enterprises, which means that they're backed by the government, the bonds that they issue from all of these mortgages, us taxpayers are on the hook, so to speak, if something happens with those bonds. And so they're charged with looking at payment history, payment likelihood from any type of loan that they're allowing. Without data about how likely it is that a loan will be repaid with an ADU. It's difficult for them to just open up broadly financing for something that they have no idea what the performance [00:24:00] of that loan will be.
[00:24:02] So they work with lenders who know what they're doing to allow, for example, construction with ADUs. Umpqua shares a very good relationship with those. So they trust the way that we do our business. And they are continually looking at broadening their offering recently on Fannie Mae's homestyle product.
[00:24:23] They opened up very broadly, the ability to finance ADUs. So that's a mainstream product that really any lender who offers the homestyle loan, is able to do ADU financing. They may or may not be construction lenders also, but if they do the renovation product with the homestyle renovation, they would be able to use that for ADU financing, the other piece on the regulatory side, the CFPB, the Consumer Financial Protection Bureau is [00:25:00] reviewing the rules as it relates to income.
[00:25:04] And there continues to be discussions about what's allowed and what's not allowed, and what might change over time. And we're right in the middle of that five-year period where they're taking a hard look at rules. So a lot of us are submitting comments related to that new regulatory look, to see if we can help persuade regulators that we would be able to include that type of income. I'll add one more thing to that, if I may. The agencies Fannie and Freddie are somewhat reluctant to offer construction financing for rental properties, investment properties. I think that might actually be a question you have teed up. So, so let me hold off on that until you tee that question up, but, but I want to make sure that we address that too.
[00:25:55] Kol Peterson: [00:25:55] Thanks. So to clarify, one thing, you mentioned. Every bank that [00:26:00] can do a homestyle renovation loans can theoretically also, based on the underwriting standards, that Fannie has, finance ADUS. That's a big deal, but will banks actually have their own internal policies that will preclude them from doing that?
[00:26:16] Susan Brown: [00:26:16] That's a great point. That is a very high probability. There's, what's called overlays where banks can put in rules that are outside of what Fannie Mae or Freddie Mac would require. Overlays are done all the time, depending on that bank or that lending institutions risk appetite. So while they have homestyle and it offers the option to finance an ADU, not all lenders may agree to do that.
[00:26:46]Kol Peterson: [00:26:46] How are you has Umpqua handling pre loan issuance construction and renovation appraisals currently? That's obviously a hot topic in terms of the future value of a property. How does Umpqua do that?
[00:27:00] [00:27:00] Susan Brown: [00:27:00] So our appraisal process includes collecting all of the documentation that's going to go into that project. We get a contract from the builder that explains exactly their scope of work. We get a detailed description of materials, a line item budget, that really helps us understand the quality of the materials going into that particular project, site plans the drawings for the project, everything that's going into make that project.
[00:27:31] Then when we order the appraisal, we send all of those exhibits to the appraiser and we ask for an as completed value.
[00:27:41] We work through what's called an appraisal management company. So they're responsible for making the actual assignment to the appraiser. We ask our appraisal management companies to assign appraisers who have those high level of certifications, who understand [00:28:00] construction and if they understand construction, that means that they're sophisticated and probably more knowledgeable and hold higher certifications than let's say an entry-level appraiser. We try very hard to engage highly skilled appraisers who understand the market contribution of that ADU.
[00:28:22]They go through and find comparable properties, some with ADUs perhaps some without, and they're able to make adjustments based on those criteria. And then they bring a report back to us. That gives the total project's as complete value. And that's what we use for the value to determine our loan to value amount.
[00:28:49] Kol Peterson: [00:28:49] Thanks. I would imagine that markets that are outside of Portland, say, California, that Umpqua serves, it's more challenging for appraisers there to find sales comps.
[00:28:59][00:29:00] Do you have any comments about that?
[00:29:01] Susan Brown: [00:29:01] Yes. You're right. In communities where ADUs have not been widely adopted, it is more challenging. When Fannie and Freddie are looking at appraisals, they want to see an appraisal that has at least one comp for an ADU. So if there aren't any sold recently, That can be a very big challenge.
[00:29:26] It can be a very big hurdle. A good appraiser though, can support their opinion of value. They can support what they feel is contributed by that ADU. So it's possible that alone could get done where there are no comparable sales, but it is much easier and much less complicated if we've got an appraisal report with an ADU comp. It's pretty much a requirement, but depending on [00:30:00] what your loan to value is, there might be certain circumstances where a loan could be done without a comp, but I would say that those would be pretty limited.
[00:30:12] Kol Peterson: [00:30:12] There's certain loan products out there, namely home ready loans that allow for for rental income to be classified towards an individual's debt to income ratio, but homestyle renovation loans, I'm not sure that they would allow for that. Just to be clear, can 75% of a future rental income potential be counted towards an individual's debt to income ratio with homestyle renovation loans?
[00:30:33]Susan Brown: [00:30:33] In our world? No, just to be really clear. There's a couple of reasons for that first off the home ready that you mentioned that is a product that can be attached to the homestyle loan and that home ready, the intent of that program is to address borrowers with low to moderate income. There's an income limitation. I won't quote it cause I'll probably be wrong. And so it gets to be a very narrow [00:31:00] scope of borrowers who would qualify to use that loan. And it's difficult to make the criteria for that loan fit with financing a property with an ADU. It's there and there's a very narrow scope of customers that definitely could benefit by using the combination of those two products. On a broader topic of including that 75% of rental income, because we're not allowed to use rental income. We don't take that 75% calculation. On other investment properties that we finance, if a borrower has a long history of being a landlord, there's a possibility that on a new property they're acquiring, we could use that 75% of income, but in our world, all of ourADUs are for owner occupied only and don't ever take into consideration what rental income would be derived from a property.
[00:31:59]Kol Peterson: [00:31:59] Next [00:32:00] question is going to key right into that, which is, does a property that has loaned on have to be owner occupied, or can it be for an investment property or rental property?
[00:32:09]Susan Brown: [00:32:09] Homestyle is a product that can be used for investment properties and we use that loan for investment properties. However, we have a requirement on the homestyle loan that that's owner occupied. I can't tell you if that's our overlay or if it's Fannie Mae's. I think Fannie Mae has directed that that has to be owner occupied. I'm curious to see what will happen over time now that the ADU regulations really everywhere are broadening so that the property doesn't have to be owner occupied anymore.
[00:32:42] That's a fairly new development in most communities. And so as there is more market acceptance for that. I'm hopeful that Fannie and Freddie will both look at that and become more comfortable with us using that for an investment [00:33:00] property for an ADU as well.
[00:33:04] Kol Peterson: [00:33:04] Susan, I saw a little question. I just wanted to briefly mention, because we're talking a lot about the west coast here and my default answer to people who are like, there's no ADU financing, I'm like, yes, there is, just talk to Umpqua. That that's the bank that says that was great. Right? You don't serve Minnesota, you don't serve New Hampshire. So I want to make a couple comments on that note, which is generally speaking, national banks do not do renovation loan financing for ADUs, but there is two that I'm aware of that are national banks that do it.
[00:33:30] So I'll mention those now because it's relevant for everybody on this call. At least if you're in the U S which are, I think Guaranteed Rate is one and another one that I'm familiar with is Eagle Home Mortgage. Can you give any comments on that?
[00:33:42] Susan Brown: [00:33:42] I do. No, I don't. I'm going to rescind what I was going to say on that, depending on the circumstances. And again, it, it right now is a very unusual particular time and this time will pass. So I would say that yes, in normal circumstances, I think that's [00:34:00] exactly right. Kol, that's great. Great advice.
[00:34:03] Okay, great.
[00:34:03]Kol Peterson: [00:34:03] So if someone wanted to find renovation, construction loan, financing options for non-owner occupied housing, what types of banks and credit unions would they want to look for?
[00:34:16]Susan Brown: [00:34:16] Kol to your point. My knowledge is really rich on the west coast and not so much in other parts, but I think the model here would be similar.
[00:34:24]There are certain lenders that have deep knowledge and understanding of construction. And when they have personnel like that at their bank, all the way from originators, all the way up to the credit administrators who are making the rules, they have a broader tolerance. The more you understand risk, the more you can price for it and offer that product. In our community here on the west coast, there are a couple of lenders that do in investment lending. [00:35:00] That tends to be getting into what's called spec lending because there's never a real assurance whether or not that property is going to be held truly for a rental or when it's complete, if it will be sold like a spec property.
[00:35:15] So there's a narrow group of banks that have an interest and offer that type of financing, but they are out there. They're generally going to be regional, I would say the particular bank that I'm thinking of is regional. That shares just about the same footprint that we do. And I would be happy on an individual basis if people want to contact me, I'd be happy to share some contacts that I have for folks who do that.
[00:35:38]Kol Peterson: [00:35:38] Is the conforming loan limit a barrier in terms of loaning for central city neighborhoods that wish to build an ADU and maybe you could do us all a favor and just tell us in brief terms what a conforming loan limit is.
[00:35:51] Susan Brown: [00:35:51] Absolutely. Yeah. And I, in fact, I took a couple notes here to make sure I get that just right. So a conforming loan limit is [00:36:00] prescribed by the federal housing finance administration. That's an oversight bureau that oversees Fannie Mae and Freddie Mac. They are allowed to do maximum loan amounts that are determined by lots of formulas and every year that maximum loan amount changes.
[00:36:19] In nearly all of the United States, there's a maximum loan amount of $510,400. There are limited number of parts in the United States that that maximum loan amount goes up to about 760,000. Los Angeles would be an example, New York City would be an example.
[00:36:41]Kol Peterson: [00:36:41] Wouldn't San Francisco and Seattle also be examples?
[00:36:46]Susan Brown: [00:36:46] Probably. If you look up Fannie Mae conforming loan limit, there's an interactive map where you can see every single county in the country. It's a very easy to use interactive map that would tell you specifically for your [00:37:00] geography.
[00:37:00] In most of the United States, that $510,400 is the maximum loan amount. So if we were trying to finance a loan with an 80% loan to value, that would be an as complete value of $638,000.
[00:37:17] So the question becomes, in your community, is $638,000 a reasonable value, or is it much higher than that? If you're San Francisco, that's probably not going to get you very far. However, San Francisco is probably about $700,000 range, which would then get up to about probably an $850,000 finished value. So it really does modulate with that community's values.
[00:37:44]In Portland $638,000 is doable. I think, there are probably people more familiar with the, with the home values in this space. But from my thinking, that gets you pretty close, not for a mansion, of course. [00:38:00] And then you know, $500,000 ADU, but the type of projects that most of our folks are talking about.
[00:38:06] Kol Peterson: [00:38:06] So just to be clear, you haven't seen the conforming loan limits being a barrier, a policy barrier. In other words, in neighborhoods like inner Portland to ADU construction loan financing?
[00:38:18] Susan Brown: [00:38:18] Well, I guess what I would say from our perspective, because we have access to our portfolio. If we need a larger loan amount, we use that portfolio.
[00:38:27] So we don't bump up against that. We just use the product that will accommodate the loan that we need.
[00:38:33] Kol Peterson: [00:38:33] Okay. So you roll over from a default position of using the Fannie Mae securitized homestyle renovation loans to using the portfolio lending options, if, and when you need to.
[00:38:43] Susan Brown: [00:38:43] Right. And then on brand new construction, we also use the Fannie and Freddie construction to perm financing, which starts from a project from the ground up.
[00:38:52] So just depending on which one works the best for the customer scenario. But I think on the broader topic [00:39:00] of that, Kol, when you're thinking about places like Seattle, and you've got properties that are selling for, or the value is going to be somewhere around $2 million, it's very clear that a Fannie or Freddie loan is not going to be sufficient for financing that project.
[00:39:15] Unless the borrower has a lot of equity in the property and they're taking out a loan just as a convenience instead of a necessity. But in those very dense marketplaces, it can get more challenging to use a conventional loan for ADU construction.
[00:39:31] Kol Peterson: [00:39:31] Okay, cool. I'm going to have Kelcy actually share a slide with that graphic here.
[00:39:38] It gives a sense of where there's some exceptions to the default $510,000 limit, which changes on an annual basis. Correct, Susan?
[00:39:47] Susan Brown: [00:39:47] That's right. That's right. And what's nice about this map that Kelcy is showing when you hover over it, it will show you four counties all across the country, what the maximum loan amount is for that [00:40:00] particular county. Now keeping in mind, those are for single family homes. Fannie and Freddie both finance one to four units. So when you're looking at financing for four units, that's going to be a much higher number than it will be for the single unit.
[00:40:20] Kol Peterson: [00:40:20] Well, that's an immaculately good segue to my next question, which is about middle housing, meaning triplexes and fourplexes. So you know, th that that point becomes extremely relevant in that conversation. So what is Umpqua been doing or how has it been positioning its services look construction on the services in terms of middle housing, middle housing is already something that can happen.
[00:40:44] Presumably Umpqua has already done loans for this, but now it's just going to become a more expansive option in a lot of jurisdictions like Oregon.
[00:40:51]Susan Brown: [00:40:51] Correct, yes. So how are we positioning ourselves? I think one of the first things, Kol, and this is a little bit of a shout out for your ADU Academy. [00:41:00] Many of us at Umpqua have attended your academy and we were successful in passing the test.
[00:41:05] So we're now certified ADU Specialists. So, just a plug. If you haven't had a chance to attend that Academy, it is worth the time the connections, the information have been incredible. So shout out for that time spent. Really great resource. So that's given us connections to real estate agents who also specialize in the ADU space.
[00:41:29] That's been a very, very important connection for us. We spend a lot of time talking with real estate agents about what's possible in our world. Fannie and Freddie already allow for financing of one to four unit properties. The gap right now is going to be finding financing for constructing those units.
[00:41:53] That is not yet widely available. As we were talking about for our construction [00:42:00] program that I oversee, it's for single units only, and because an ADU is an accessory use, that's just considered part of the house and it's still done as single family, but we don't have financing options available for multifamily rentals.
[00:42:18] They have to be owner occupied in one of those for construction is what I mean to say for construction, our program right now is limited to single family only.
[00:42:29] Kol Peterson: [00:42:29] Final question here for you, Susan, what are some general aspirations that you have as far as financing innovation goes in this general space?
[00:42:37]Susan Brown: [00:42:37] I dream all the time about what if, what if we could do this? What if we could do that? For me, a particular place of interest is how ADUs would be able to contribute to the wealth building of low and moderate income families. That's a topic that has gripped [00:43:00] anybody in this space, all across the country.
[00:43:03]And there's a lot of risk associated with lending in that way. It's a, it's a complicated topic. We talked about the fact that we can't use rental income. We've generally got customers who need that income to qualify. So discussions are happening around credit enhancements or credit guarantees or grants for homeowners who would add an ADU who are either low or moderate income homeowners, or would agree to rent their unit to either a homeless or a lower moderate income tenant.
[00:43:43] And there's lots of discussions happening across the country about how we get property managers involved to help occupy the unit. How do we fill that gap? If they've had rental income for two years? Would [00:44:00] we maybe be able to calculate it, that income after it's what we call seasoned income? And so some kind of credit enhancements that might fill that gap.
[00:44:10] So I would say in this space, that's been of particular interest to me. I'm also working on some initiatives with some of the manufactured home companies that are the factories that are across the country. They're beginning to develop lines of ADUs, which again are different and special because they have to be craned into whatever location they're going to or brought on a truck.
[00:44:35] So a five foot setback, it's difficult to get a fully constructed unit there. But I have a really special interest in financing for those type of projects. And then just really more broadly, how do we continue to serve everybody who wants to, and is capable of owning a home? And just continuing to do our work in space to help as many customers [00:45:00] as we can.
[00:45:01] Kol Peterson: [00:45:01] Great. Thanks, Susan.
[00:45:03] Kelcy King: [00:45:03] That wraps up the interview portion of this episode of the ADU hour. As a reminder, these episodes are the edited audio version of interviews that we conducted via a webinar series. Good news. You can access the full video series via Kol's website, BuildinganADU.com. Now for the second half of the show I curate questions from the audience that gives our guests the opportunity to dive deeper into a topic or address new ideas and questions.
[00:45:31] All right, so Susan, we have 30 questions.
[00:45:35] Susan Brown: [00:45:35] Oh boy.
[00:45:37] Kelcy King: [00:45:37] I'm going to rapid fire.
[00:45:38] Susan Brown: [00:45:38] Okay.
[00:45:39]Kelcy King: [00:45:39] Have you seen any construction loans for multifamily, duplex or triplex looking to add an ADU?
[00:45:48] Susan Brown: [00:45:48] I personally have not. That is a great question, multifamily. So are, I wonder if the writer is asking about like a [00:46:00] fourplex, that's adding an ADU.
[00:46:05] Kol Peterson: [00:46:05] And let me intervene and say that's an extremely rare new thing that is only a law. I mean, as far as I know, maybe I'm wrong, but that's only just recently been allowed in California the first time in the last, like since 2020. So unlikely that you would have seen that yet.
[00:46:19]Susan Brown: [00:46:19] I personally haven't. However, I know in some jurisdictions they have what they call ADUs and junior ADUs, which is getting into several units in the same property. Because those are very new financing is going to be a challenge in any of these brand new property types. Like we talked about earlier in the show when there's no performance data and we don't know how they're going to pay, it's going to be probably a little while before those financing mechanisms catch up with those new types of properties.
[00:46:58]Kelcy King: [00:46:58] Is the loan process [00:47:00] smoother than a HELOC or other construction loan process?
[00:47:04] Susan Brown: [00:47:04] Let's see, construction loans are more complicated because there's more moving parts. You've got the credit piece, the project piece, and the builder piece. What I can say from our experience at our bank, we have a very short processing time, an average of 70 days from the day we take the application to when we fund the loan.
[00:47:27]Some other lenders it might be a lot longer than that. When you're working with people who really know what they're doing, it doesn't have to take that long. You know, this six or eight month period, I will say that we funded our fastest one in 14 days. So if we have a complete package and the borrower's ready to go, we're ready.
[00:47:48] Kelcy King: [00:47:48] Wonderful. Thank you. During the construction phase, are the payments interest only.
[00:47:54] Susan Brown: [00:47:54] That's a great question. That's going to depend on the lender offering the product. For [00:48:00] our products, it is an interest only payment and that's based on the amount of the loans that had been borrowed at any period of time. Some lenders and in fact, one of our programs that we have is a full P I T I, principal, interest, taxes, and insurance during construction, but most construction loans are going to be interest only, but the individual lender would be able to give those specifics.
[00:48:27] Kelcy King: [00:48:27] Great. Have you ever underwritten the ADU loan as a multifamily based on cap rates?
[00:48:35] Susan Brown: [00:48:35] We have not. That one is getting into a commercial type of financing, as opposed to a residential type of financing. When you get into cap rates for determining value, that's going to be more in the commercial realm.
[00:48:48]Kelcy King: [00:48:48] Could you say more about your experience with financing modular units and if those projects were cheaper than site-built.
[00:48:54] Susan Brown: [00:48:54] Great question, we have lots of experience with modulars and again, my [00:49:00] contact information will be up if people have specific questions. For us, factory built housing is really an up and coming property type. And we've been doing modular construction on both full main houses and ADUs for quite some time. So we have a high comfort level with that. For the listeners, modular construction and manufactured home construction seem the same, but modular construction is based on state building code and manufactured homes are built on a federal HUD code.
[00:49:38] So it's a different in the code that you need to use. Modular is estimated to be about 20 to 30% more expensive than manufactured. And right now, in our experience with our projects, we're seeing modular construction being somewhat expensive because people are using [00:50:00] those in a very custom construction way and having them individually designed and very specialty architectural features.
[00:50:09] However, the plants that manufacture manufactured homes, many of them also do modular construction. And those are just state building codes. Those are somewhat more expensive than a manufactured home, but not as expensive as a custom modular. That's kind of a broad answer to that, but we do modular all the time.
[00:50:36] Kelcy King: [00:50:36] Thank you. Can you talk about the difference between loans just for construction of the new ADU? Do they consider the value of the existing property and the first mortgage cash out refinance loans that look at the future value of the entire property, what is the loan to value ratio for each.
[00:50:54] Susan Brown: [00:50:54] Okay. So if a customer is doing a cash out refinance, [00:51:00] that's going to be based on the current value of the property, we call that "as is" valuation. On a cash out in my experience that doesn't ever include the improvements that will be added. When we're doing a refinance, we take the value of the existing property, or I would say the improvements that are already there, plus the value that the ADU brings. So our loan is based on the entire project when it's finished and we establish our loan to value based on that entire value, not just the value of the added ADU.
[00:51:37]Kelcy King: [00:51:37] Do you offer home equity conversion mortgages?
[00:51:42] Susan Brown: [00:51:42] Ah, HECMS also known as a reverse mortgage at Umpqua, we do not, but there are specialty lenders who offer HECM loans or reverse mortgages. If you just Google reverse mortgage in your area, there are a number of lenders who do offer.
[00:51:57] Kelcy King: [00:51:57] Can you comment on requirements to become an [00:52:00] approved contractor with Umpqua or what that process might look like for any other bank?
[00:52:07] Susan Brown: [00:52:07] Yes, I can give broad strokes, and then I'm happy again to talk with anybody in particular. So when we are financing a project at Umpqua I should clarify our program doesn't accommodate owner builders. So all of the projects we use have a general contractor.
[00:52:24] We're looking for contractors who have had their general contractors license for a minimum of three years and have been doing work in that geography for some period of time so that we know they have access to trades and subs and suppliers for that particular job.
[00:52:43]We're also gonna do a quick credit check to make sure that they've been paying their substance suppliers timely. We do a quick review of their CCB to make sure that that's all current and, and in good standing. And then we verify that they've got the proper insurance in place [00:53:00] for any kind of liability that may occur at the job site.
[00:53:03] Kelcy King: [00:53:03] Great. Can you go over offering the construction loans or the renovation loans, renovation FHA, or 203K Renovation Loans?.
[00:53:16] Yes, we
[00:53:17] Susan Brown: [00:53:17] offer both of the 2 0 3 K products. There's a limited and a full 203 K. The limited will allow for improvements, I believe it's up to $35,000 that may have changed, but I know in the recent past it was $35,000. And then the full 2 0 3 K, we joke and say that you can really tear down an entire house and rebuild as long as it's on the existing foundation. And those will allow changing properties from a one unit to a four unit, a four unit back down to a one unit, all kinds of interesting allowances with that FHA program.
[00:53:56]There's a few extra requirements with some of the two. [00:54:00] Because they also require a plan consultant in addition to the general contractor. But we do those loans as well.
[00:54:09] Kelcy King: [00:54:09] Okay. Is there a VA loan in that space? Like a VA renovation?
[00:54:14]Susan Brown: [00:54:14] I've heard that there is I have not yet identified a full actual VA loan.
[00:54:23] What I've seen more regularly is a two time close construction loan where somebody will do temporary construction financing and refinance into a VA loan. I have yet, personally, to encounter a true VA construction loan. That's a loan to a customer.
[00:54:45]Kelcy King: [00:54:45] Does Umpqua finance ADUs everywhere that you do business? For instance, will you finance an ADU in a rural California market where not very many ADUs have been built?
[00:54:55] Susan Brown: [00:54:55] Yes, we can do APU financing in our entire footprint. As we talked about [00:55:00] a little bit earlier in the show, part of the challenge is going to be getting comparable properties that also have an ADU. So it would be good to look at the particular project.
[00:55:10] We can give a little bit of counsel and advice on what we think the outcome of that appraisal will be based on what we know about the area.
[00:55:18] Kelcy King: [00:55:18] Can you go back just a tiny bit and explain the difference between a renovation loan like homestyle loan and a construction loan?
[00:55:27] Susan Brown: [00:55:27] Yes. Renovation loan. That true sense of a renovation loan is you're changing something that already exists changing, renovating a kitchen, adding a story to the house, any kind of a change to an existing property.
[00:55:44] Construction is generally categorized as something brand new. That there's never been a certificate of occupancy, there isn't a, a home at that location. The terms can be used interchangeably and [00:56:00] often are, but I would say by definition, renovation is changing something that already exists. New construction is for a brand new project.
[00:56:10] Kol Peterson: [00:56:10] Dig into that a little bit more Susan. So that, that that's actually something that was a stumbling block for my understanding of this whole field for a long time, because so many different banks use different terminology for these types of things. So like with the explanation, the definition that you just provided, one could easily interpret what you just said to say, well, if it's a basement conversion, it's going to be a quote-unquote renovation loan.
[00:56:31] Whereas if it's detached construction of we'll called a construction. Can you comment on that?
[00:56:36] Susan Brown: [00:56:36] Yeah. Yes, you are correct. We would call the basement or renovation. We would also call the addition of the ADU or renovation because that's changing an existing property. New construction for us in our world would it be if we have bare dirt and we're building from the ground up.
[00:56:56]Kol Peterson: [00:56:56] But other banks would call their ADU portfolio [00:57:00] loans, ADU construction loans?
[00:57:02]Susan Brown: [00:57:02] Right in the terms are interchanged a lot. And for example, our portfolio product is good for new construction and renovation. So we just kind of call it construction and reno.
[00:57:15] Everything is construction or reno, and it's either new or existing, but you're right, the language is interchanged synonymous. People use both words to describe both.
[00:57:27] Kol Peterson: [00:57:27] Got it.
[00:57:29] Susan Brown: [00:57:29] Yep.
[00:57:31]Kelcy King: [00:57:31] So this is maybe going to vary a little bit, and I feel like you kind of touched on this, but with the robust appraisal process, what are the typical origination costs and time?
[00:57:41] Susan Brown: [00:57:41] I'm going to stay away from costs, that completely depends on the project, that's such a variable thing.
[00:57:48] From a timeframe to process from application to when we fund and we're ready for construction to start I'm proud and happy to say we've done that as quickly as 14 [00:58:00] days. Our average time is about 70 days. And a lot of that has to do with kind of finishing up contracts before we can order the appraisal. So I would say our loan officers who do this work the most often have a turn time of about 40 days from application to funding.
[00:58:18]There's some regulatory requirements for quoting costs and rates. So I, I can't comment personally, but we certainly can with the right disclosures.
[00:58:25]Kelcy King: [00:58:25] While rental income can't be calculated into income for financing, could retirement income of a parent, if occupant, and not, co-owner be part of that calculation or would the parents' income necessarily necessitate a part ownership?
[00:58:41] Susan Brown: [00:58:41] That is a great question. Some of this is slightly beyond my area of expertise, but I can comment generally. Some construction loan products, including some that we offer, allow for a non occupant co-borrower.
[00:58:59] So that would be [00:59:00] somebody who's not going to be living in the house, generally family, whose income could contribute. Generally, if a person's income is used, they also are an owner on the property for lots of securitization reasons with the note and trust deed. If somebody's paying, we want them to have an ownership in the property, so that there's that vested interest to keep paying.
[00:59:25]But that is a thing that is done quite frequently, where parents will co-sign with children, for example, to gain access, to financing, to build.
[00:59:36] Kelcy King: [00:59:36] Can you clarify for all loans, including your portfolio loan? Umpqua will lend only up to 80% loan to value on owner occupied or does, is there more variety in that?
[00:59:49] Susan Brown: [00:59:49] That was just an example when we were talking about the conforming loan limits and the way that I would answer that would be to say it will depend on the transaction [01:00:00] and what is allowed. Currently, we have capability to loan above 80%, depending on the project. And again, that's very individual, but we could talk about specific for sure.
[01:00:12]Kelcy King: [01:00:12] Thank you. I have a decent amount of repeat questions.
[01:00:14]Kol Peterson: [01:00:14] I'll kill a little bit of time, kelsey maybe we'll do one or two more questions, but asking Susan, whether you're going to be running for presidency, isn't it.
[01:00:23] That's maybe not useful information.,
[01:00:27] Susan Brown: [01:00:27] You know, right now I'm very focused on my work and construction lending and that's not on my radar at this time.
[01:00:33]Kol Peterson: [01:00:33] Yeah. So I thank you so much for your expertise. It's incredibly helpful for the movement to have somebody like you, who is able to articulate and speak to the many, many questions that people have on this topic.
[01:00:47] Kelcy King: [01:00:47] Just really quick from Nancy. She just typed it in. Are construction loans a similar rate as conventional loan rates?
[01:00:55] Susan Brown: [01:00:55] Generally, yes, they're similar. They do [01:01:00] run slightly higher because it's a riskier type of loan. Generally when we make a home loan, we have collateral, which is a house when we do a construction loan in its raw form, all we have is land and there's no collateral yet.
[01:01:16] So loans are priced for risk. And when there's no collateral, when you start, that's a riskier loan. And so generally the construction rate is going to be somewhat higher, but not a lot. You would be surprised. And, and then depending on the, oh, I'm just, I'm going to get myself in trouble here between a quarter and a half a percent in interest rate higher on a construction loan, but not always. I know that sounds a little bit vague, but again, it depends on the scenario, the borrower, the project, all of that. There is a slight increase in the price, but not significant.
[01:01:58] Kelcy King: [01:01:58] Thank you. [01:02:00] There are just enough repeat of this question. I know that you did touch on a little bit earlier, but why can't Freddie and Fannie back a loan on future rental income?
[01:02:11]Susan Brown: [01:02:11] And that's such a great question and it is the question of the day. So the fact that it's being asked is not a surprise, and in fact, many voices can change things. So maybe you can write to your representatives and so on to help adjust this. Again, a bit of a history lesson, the Dodd-Frank Act was put into place after the financial crisis in 2008, there had been Very wide ranging criteria used to qualify people's incomes for loans. And in fact, in some cases, no income was ever verified at all. And so following that in about 2010, rules were put into place that allowed for a bank to have what's called a qualified mortgage. If we would [01:03:00] underwrite the loans a certain way, then we could enjoy what's called safe Harbor that we had made a loan responsibly that a customer could repay.
[01:03:11] Part of that requirement is an assessment of the borrower's ability to repay, meaning that they have adequate income to pay back a loan. We're looking at their income and it will support the loan that they're requesting, what that regulation prohibits is the use of future undocumented income.
[01:03:38] So if there's never been income derived from the property, we don't have a way to demonstrate the two year track record of it happening, so that we're able to incorporate it into our calculations.
[01:03:50] It's as simple as that, it's called appendix Q of the ability to repay rule. Call me and we can have a wonky technical [01:04:00] conversation about all of that.
[01:04:01] Kol Peterson: [01:04:02] I just wanted to thank Susan for being such a wonderful guests, very informative for everybody here.
[01:04:07] So thanks for joining in the ADU hour.
[01:04:09] Susan Brown: [01:04:10] Thanks everybody.
But it's hard to find builders who have built in other jurisdictions around Portland at this point.
Joe Robertson: Yeah. We're open to it, but we, we also need to gauge it by travel time and we don't want to get further than about 30 minutes away in between projects and have to spend too much time on the road with the traffic situation here in Portland.
Kol: I know when I think of the work that I've seen, that you do, I've seen detached new construction and I've seen bump out addition ADUs. Do you also do internal ADUs [00:05:00] or other, you know, other forms of ADUs?
Joe Robertson: Yeah. Yeah, we have we've completed a few basement conversions to ADUs and several attached ADUs, like you mentioned. The, you don't see the basement conversion so much, cause they're kind of harder to take pictures of.
So I haven't posted any of those. Well, I think I do have one on my website, but we prefer to build detached standalone new construction but also garage conversions. We do quite a bit of those and we like, we like garage conversions, but we're not opposed to basement conversions, but there's there's just a select few that are set up to where it can be done properly. So it's kind of limited.
Kol: So prior to your decades of ADU construction experience, you did production home building. Can you talk about some of the lessons that you have brought to bear in the ADU development, ADU building space that came from your previous [00:06:00] experiences?
Joe Robertson: Yeah, so years ago I was a, for many years in a custom home construction and in Ashland, North Carolina, and I noticed the other day you had somebody on your your listeners from Asheville, North Carolina.
And I built primarily a timber frame homes, exposed, exposed, being construction and mortise and tenon, and post and beam construction but all types of residential custom home construction, each one designed individually. And then when I moved to Portland 29 years ago, I started working for a small builder developer that developed his own subdivisions.
And we grew quite substantially over the 10 or 12 years that I worked for him. And Joel, you're one of the major builders in the area that wasn't a national builder and production. Hall's mostly mid price production homes. And that's where I kind of honed organizational techniques and scheduling and estimating and so forth.
And so I've [00:07:00] applied both aspects to, to building ADUs. I, I, I like to say, ADUs are like building a little custom home in somebody's backyard which it is to me, but we also use a lot of the principles that I use in production housing for organization estimating, scheduling, and so forth.
Kol: Yeah. And I'll be prodding you about that process. Actually, let's just go into that. Can you tell us a little bit about the design build process that you use? And tips you'd have for other builders who are trying to adjust into this space.
Joe Robertson: Yeah. So we, I started this system quite a few years ago.
Well, actually when I started building ADUs, so we'll go out and do a site analysis with the customer and just look it over, have kind of an informal meeting with the customer and give them our opinion, answer their questions. Then the next step after that with us is we do what we call a feasibility study.
And in that we start with the [00:08:00] designs, whereas the design build part, and we, we also welcome projects from architects or customers that already had an architect and we've done numerous ones of those, but for the design build aspect we do a feasibility study and we start with the site draw site plan, determine the footprint and then work the floor plan off of that, and then develop it into exterior elevations.
And there's a lot of back and forth with the customer during that stage, obviously, till we get to a point to where I say, are we close enough to where I can bid this out to all my subcontractors and suppliers, you can still move a window or change your cabinet plan and I do that a bit. I have a system where I can send a bid package out plans and specs and do a real detailed cost estimate.
And also during that time, we meet with the city over the counter in an informal review mostly with planning sometimes with structural and let them see what we're proposing to do and see if there's any issues so that we had them off before we actually apply for a building permit. [00:09:00] And we present that to the customer in a booklet form and also electronically.
We charge a fee for that and when they sign up. So we try to answer all the major questions in that. And we also in designing try to design to meet their budget. And then the next step is up to them when they sign a building contract, we credit that fee against the price that we'd given them for the for the feasibility study.
Kol: I think your, your feasibility study process is a good hook for getting new leads. For getting clients in your funnel, so to speak. Can you talk a little bit more about that? You know, roughly how much we're talking. How in depth are these feasibility studies? As a point of reference, I do consultations for homeowners who are at the very beginning of the process before they've talked to a builder designer, I charge $200. No, you know, I don't do referrals. I just kind of give my own opinion of what their situation calls [00:10:00] for, what kind of builder they should look for, what should, and it's not really a feasibility study, but it's more or less my, my professional opinion of what they should anticipate the process looking like, but you're doing a much more in depth feasibility study.
So let's, can you. Pull that out for us a little bit.
Joe Robertson: So my first site, I call it analysis. First consultation is very much like your. It's an informational thing, where you are answering questions basically, and sharing what's required by the code and so forth. And then the step further into the feasibility study, it gets pretty detailed and we spend a lot of time with the customer.
And I don't mind saying it's on it's on my website. We charge $1,950 to do a feasibility study, which if a customer doesn't go through the building contract we've if I counted everything out, we've lost money, but. It's to cover us, hopefully part of the time, if it doesn't go through, but it's also, you know, to get a little commitment out of [00:11:00] the customer that we're going to do all this work for you.
And, and if you decide you want us to build your ADU we'll, we'll give you that money back. It's built into the cost of, of the project. So it's worked out really well. And the conversion rate to that is, is pretty high. It varies a lot, but I'd say in the 70, 75% range converts to an actual build,
Kol: The remaining 25%, you suspect they're going to other builders or they just not going forward with their ADU.
Joe Robertson: I don't think I try to check up and I don't think I've lost too many to other builders. Like over the years, maybe. Two or three or four. Sometimes financing is the big holdup. Or they just changed their mind or it's, it's a little too overwhelming, it's a big deal. So, and it's a long process. So some people just aren't totally cut out for it once they find out everything about it.
But that's one of the beauties of the feasibility study. They definitely get their [00:12:00] money's worth out of it.
Kol: We should clarify that when I've seen your feasibility studies they actually include preliminary drawings of the ADU that you're talking about building.
Joe Robertson: Correct. So we do floor plans. They're they're detail. I mean, everything's on the floor plans, except for all of the notes and stuff that you need to put on for permits and exterior elevations. And we'll usually do we do it in Revvit. So we usually do a couple of 3d renderings either outside or inside or both. So when we go to final plans, we're just adding engineering and all the, the details that the city is going to want to see on the application plans and any changes the customer makes along the way.
Kelcy: You're saying the word rendering reminded me that can you tell us where you're sitting right now? Where we, where we think you're sitting?
Joe Robertson: Oh, well this is one of my ADUs I'm sitting on the floor. No, I'm, I'm actually in my office with a backdrop of a picture of one that we built.
Kol: We're going to go into [00:13:00] costs here. Joe, talk about cost and I can put myself on mute.
Joe Robertson: I hope my my dog doesn't hear. Cause it'll start to o. As far as costs, I noticed, I heard you say that we're one of the least costly ADU builders and I, I don't, I can't say that for sure.
And we don't want to be the cheapest, but we want to be as competitive as possible. And I think we were told that we are .I don't think I can say I've lost a whole lot because of costs I've lost. Maybe some that was more than the budget that the customer could stand, but not because I was competing against somebody else.
But we'd like to compete against other builders on a cost standpoint, because I think. We're not the cheapest, but I think we come out good. And I think we give the customer good value for the dollars they spend. But we are competitive for maybe three, three different things. One is, is volume because of the systems that we we have in place and our organizational systems [00:14:00] and skills we can build more ADUs.
We, we one year we built 20. I can't say that was comfortable, but it turned out well, all of the customers were happy with their product and we built them on time and budget. But 15 to 17 in that range, depending on size and complexity, is a more comfortable volume for us. But when you build in that volume, you can keep your cost, I think, a little bit more competitive and then 2, Our subcontractors and suppliers have been with me. Lots of them have been with me 20 years or more. Many of them 10 years or more. I think the newest one we have is three years . And so it, it develops a loyalty and it helps to control costs when you're not jumping around from subcontractor to subcontractor, especially in the market that we had before this little, a big crisis hit us.
And then, like I mentioned before in the feasibility study we designed, we were very upfront with the customer to get a budget up front. And then we [00:15:00] design to that budget when we're doing a design build. And we were pretty successful with that.
Kol: So let's talk a little bit about your business. How many, like how many full-time staff are there and what portions of the construction do you sub out and what portions do you do in house?
Joe Robertson: We're a small company and happy to be that way, especially when things turn down. It's myself, my wife does the bookkeeping here in the office. I have a project manager I believe you've met.
And then he has an assistant that he's basically training to to do more and more of his job. And I'm training my project manager to do more and more of my jobs. So we're, we're kind of building within at this point. And I mentioned near future. I don't want to grow any more than we are. I'm very happy with the size that we are and I don't really want to do anymore volume that I just explained -that works quite well for us. And we keep [00:16:00] it all the customers happy that way. So we're a pretty tight knit company. Our designer works for us on a contract basis, so per job basis, but he like all my other subcontractors. That's done all my work for many, many years. So it's more than just a, "Hey, go to this guy and get a plan drawn."
We've got a real good relationship. And then I also have a designer, like a selections coordinator, who is an independent contractor. She's also a designer for Nike who works with our customers. When they go in for permits, she starts working with them and helps them kind of hold their hand and help assist them all the way through making all their finished selections.
So that's the size of our business.
Kol: So what are some elements of ADU construction that make it more challenging than conventional single family home building?
Joe Robertson: So I've said this a lot -that building an ADU, like I said earlier, it's like building a custom home in [00:17:00] somebody's backyard- is more difficult to me - and I've got experience in building hundreds and hundreds of houses.
And building an ADU is more difficult than going out and building a 2,500 square foot house on a vacant lot, by far. As far as challenges, the access is the obvious one. And we built some that I look back and I can't, I can't even see how we did it, but where there's five feet between the house and the property line.
And we got everything through there, the concrete and the lumber and all the equipment and so forth, the grading. So access is always a consideration. We love, love, corner, lots, or alley, lots too love those. And then utilities, that's one of the first things when I go out on one of those site analysis to meet a customer, it's not fun or sexy to them, but the first thing I'm looking for is the sewer stack and where's the sewer and how to connect up the utilities and the electricity and the water. How many fixtures do they have in their house and so forth because the utilities [00:18:00] are, are, and particularly the sewer is, is one of the biggest challenges we have.
We gotta really gotta be creative sometimes to get that connected up. And then you're just, we're in urban neighborhoods. So parking is limited as far as getting deliveries and subcontractors have to park close to, to get the equipment out and load it into the job and so forth. That's always a challenge and... almost always a challenge... and neighbors not, that's not really a challenge, but it's something we could go out of our way to introduce ourselves to the neighbors.
Explain what we're doing to hopefully set their expectations and to take the fear out out of, away from them and have them contact us anytime they, they feel the need to. So that's something you don't normally do when you're building in a, in a subdivision somewhere. Those are a few of them. There's more.
Kol: Now last week we had on Ezra Hammer with Portland Home Builders Association, and I asked him about what [00:19:00] type of advocacy builders could do.
And I, I know that you and I have both worked on some system development charge advocacy and you actually were involved I believe with 2010 SDC waiver before I was. So can you talk about your role in political advocacy for lack of a better term for ADUs over time?
Joe Robertson: Yeah. I've been involved with the home builders for, for many, many years on different levels.
And when I was building ADUs probably know the year better than I do, but I think, I think back around 2009 head of head planner at the time who has since retired contacted me and, and I know him from just regular residential construction for years, and he knew I was building ADUs and asked me if I would help support them.
The planning department was going to go before the city council and ask for waivers on SDCs. This was during the recession. So they were trying to promote building, which was nice of them. And also [00:20:00] trying to promote ADUs, and so I did, I worked, I worked with him first and the preliminary stuff. You'd get a little presentation and have some other people there from the planning department.
I was the only builder at the time who had built more than one ADU. So I, I justified then they did waive the SDCs and that's where the whole thing got started. And then since that time, as you know, I've, I think has been three more times, I've testified to the city, every time it cause they, they waived them for three years and then another three years and another two years and so forth.
And so I've, and the last time, last two times, I think I've worked with you lobbying and, and testifying there. I also worked on a committee that worked with the planning department on access revising the code for accessory structures which includes accessory dwellings, but other things like garages and other detached buildings.
So I've had quite a bit of experience on that end of it over the years.
[00:21:00] Kol: Can you tell us about, I mean, you said you were building ADUs prior to the 2010 SDC waiver, which is when they kind of took off. Can you talk about how the 2010, SDC waiver impacted your business directly?
Joe Robertson: Yeah, it was kind of like the perfect storm.
And I, at that point, I even had a customer come in and testify to, to the city council at that time and tell what a big difference that, that it would have made for them. But yeah, it was like the perfect storm in that they did the waiver more and more people learn what ADUs were. I used to have to explain them to everybody that I talked to you and more and more people learned what they were love, the concept.
And then I was really shocked by how many people learned of this waiver as fast as they learned it. And so it was a real shot in the arm. And then we started coming out of the recession. So it was like kind of a perfect storm, everything coming to a peak with a demand for building ADUs. But it was [00:22:00] definitely spurred by the SDC waivers.
Kol: And I want to tie that into what we're going through these days. So let's talk about the impact of COVID. Could you talk about whether you've seen an increase or decrease in new inquiries since COVID?
Joe Robertson: Yeah, it's weird. It's a surprise, you know, what's up is down and down is up and it's, nobody knows what's going on, but it's it's been crazy.
So last fall we were three years straight. We were everything we could handle that keep, keep going with demand. And then last, late summer, early fall, it just kind of started dying down. And then I've seen your report since then and seeing it was not just us, it was industry-wide and, and ADU industry-wide.
But it really died down in fall and winter. And usually our, our interests level and leads stay pretty consistent throughout the [00:23:00] year. There's not a whole lot of peaks and valleys, excuse me. So I was concerned and then, and so we stepped up a little bit on our marketing and then in March late February, early March, things started picking up up significantly and then the COVID crisis now.
And, oh God, that's just going to pull the rug out from under us. Well, it hasn't, it's, it's been. surprisingly, and I'm glad, we've had more inquiries since, since the shelter in place than we had before. And it kind of makes sense and that people have more time on their hands. They're at home. They ...building an ADU may have been on the back of their mind, and now they have time to look --more time to look into it.
I don't know, but since shelter in place, we've signed four feasibility studies and two contracts. So it's as good as the good times, the best of times, just in this little short period of [00:24:00] time. So we'll see who knows in the future, all bets are
Kol: Well, that doesn't help me with my next question, which was what you hypothesize the next two years will look like for the ADU market. Let's just assume worst case scenario COVID is still in effect for. You know, a year or so, and we go into a recession. What do you hypothesize this would, how do you think this would impact the ADU market?
Joe Robertson: I think well, first of all, nobody knows, but here's what I think of that. I think the ADU market will stay healthier than other aspects of residential construction remodeling, probably not because you're in somebody's house. If this COVID crisis is still right up front people, aren't going to want you in their houses, obviously. Building an ADU especially a detached ADU, we're [00:25:00] out away from their house, a reasonable distance. And because of the size of an ADU, I built, like you said, a reduction housing for years, and we would just run people through there, like crazy to, to build them in 90 days and so forth.
We don't have that tight of a schedule on ADUs. Although we do schedule them really efficiently, but because of the size, you can only put one subcontractor at a time in there. So you can, social distance, or working distance pretty easily with a, with an ADU, as far as the marketing part of it.
I just don't know. If interest rates stay low, that'll help a lot. But if people are worried about their jobs or they're worried about the stock market, that's going to affect all of us. So it's, it's. Really a guess, but I think ADU construction will fare better than most other aspects of construction.
Kol: Yeah, I think that is true. And I think you, your experience in 2010 [00:26:00] and my experience with this market in general indicates that ADUs will fare, just fine, relative to other things in the face of a recession. So that's all, that's the only data point we have to go on. Really. So any significant changes to your business model in the last few years that you'd like to share?
Joe Robertson: Yeah. As far as the way we do things, it's pretty, pretty much the same, but we'd done that feasibility study program for 20 years. But we use a cloud-based construction management software now it's taken, it's a big, big program. It's taken us. Almost four years to get really up to speed, to all, to effectively use all the modules of it, but it's wonderful.
It it handles all aspects of our business from new leads for feasibility study process, all the documents scheduling owner selections, change orders, bidding estimating subcontractor control and all the communications between [00:27:00] subcontractors and us and us and the customer are all in that job for the customer.
And the customer has their own partner portal, excuse me, where they can pull it up on their phone or their tablet or their desktop. And see their schedule their plans, any documents and any of the emails back and forth, or our communications back and forth. And it's just been fantastic. Art. I mean, you used to drive around with a whole pile of blueprints in the back seat and a box of files and everything's in our phone right now.
And it's just been one of those things that now that we're used to using, it's been a big learning curve, but now that we're used to using it, it's like, how did we ever do without it kind of a thing? What customers love it.
Kol: What's the software called ?
Joe Robertson: Builder Trend. There's several of them out there. But we really, we shopped and looked into it and we just really liked this one.
Kol: One of the conversations, the recurring threads, that I've been having with several of the guests is about predesigned ADUs. And you [00:28:00] have some direct personal experience with this now, really interested for your take on these questions in a number of different ways. But let me just hand it over to you. Tell us about your experience with predesigned ADUs. How is that doing? What's the response been? What have, you know... and I'll ask you more about that in a second.
Joe Robertson: Okay. So yeah, so I mentioned working with the planning department and when they revise the code for accessory buildings and includes accessory dwelling units part of the changes where they allow we have in Portland generally speaking side yard and rear yard setback of five feet.
And so that's where you have to place an ADU that the closest you can place it to to a property line, but they one of the amendments to the code was they will allow small structures, one level that are no longer than 24 feet in either direction, and one level to be closer to the property line.
Technically you can build it right up to the property line, but we'd never recommend that. But but-- three feet, [00:29:00] two feet-- makes a big difference on a 5,000 square foot lot. So, and they, they relaxed, if that's the right word, the restrictions on the aesthetics of it, how that has to look, they, they made a little prescription that if you follow this prescription, so that meant you could design a building that a little ADU that could fit on anybody's or that could work.
On theoretically on anybody's lot throughout the city, that's encompassed in that code. So we, we came up with three or four of them, a one levels and developed pricing for them and put them on our, our website. And it's been pretty successful. They've all been modified somewhat because you have to, to make them work on the site with flipping them or window locations and things like that.
But they're basically the same plan built, built. None of them look identical, which is good. But they've been pretty successful. I think we've, we're up to seven of them now that we've built. So now we've just come out with a two-story model that does [00:30:00] have to be set back in five feet, but it meets the criteria.
So it could be built on other areas throughout the city. And we're gonna do a little smaller two-story one coming up.
Kol: All right. So, so let's, let's give a little bit of insight about. Well, first of all, what's the value proposition to a homeowner for a pre designed unit? And then what are some considerations that new builders to this space should consider if their business model is contingent upon a predesigned ADU?
Joe Robertson: Hmm. Okay. Well, if you, if you look at ours on our website, it says there are no changes are allowed. Well, that's, that's in a perfect world and we can't really do that. You have to be flexible to make it work for the individual on their site. So we do changes but [00:31:00] what the advantage is- is the price has predetermined. You know what it is right up front. We, with that price, we show them what's included and we have allowances for like quartz countertops, lVT flooring, a plumbing fixture package. And then we say, this is, what's included in this price for this ADU. You don't have to go with that, but this is what's allowed for.
And a lot of people will stick with it. Other people want to just pick new stuff, but they know for that price, with these materials that they can. So it takes a lot of the uncertainty out of it. I would like to say that it goes through the permit process faster and it should but I can do a whole, whole hour long on the permit process, so I won't go there, but it does go through quicker, but not as efficiently as it should.
And maybe that'll change one of these days. I don't know, but that was the intention. Was that okay, you guys have reviewed this over and over [00:32:00] again. But so far they keep coming up with new stuff for us to deal with, but that was the intention to begin with is that we go through the permit process a lot faster too.,
Kol: And advice for other builders in that particular regard?
Joe Robertson: Just to be, yeah, it's a fine line to try to be predesign and sell up package if you will, and being flexible. You pretty much have to mix the two together. I see a lot of pre built ADUs, which I think is a great thing to market, but you're really limited on where those can go for a variety of reasons. So I wouldn't make it just a cookie cutter thing. I don't like myself to build two of the same thing.
I liked the fact that every one of ours looks different, but I think maintaining some standards that gives the customer certainty on [00:33:00] price and design and combining it with a little bit of flexibility to allow them to tweak it to their, their liking and what works on their sites, the key to make it work.
Kelcy: I love this one from Kevin. What are some of the mistakes you've made that you've learned from the most?
Joe Robertson: Oh boy lots over time. And that's true too. Just construction in general.
One of the big things with building ADUs of people's backyards are I mentioned the utility connections being a challenge, but also when you're connecting-this maybe boring to some, but when you're connecting sewers and waterlines to existing basements, what you create, but when you fill it back up is a weak spot in the soil to where a groundwater will go to and run down the path of least resistance, which is the pipe and direct it right to the customer's basement, where you're [00:34:00] going into to tie into the sewer.
So we've learned all kinds of new techniques to stop that water and to waterproof the basement. So we don't get a call on a Sunday night with somebody having water in their basement that we have supposedly caused. So that's, that's one big one that, that did wake me up in the middle of the night.
Kelcy: Great. Thank you. Does the feasibility study include a survey per test or soil test?
Joe Robertson: We, we do a, a perk test ourselves when we are going to use a stormwater system like a dry, well we'll just dig in and do the perk test ourselves, which is a requirement of the city. When you apply for the building permit, we don't do it in the feasibility study.
I know, excuse me, from experience that properties on the east side of the river here in Portland, drain pretty well and will accept dry wells and properties on the west side of the river won't. And so [00:35:00] there's things like that, that we know whether to do it or not to do it. We get the survey done. The survey is required almost in every case.
While it's going through the permit process, if we're reasonably sure where the property lines are within, say a foot, which you usually are in the city, lots but it is required that you have a survey and, and build that into the estimate and soils only if you're on a, what the city considers a sloping lot.
Do you have to have a geo tech survey done? We have one right now that had enough slope to where we had to have a geo-tech and then he comes out. Once we dug our footings before report concrete and inspected and write up, write a report, but not very often.
Kelcy: Speaking of the utility, can you say, what percentage of ADUs you hook up to the existing property versus directly to the city?
Joe Robertson: Almost always the sewers hooked up to the existing property. We've had a few that were like, went from- it had a front edge on two streets to where [00:36:00] we could tap the sewer separately for the ADU, but that's really pretty unusual. So you usually share the sewer with the water. That depends on how many baths are in the existing house and how many you're building in the, in the ADU.
Whether you can share the water with the house, you can always share it, excuse me with the house, but you have to upgrade the meter so big that it kinda makes sense sometimes just to put a separate meter in for the ADU. But if you can share it, you're much better off from a cost standpoint. But I'd say maybe 70% of them we share directly with the house.
music: Okay. Thank you.
Kelcy: Do you know what percentage of the ADUs you built are going to be given and inhabited by family members and friends versus those are going to be directed rented out for a long term rental or short term rental?
Joe Robertson: Yeah, that's a great question. And when I first started this way back, I thought, oh, rental property, everybody's going to [00:37:00] want to investment and have rental property. It makes so much sense. And it does, but almost half of them aren't strictly rental. We do a lot of houses for aging parents where the aging parent actually pays for the ADU on their adult children's property.
They live in it for. However long. And I love it because it's a, win-win win for everybody. The adult children get all the value increase on their property in a future rental. And I think that whole aging in place thing is growing and growing. And I think it's going to become more of a factor, but that's, that's my favorite use for ADUs, but all kinds of other uses and the beauty of an ADU is it can change on a dime.
You could change the use of it from year to year. You can't easily in Portland change from short-term rental, to long-term rental, but you can go long-term rental to studio, to office, to grandmother's staying in it, to a kid getting out of [00:38:00] college and in-between careers or whatever. So there's a lot of flexibility there, but it's not strictly rentals. I would say 60 to 70% maybe rentals and the others are family and other uses.
Kol: Let me jump in with a little bit of commentary on this. So in the, there was a couple surveys that have been conducted in the city of permit data ADUs. And, and from those surveys, we know that there's really just two main motivations of why people build ADUs is that's passive rental income potential, and multi-generational household flexibility.
It's oftentimes like Joe is articulating a combination of those two things. It's sometimes like I have a parent who's going to be moving to down eventually, but I want a I want to have it as a rental in the interim or, or, you know, some kind of combination like that. So, but it's usually those two motivations coupled together.
Kelcy: This one, how are most of your customers financing their ADUs and for those that are [00:39:00] financing, can you offer any insight on what has flowed the best without hiccups?
Joe Robertson: Yeah. And I think Kol can probably speak to this better than me too, but from my experience if it's, if it's for a elderly parent, then that's probably cash because they probably sold their big house that they've lived in forever and they have a bundle of cash that they're sitting on and, and this doesn't use it all up and they can still have a house paid for essentially.
And money left over for the average individual. That's going to rent it out or for other purposes. If they have it, the home equity loan is by far the best way to go least restrictive. They control the money. But if they can't, if they don't have the equity, then the next step would be an actual construction loan, our refinance of the whole property.
The construction loan part works just like a builder works with the construction loan where. They borrow the money just to build it. And a bank comes out and makes inspections and then releases money to the builder on a monthly basis. And that's okay. [00:40:00] It's just a lot of paperwork and red tape and they put the customer through a lot more of a ringer than, than any other types.
So I'm sure you've got more on that Kol.
Well, I, I I've actually liked to die to go into that last topic a little bit without calling out any particular banks. I, my impression is that renovation loans, construction loans are great that they're there, but that they're a pain in the butt. And I don't know that there's anything that can be done about that.
But I usually put it out there as like the, you know, if you can do a, HELOC or a cash out refi, go with that. But I'm really glad that banks are doing renovation loans, construction loans. Can you talk a little bit about some of the. Like, would you turn away a job because it was using that kind of construction loan financing, and it was that much of a hassle or like, tell us a little bit more about your experience as a builder with that?
Honestly I felt like it, but I was already too far into it to turn around [00:41:00] and I would have left the customer, holding the bag, so to speak because it's not so bad for me. Once it's set, then I have to go off of their draw schedule and fill out their forms and they check me out financially and all that and check the CCB and all that, which is fine.
I've got those forms already prefilled out to send in when they ask for them. But what they put the customer through. We had one that was attached ADU in Southwest Portland and these people were financially sound, but I bet it took six months for them to process that loan. And they just kept asking for more and more and more, and the people were just frantic over it.
And I wouldn't have ditched them at that point, but I felt like was just get out of this thing, but it worked out in the end and they're glad they did it now, but it was painful. And I think that's going to get more competitive and I'd like to think that it would get more [00:42:00] streamlined. It's way, way too cumbersome. It, it just doesn't need to be that way.
Kol: So, so from the homeowners vantage, it's definitely, you're validating that it is a pain in the butt. And that's every, every time I've talked to somebody who's gone through it, it's a pain in the butt. And from a builder's perspective, you think it's worked okay, but you've gotten paid after each phase of construction, which is not typical. Is that correct?
Joe Robertson: Yeah, we, we, we have a regular draw schedule in our contract that is X percentage at a real defined stage of completion, like 20% when the foundation's in and all the utilities are hooked up and 25%, when it's framed up to reef, sheathing and stuff like that, we have to find out all the customer can understand it. It's fair. But with. With a construction loan through a bank, they've got that, you've got to convert to their forms and they have to check their forms off in a certain way. And it's just more cumbersome and it slows the process down a little bit, but I [00:43:00] can live with that if they would process the loans better for the customers.
Kol: Yeah. And I, I just want to be clear that while I think it's this form of financing I think is just objectively, has been historically a pain in the butt. I still am so thankful that it's there. I think it's a great mechanism and I don't necessarily know what banks could do differently. I just know that that's what I've heard from people about.
Joe Robertson: Yeah, unfortunately that hasn't changed much so far.
Kelcy: What other costs can a homeowner expect to pay, even with the turnkey price of the predesign unit, such as site work, utility hookups, permits.
Joe Robertson: Good question. So when I did develop those pre designed ones and did a cost estimate on them, I went back through historical data as far as costs, and I figured an average site development costs for grading utility connections and so forth backfilling, anything to [00:44:00] do with the site.
It's, the rest is pretty easy to estimate, so I just average it too. So in that cost is average site work for us. Average 5,000 square foot, lot of a house in Portland with reasonably good access. Access can cost a lot more if you have to do special gymnastics to get in the backyard. So so that will fit most situations in Portland.
So as far as additional costs, if you're over and above that, of course the water line. If you have two and a half baths in the house and you want to build an ADU, then you're looking at a $7,000 meter upgrade or a new meter costs. So that's not in there, but most older Portland homes don't have two and a half baths.
So then we are turnkey. We typically include what we have to put in. As far as appliances we put in a dishwasher, if they want it oven [00:45:00] freestanding range, oven, and a hood or micro hood above that. We don't typically, and they're not included in the predesigned cost, the washer and dryer or the refrigerator.
Cause those go in after we're done and they're not required for any inspections. So to be move-in ready on the predesign ones that we have, you'd have to add the refrigerator washer, dryer, and any window coverings blinds that you're going to put on the windows. Then it's a hundred percent ready to move into.
Kelcy: All right. Thank you. I know you kind of talked about your side of the business in that you're still seeing contracts being signed. You've signed a couple of contracts. I'm just curious about the supply chain or labor. How has that been affected? And do you think that that is going to continue? How does that look?
Joe Robertson: Boy, this is just such a new and different situation. What I don't hope doesn't happen is what happened after the last recession to where there was so much demand and the subcontractors [00:46:00] and suppliers were had way more business than they could handle and, and were understaffed and couldn't get help.
I hope this is more of a gradual recovery, so to speak to where we don't have it. Cause we had awful lot of. Pretty drastic price increases during that period of time too. I couldn't keep up with it. When people would ask me, what do you think this is going to cost? I really hesitated because it changed so fast.
And if I set a number out, I'd be the bad guy a month later when it when the cost change. So I hope that doesn't happen. I hope it's a gradual thing. And I think it, maybe it will be a gradual thing by the way. The talk is about gradually opening things up as we go. So
but hopefully we won't see the kind of price increases that we did before after the recession.
