Housing changing households: regulatory challenges for micro-units and accessory dwelling units.

• Author: Infranca, John

INTRODUCTION I. THE NEED FOR NEW FORMS OF HOUSING A. Growing Mismatch: Demographic Changes and Existing Housing B. Criticisms and Claimed Benefits 1. Micro-Units 2. Accessory Dwelling Units II. THE STATE OF MICRO-UNIT AND ADU DEVELOPMENT C. Cities with Micro-Unit Developments D. States and Cities that Encourage ADU Development III. REGULATORY CHALLENGES FOR MICRO-UNITS AND ADUs A. Austin B. Denver C. New York D. Seattle E. Washington, D.C. F. General Financial Obstacles to Micro-Unit and ADU Development IV. THE WAY FORWARD OR A PASSING FAD? CONCLUSION INTRODUCTION

In recent decades, household sizes have shrunk and more people are living alone. At the same time, individuals are living longer and the number of multigenerational households, which were more prevalent in prior generations, is increasing. Available housing units frequently fail to match the needs of a city's evolving household forms. Regulations that fail to keep pace with these changes exacerbate this misalignment. In the words of one prominent affordable housing developer and advocate: "Of all the things that get in the way of better and more affordable housing options, the biggest obstacle may well be the tangle of building, zoning and occupancy regulations governing what can be built and how it can be used." (1) This regulatory tangle does not prevent the construction, in cities throughout the country, of illegal housing units that do not conform to zoning or building codes and that may not provide safe living environments. (2)

In response to unmet demand and illegal units, some jurisdictions have altered regulations to pennit the development of different types of housing, including both accessory dwelling units and micro-units. Accessory dwelling units (ADUs), which are often referred to as in-law units or secondary units, are self-contained units located on the property of a single-family home. While ADUs--which in the past were prevalent in many areas of the country--are particularly suited to lower-density areas, multifamily buildings with "micro-units"--multiple small individual units in a single structure--may be more appropriate in denser communities. (4)

Developers in a variety of jurisdictions have shown interest in both unit types. New York, Boston, Seattle, and San Francisco either allow or actively promote micro-units. A range of communities have changed regulations to permit construction of ADUs. Santa Cruz, California, for example, provides technical assistance to prospective ADU landlords, pre-approved designs, a low-interest loan program, and other resources. Supporters champion both ADUs and micro-units as a means of providing affordable housing, reducing sprawling development through urban infill, mitigating the energy usage and environmental impact of larger developments, and allowing seniors to age in place. (5) City planners, business leaders, and local officials have embraced micro-units as a means through which expensive cities can attract and retain young professionals. (6) However, given the nascent attempts to permit and encourage these housing types on a larger scale, there have not been comprehensive analyses of their actual effects.

There has been some prior study of regulations affecting ADUs, and advocacy organizations have drafted model ordinances to enable the construction of these units. (7) These analyses have been tailored to a single jurisdiction or a small number of neighboring jurisdictions and have focused on ADUs and not micro-units--which raise distinct regulatory issues. This Article provides the first comprehensive study of regulatory challenges to both ADUs and micro-units in a geographically diverse range of jurisdictions. Given the overlapping purposes ascribed to these unit types--reducing sprawl, providing more affordable housing, and responding to changing demographics--jurisdictions would benefit from considering both forms of housing as they evaluate potential regulatory changes.

This Article focuses on regulatory and other challenges to developing both of these unit types in five cities: New York, Washington, D.C., Austin, Denver, and Seattle. (8) Part I discusses how changing household composition is resulting in a mismatch between housing needs and existing housing supply. It also reviews the claimed benefits and potential criticisms of micro-units and ADUs. Part II surveys existing developments of these housing types throughout the United States. Part III reviews the status of micro-unit and ADU development in the five study cities and highlights the key regulatory and other challenges to developing these units. Part IV highlights the key lessons from this regulatory analysis and evaluates whether the demand for these units is a passing fad or signals a more substantial shift in housing and planning patterns.

1. THE NEED FOR NEW FORMS OF HOUSING

   1. Growing Mismatch: Demographic Changes and Existing Housing

      Changing household compositions render the existing housing stock inadequate for many households. Figure 1 depicts the dramatic increase in the share of households consisting of one person. (9)

      As shown in Figure 2, in each of the five cities studied at least one-third of households consist of just one person; in Washington, D.C. nearly half of households consist of one person living alone. The share of one-person households grew in all of these cities between 2000 and 2012. (10) It is no coincidence that the number of one-person households has grown as an increasing share of adults are delaying marriage or choosing not to marry. One-in-three adults in the United States were single in 1950. (11) By the 2010 Census, the share of adults who were single (but not necessarily living alone) had risen to 48%. (12) In addition, the number of marriages declined from 8.2 marriages per 1,000 individuals in the total population in year 2000 to a rate of 6.8 marriages in year 2011. (13)

      Since 1965 there has been a consistent net migration of single, college-educated individuals between the ages of twenty-five to thirty-nine into major metropolitan areas of over one million individuals. (15) These areas were often marked by out-migration among the total population. Although many of these newcomers live alone, they are often very socially active and spend considerable time in public spaces. (16) Younger adults delaying marriage are not the only group contributing to the growing share of adults who are living alone. The share of Americans over the age of sixty-five grew from 7% in 1940 to 13% in 2010. (17) Over 40 million Americans are now sixty-five or older. This is more than quadruple the number in 1940. (18) Twenty-eight percent of individuals sixty-five or older lived alone as of 2010. (19) Coinciding with the rising number of single households, since 1980 the average family and household size has declined nationally. Family size fell from 3.29 individuals in 1980 to 3.14 in 2010, and household size declined from 2.76 to 2.58 over the same period. (20)

      All of these changes increase demand for smaller housing units. However, in many locales there is a substantial gap between the number of single-person households and the stock of studio and one-bedroom units. (21) The number of single persons living alone--the vast majority of whom would likely find a studio or one-bedroom apartment to be the most affordable housing option--exceeds or nearly matches the number of studio and one-bedroom units in each of the five cities. If you add to this group the number of households consisting of couples with no children, some share of which would likely prefer a studio or one-bedroom to a larger and likely more expensive two-bedroom unit, the total number of these households far exceeds the stock of smaller units. In addition, the substantial number of unrelated adults sharing a unit in each of these cities may indicate hidden demand for studio and one-bedroom units. A market survey by a California-based multi-family developer found that 62% of respondents would prefer living alone, even at a higher cost, to living in a larger apartment with a roommate. (22) Figure 3 depicts the cumulative number of these three household types and compares this to the number of studio and one-bedroom units in each city.

      As households grow smaller and more individuals live alone, a different phenomenon is also changing household compositions. A recent report by the Pew Research Center found a "revival since 1980 of the multi-generational family household." (24) After reaching a low point in 1980 of 12.1% of the population, the number of people in multigenerational households (25) increased to 15.1% in 2000, and 16.1% in 2008. (26) This reversed a decline--between 1940 and 1980--by more than half of the share of Americans living in these households. This growth is attributed to the rising immigrant share of the population, which is more likely than native-born Americans to live in a multi-generational generational household, as well as an increase in the median age of first marriage, which is associated with more adult children living in their parent's homes. (28) The total number of multi-generational households increased to forty-nine million as of 2008, up from thirty-two million in 1950. (29) Some cities are expressly identifying the prevalence of these households as a reason for permitting ADUs. (30) In addition, developers, including Lennar Corporation, PulteGroup, Ryland, and KB Homes, are providing more flexible layouts that include accommodations for ADUs. (31) At the same time, the growing percentage of young adults moving back home and living in a multigenerational household (32)--due to factors including high housing costs--may reveal potential demand for more affordable micro-units.

   2. Criticisms and Claimed Benefits

      Although there is little empirical evidence on the effects of micro-units and ADUs, critics and advocates make strong arguments regarding both housing types. This Subpart reviews the key...