As homeowners in Minneapolis’ Longfellow neighborhood, Stephanie and Ross knew they needed to tear down their detached garage when they were expecting their first child about two years ago. The old structure was in bad shape and couldn’t meet their new needs for space with a child on the way.
But, in those early days of construction planning, the couple realized another issue with their property: Where could they comfortably host grandparents from out of town, now that their family is growing in size? That’s when they decided to build a new one-bedroom apartment on top of a future two-stall garage, making for a home-improvement project that felt like one for the benefits of two.
“For us to stay here (in Longfellow), we needed more room,” said Stephanie, standing in the apartment over the weekend. Crews on Friday had just finished the unit, which shares a lot with the family’s main residence and has a private entrance via an alley.
Dubbed an accessory dwelling unit (ADU), the new space is one of some 150 similar structures in Twin Cities’ neighborhoods that are mostly for single-family homes, according to the Family Housing Fund, a Twin Cities housing nonprofit. Since cities have passed ordinances permitting ADUs in recent years, property owners and city planners have touted the housing structures as a low-key solution to adding more housing without changing the look and feel of neighborhoods, or upsetting people who do not want taller or bigger houses near their own homes.
Urban planners and elected officials across the metro — and state — say they are working with new urgency to try and fill a shortage of housing by building more. From new language in city codes that aims to protect renters to a first-of-its-kind zoning change in Minneapolis to increase residential density everywhere (via Minneapolis 2040), politicians in the Twin Cities have introduced a slew of new policies over the past year as possible solutions to the housing gap.
But less discussed has been if, or to what extent, ADU’s have made a dent in that problem. According to local architects and experts in housing trends, the structures’ high cost of construction — which can range between $140,000 and $320,000 in Minneapolis — and building requirements can deter people from adding the new type of development. Sarah Berke, a program officer at the Family Housing Fund, said accessory dwelling units aren’t as common in the Twin Cities as they are in other places.
“The potential for ADU development in the metro is still, I would say, largely untapped,” she said.
Adding housing very gradually
According to code, ADUs can be attached to homes as mother-in-law units, detached as cottage houses, in yards as garage apartments or inside the main residence (such as a basement or attic apartment), among other housing types. All must have plumbing, electricity and basic amenities for living, as well as their own entrances.
Homeowners typically build them for similar reasons: to host overflow guests, to gain extra rental income, as a smaller home to move into later in life or to provide a new house for adult children. In Minneapolis, ADUs must be at least 300-square feet and owners of the main residence must live on the property.
“In Minneapolis, it was about allowing more housing choice … but not really altering the character of the neighborhood,” said Shanna Sether, a principal city planner.
From the perspective of local architect Theo Grothe, who works for the firm that designed Stephanie and Ross’ new detached garage-apartment, more and more residents are interested in ADUs as time progresses.
Since 2015 — the first year in which Minneapolis residents could apply for permits following a new ordinance by the City Council — construction peaked in 2017 with 38 new ADUs. In total, the city has permitted 137 ADUs. They are on about 0.2 percent of single-family lots.
“It’s about what we expected,” said City Council President Lisa Bender, who authored the zoning-code change in 2014.
Meanwhile, St. Paul has four permitted ADUs. The city adopted an ordinance that allows the housing type in certain parts of the city after Minneapolis, in 2016.
But it’s not just the urban core that’s home to accessory dwelling units. Many Twin Cities suburbs have passed ADU ordinances in recent years.
Roseville passed an ADU ordinance nearly a decade ago. Since then, a handful residents have gone through the permitting process to build an extra unit on their property, said senior city planner Bryan Lloyd.
When a resident applies for a permit, the city mails notices to neighbors. The most common feedback is calls asking “‘That’s a thing? How can I do that,’” Lloyd said, “As opposed to ‘We can’t have another house in my neighborhood.’”
That seems to be the case in Minneapolis, too. Bender said despite initial concerns when the council adopted the ordinance — most of which from a group of residents who argued ADUs would complicate parking and traffic — she too has not heard opposition to their construction in recent years.
“One of the concerns we heard was that suddenly neighborhoods would change very quickly,” she said. “(But instead) it has felt that this is a way to add housing very gradually in neighborhoods, in a way that neighbors probably don’t even notice.”
Expensive dwelling units
For Joe Slavec, owner of a Minneapolis construction company, the topic of ADUs is exhausting. He said he and other local construction businesses spend a lot of time talking about them with potential clients — and even sometimes do bids on projects — yet some 90 percent of plans don’t materialize because of the structure’s price.
“We’ve done the math, and we’ve built a few. They take a lot of extra work,” said Slavec, of Minneapolis Garage Builders, LLC.
Across the country, the price of new construction is at its highest it’s been in 70 years, a BuildZoom analysis of R.S. Means’ construction price index found.
Another challenge for interested homeowners: Borrowing the money to build an ADU isn’t necessarily the same process as borrowing to build a house. Financing can be an impediment, since there’s still a lot of gray area in terms of assessing a property with an ADU on it, and there can be hurdles to getting a loan to build an ADU intended as a rental unit, said Berke, of the Family Housing Fund.
“If we want to see more accessory dwelling units, the big barrier is cost,” Bender said.
Beyond price, Slavec said clients’ expectations on timing for construction can also be a challenge — homeowners often want ADUs built fast. But the accessory units require special inspections and building requirements compared to other residential properties that can slow the process.
Bender said the inspections — which should include all rental spaces inside existing homes, under the ADU ordinance — aim to ensure that people are living in spaces that are safe and legal.
“We make sure that the existing structure is allowed in that zoning district. We make sure the principal use is already allowed. We verify owner occupancy because that’s one of the requirements today in the books,” said Sether, the principal city planner in Minneapolis. “We’re also checking for height, setbacks — things like that.”
Easing regulations
In other cities, the number of ADUs increased after city planners relaxed regulations, and in some cases offered incentives or outreach campaigns, according to a report by housing researchers at the Terner Center for Housing Innovation at the University of California-Berkeley and other housing research organizations.
In Portland there are ADUs on about 1.5 percent of single family home lots, Berke said. In order to hit that benchmark Minneapolis would need about 1,200 ADUs, St. Paul would need 888, and the Twin Cities region would need about 11,000, according to a MinnPost analysis of MetCouncil data.
Portland’s modest ADU boom is relatively new. The number of accessory units increased as housing costs have risen and as the city took steps to make it easier, and less expensive, to build them, waiving some fees associated with new construction on ADUs; allowing short-term rentals in ADUs and loosening design and setback rules. (Sether, a principal city planner in Minneapolis, said they studied ADUs in Portland and other cities as the city wrote its local ordinance years ago.)
Other cities have seen the number of ADUs increase after removing barriers to building them, too, the report found.
A different conversation
The Family Housing Fund suggests practices to help boost ADU construction and relieve housing pressures in Minnesota cities. Among them are allowing all different kinds of ADUs — attached, detached, and interior units — and reducing or removing rules like parking minimums, design and occupancy standards, height limits and size limits.
“Cities can really pass ordinances that make ADU development easier and more likely to happen,” Berke said.
St. Paul loosened restrictions on ADUs recently. Initially, in 2016, the city adopted an ordinance that allowed ADUs within a certain area: a half-mile north and south of University Avenue, from Lexington Parkway to Emerald Street. In 2018, it revised its ordinance to allow them throughout the city.
St. Paul has permitted four ADUs, but expects to see more now that they’re allowed citywide, based on inquiries from residents, said Suzanne Donovan, a spokesperson for the city’s Department of Safety and Inspections — especially as construction season starts.
Across the river, Bender described the 2014 ADU ordinance as a “baby step” to diversifying housing options. The city’s long-term plan for development, Minneapolis 2040, which the City Council finalized in December, eliminates all single-family zoning to allow multi-family housing of up to three units on every lot. She said that call for more residential density essentially loosens ADU rules since owners of single-family lots who don’t live onsite would be able to rent out units, as well.
“Five, six years ago that conversation was different. Now, there’s more support and awareness around the need for rental housing in our city, which is a majority renter city,” said Bender, who represents Ward 10 neighborhoods that include Lowry Hill East, Whittier, South Uptown and East Harriet. “Places like Ward 10, which are 80 percent renter units, there wasn’t an opportunity to do an ADU, and in other parts of the city that have high demand for rental housing.”
After that change, the council president wants the city to take note of other metro areas’ use of accessory dwelling units to ease a shortage of affordable housing, specifically.
“I do expect that, over time, we will slowly start to see more of these depending on how, you know, the housing market is going, what construction costs look like — all of those factors,” she said. “Over time as we learn more about ADU’s, and now that we’ve made them possible to have in renter-occupied housing, you know, I think we can expand the opportunity to use it as an affordable housing strategy.”
As a builder I can assure you, building more housing units will not reduce rental rates, as long as 40 years of structural impediments to wage and benefit growth remain in place.
Rental rates continue to climb, while many working people remain stuck with service wages that are in fact less, relative to the economy, than they were in 1990.
That and the high cost of debt for working people, with the profound increase in debt for working people, while the regulatory regime favors consolidation and “rentier/creditor” money, assures increasing poverty status for more people over time, more people less able to pay the rent, no matter how much housing there is.
It is not merely “supply and demand”, build more and they will come. They simply can’t if they don’t have the money.
I couldn’t agree more with Mr. Duncan. We don’t have an affordable housing crisis–we have an income crisis. As he points out, real wages haven’t increased in 30 years while the cost of building any housing has continued to grow (I’m sure Mr. Duncan knows that much better than I). You can’t pay more for wood, skilled labor, land, plumbing, etc., without increasing the cost of the finished product.
Once we solve the income issue (for which I don’t have an answer) we may solve the housing crisis.
That’s an astute and well thought observation. The last 40 years of neoliberalism can be summarized as Socialism for the rich, and Capitalism for the poor.
Stagnant wages are a problem, but the rest is nonsense. Increasing housing supply has and will reduce housing costs.
Pat,
If you are going to use a word like nonsense to critique my argument, you might want to expand on why you think adding housing will bring rents down, more than simply saying it will, and acting like we should all just understand that.
Supply and demand. Look at wages in the central city, the wages in places where YIMBYs want to increase supply. They can support what your generation (I’m guessing your age, apologies if wrong) paid for housing; there’s simply no policy reason for housing prices to rise faster than inflation or treasuries.
True – adding housing will reduce housing costs. It just might not reduce those costs in Minneapolis. We are seeing rural areas shrink in population and urban areas increase. There is a lot of unmet demand for housing in Minneapolis from people who don’t currently live in Minneapolis. In fact, some of those people may not even live in Minnesota.
I seriously doubt the housing market is not subject to the laws of supply and demand like any other market.
I see ADUs as a mild, incremental form of densification in the sense that each is only a tiny change that can have limited impact on neighborhood conditions. We need more of them. 70% of Mpls-St.Paul properties are single family units. Compare that to 57% in Chicago or 54% in Boston or 55% US avg.
As someone who has read about numerous cities where building housing has reduced rental rates, and who also understands basic economics, I can tell you that you are completely wrong. You can fantasize about huge structural changes to how the American economy works, or you can so things like this that actually make a difference.
Pat,
Wages for service employees are stuck at about 1985 numbers, but building costs are 2019. Flood the market with housing and all you will do is bankrupt most of the builders, ala 2008. As an actual builder/remodeler working in the trade for 25 years, I will repeat again and again, if we are going to depress wages and benefits for forty years, we don’t get to pretend more of the same is going to fix housing problems.
Stagnant wages are certainly a problem, but housing costs are driven by supply and demand. Increasing supply will reduce pressure on prices. It works in theory and in practice.
Pat,
I think there is a flaw in your faith that housing prices are directly related to supply.
2002-2007, the housing bubble, prices shot to the moon. The economy collapsed, people dropped out of the work force in droves, prices collapsed but somehow rents didn’t really go down. Why? Because when you build a structure that requires you charge say, $1000/mnth, the debt does not disappear when the market collapses. It drags on the economy, and it still needs to get paid.
In 2019, housing prices are now even higher relative to the economy than they were in 2007. So now say we build like mad, housing that working people can afford. And then just about the time it evens out, boom, the economy goes bad, those rents are not going to change because the debt has to be paid, but people are losing jobs like crazy, now who can afford rent?
The moral of the story is, this boom bust cycle we have been on since we financialized the economy in the 70’s (gave the keys of the kingdom to bankers) perverts your supply and demand theory, with so much debt building over time, so much free money for the big players, and so little gains for the majority. Until those structural problems are addressed, build all you like and prices I predict will not go down.
I don’t think I’m saying that supply doesn’t matter. But there’s been a lot of supply built from Dean Parkway to 35W in MPLS,both along Lake Street and the Greenway. I don’t think that supply has caused rents to decline in that part of the city. This has been repeated throughout MPLS and the suburbs.
I also don’t think it’s a fantasy that the structure of the American economy has changed. When capital is cheaper than labor (which it has been for a long time), when we have more of a service economy than a manufacturing one, and when the tax structure favors one kind of income (capital gains, primarily) over another (earned income) you end up with an economy with stagnant wages for the middle class (and high unemployment for a whole segment of the population). Without changing that dynamic you can’t have a steadily increasing cost to construct housing that is affordable.
Ok, I don’t think many people think increasing supply is the only solution to the problem of high housing costs, but are you suggesting that we *can* solve the problem while not increasing the supply?
The cities are growing and it appears demand is not going to decrease. It is not as simple as supply and demand, but are you denying that supply and demand is one of the important factors?
Eric,
Of course supply is an issue. Builders have been incentivized for a long time to build little but McMansions and condos. My point is, many people act as though you can depress wages for the working poor for 40 years, but somehow building a lot of housing units at 2019 costs will all just magically make the working poor able to pay for that housing.
Many people who have managed well in this economy have turned a blind eye to the fact that a lot of their success has come at the cost of the working poor. We get to shop at corporate big box stores, but try working there and tell me you can afford rents. My wage at SamsClub in 1991 was about two times what most big box employees make today, relative to inflation. Until Dem and Liberal types start facing that fact, they are sure to continue to lose elections, btw. And the people working there are going to continue to struggle to find housing they can afford, no matter how many units there are.
One of the problems with ADUs is the high cost due to absurd government regulations. In St Paul if you want to put an apartment in a Carriage House, it needs its own water and sewer service from the street, which adds $30K+ to the cost vs. tying into the service to the main house. Why is this needed???
Its ridiculous how many new apartments are being built across the metro. Yet, they remain empty because the rent is not affordable for the people who are in need of housing. For example, I have been searching for a place for about 5 months with no real luck. Sure there are plenty of available units, mostly new construction, but the rent is typically 2x what I can afford. The places that become available that are in my price range are rented within a week of them being posted. It’s so fustrating. It honestly makes me feel hopeless in my search for a place to live. I am also a single woman in my late twenties with a dog, so a good neighborhood is important to me. Having a dog makes it difficult to find a place, and increases the move-in expense greatly.
That isn’t true – the apartments aren’t empty. The reason you see the ads is because they are new. The rental vacancy rate is still very low. At the point when too much new rental housing has been added, the prices will go down.
Here’s some numbers on vacancy rate vs rent: https://streets.mn/2018/08/21/chart-of-the-day-twin-cities-rental-vacancy-versus-average-rents/
If you want to have a lot of options on a rental apartment, then you shouldn’t have a dog. If you have a dog, you should be looking at buying a house or a condo.
Maybe that’s true in what I once thought was “progressive Minneapolis”. It’s not true in Madison, WI, which I just left, or, Phoenix, AZ, which I just moved to.
At any rate, it’s time for that standard to die its overdue death.
Oddly the 2040 Plan is not mentioned at all in this article which will pretty much eliminate the AHU program. I have looked into building an AHU by tearing down the garage and building a new garage with an Apartment on top. The only issue is that my main house is only a single story and AHUs cannot exceed the height of the main dwelling. I’m going to wait to see how the 2040 rules on adding additional housing units shakes out before proceeding.
Mpls2040 should significantly accelerate ADU construction since it eliminates one of the largest regulatory barriers – the existing requirement to add owner-occupancy requirements onto the property deed.
According to Lisa Bender, and this article, any restrictions on ADUs have been eliminated buy the zoning changes in 2040: No resident home ownership required any more. Anyone can triplex and rent out a unit, or all three units. The only things left are actual building-safety requirements (like separate water/sewer connections for a detached-garage-ADU), and if the pro-density ideologues have their way, even sane requirements like that will be removed.
I’m not sure they require separate utility connections. I know the one I’m referring, which is a little house in the back yard, was simply connected to the existing house utilities, and that was maybe two years ago.
The idea that property upgrades like this will in any way ease the affordable crises is simply ridiculous. When family aren’t using these spaces they’ll be Airbnb. There’s no way this produces durable affordable housing.
Why are we talking about the number of units built, or the percentage of housing they comprise, as if THAT is the measure of success? Isn’t the question supposed to be whether or not Portland’s housing prices are coming down?
Another problem that I haven’t seen anyone even try to discuss is what happens when people try to sell this properties? Who’s going to buy a property with two houses on it? What if buyers don’t want to share their new expensive homes and properties with renters? Who’s going to pay half a million or more bucks for a property they HAVE to share with strangers? And you can’t split the lot up because the these units don’t have separate utility connections.
There have long been older homes with carriage houses that are rented out. These are usually pretty nice main properties that don’t have a hard time finding a buyer. Yes, the original buyer/builder had another purpose for the additional property, but it’s subsequent buyers who don’t have a use for it and rent it rather inexpensively. This is all to say that adding ADU’s is not a short-term fix but a long-term benefit. We need to be building at a pace such that in the future we’ll have what they call “naturally occurring affordable housing.” ADU’s are one way to get there. New construction is not affordable until it’s been paid off.
Eric,
Those carriage house properties you refer to are way older properties on much larger lots in neighborhoods with much lower density… like Summit Ave. Sure, THOSE properties have little difficulty selling, and the neighbors have no complaints because of the size of the lots and the distance between the houses. We’re talking about two houses on a standard 50 x 150 foot lot in neighborhoods where houses are 20 feet apart.
As always, I need to point out that simplistic supply and demand myths won’t reduce housing prices. You don’t build your way into affordable housing because the entire industry is organized around making as much money as possible.
Every time we discuss this supply and demand acolyte’s pop up and try to claim their describing some kind of immutable law of economics, yet despite all the building… prices don’t come down. And when we get a few examples of areas where inflation has slowed, or come down, we can’t attribute that to building booms alone, multiple factors contribute to affordability and housing prices.
It’s important to remember that these ADU’s and their advocates never emerged from any kind of serious economic analysis dealing with affordable housing.
This policy emerges from background noise surrounding “density” advocates and urban “studies”. My experience is that the “discipline” of Urban Studies and the density theories that have emerged from it tend to be more about urban chauvinism than rational policy. I’m not trying to insult anyone but Urban Studies is one of those fields that can be described more as a reservoir of intellectual fads than empirical analysis.
I repeat, the idea that these ADU’s could or would produce more affordable housing or bring existing rents down, is simply ridiculous. Why would anyone put hundreds of thousands of dollars into upgrading their property, and then rent it out cheap? I know an home owner in the Seward area that build a little house in their back yard, and they Airbnb it for hundreds of dollars a day. It THAT affordable housing?
This brings me to another issue that article may be missing. The claim that the effects of these on the neighborhoods and neighbor “support” or complaints are low or minimal isn’t supported by any real data. The fact is that people who build these “enhancements” don’t have to seek permission or feedback from their neighbors in the first place, so we don’t have any data on that.
Meanwhile, anecdotally I’ve talked to people who do in fact have complaints about parking spaces, privacy, noise, and a plethora of other issues associated with ADU’s. For instance, what’s the effect on surrounding home values? How does having two houses on the one lot next to a house you’re trying sell affect home values? Does a buyer want to live next to two houses?
The absence of any data regarding neighborhood reactions to these project might be explained by the fact that there no real attempt to collect such data. No consent is required to build, and I’m not sure there’s any mechanism to even report or complaints or compile complaints. At any rate, just because you’re not recording complaints doesn’t mean there aren’t any.
You are misunderstanding the price effect of aggregate increase in housing supply and you are misstating why housing advocates link supply to affordability. It’s like being in the market for a $5,000 used car and being upset that car companies only sell $30,000 new cars instead. Missing the point entirely.
Sure, some people may have complaints about ADUs. But those complaints aren’t legitimate. Someone’s concern over on-street parking isn’t sufficient enough to deny someone else the ability to have a dwelling.
You may think there’s not support for density. But election results point to the contrary.
Again, when advocates of simplistic economic myth pretend to the economic experts in the room more than little skepticism is order.
Housing isn’t a manufactured retail product. The supply and demand theory here actually violates basic principles of capitalism. You can’t monetize profit loss.
It assumes that builders will keep building after the price for housing starts dropping. And then once prices drop, for some mysterious reason they’ll just keep building and make less and less money. In fact when prices start dropping builders stop building and wait for the prices come back up. We saw during and after the Great Recession that builders and owners were perfectly willing to sit on property and unfinished projects until prices came back, the recession did NOT give us affordable housing.
Nor does the “new” building lower existing rents, Uptown residents will confirm that if you ask.
The supply and demand principle literally relies on magical thinking organized around invisible hands. There is no invisible hand. Economies emerge from complex cause and effect relationships and participants who make conscious and deliberate decisions. Every time we have one of these conversation we see people double down on the magic… but the prices keep going up.
And you refute your own arguement. When prices rise builders build.
When prices fall, the build less.
The problem is, that they can’t build profitably at what people can afford.
So, how can lower cost housing be built profitably, and how can incomes be increased.
Simple, just not easy
“Sure, some people may have complaints about ADUs. But those complaints aren’t legitimate. Someone’s concern over on-street parking isn’t sufficient enough to deny someone else the ability to have a dwelling.”
This is exactly the kind of “Urbanist” hubris I was alluding to. Please explain Mr. Steele how it is you’ve been empowered to decide who’s concerns are “legitimate” and who’s are not? What concept of neighborhood or community gives YOU that authority? Most of us assume that living a place makes our concerns legitimate regardless of Urban theories.
People aren’t living in tents because we have to many parking spaces, so I’ll just assume THAT comment was a lapse of attention on your part.
Maybe the election was a “density” referendum of some kind in YOUR mind, but I think it’s safe to assume that other voters had different concerns… albeit concerns you might label “illegitimate”.
That’s quite an impressive straw man you’ve built up and torn down, complete with anecdotes about friends of friends with neighbors that (heaven forbid!) occasionally rent their ADU via air BnB. NIMBYism at it’s finest.
It is well supported that the majority of ADUs are used for permanent, not short term rentals. For example, a Terner Center’s 2017 report found that 60 percent of ADUs in Portland, Seattle, and Vancouver are used as permanent housing, while just 12 percent are used for short term rentals. In a 2012 Bay Area study 85% of secondary units were occupied by individuals using the unit for permanent housing.
No one is arguing that ADU’s are the *sole* approach to addressing housing supply, but instead is just one way to add to housing supply and increase density – which seems to be another concept you reject.
The “laws of economics” are considered only ceteris paribus. In the real world, obviously, we can’t ask that all inputs into the equation stay the same. Yes, wages are an equally important input into whether a given market’s housing is affordable or not. In Mpls the % of median hshld income to rent has remained steady at 16% since 2005. It should be noted, this is not the case in other regions of the US.
This example shows why the fearmongering over Mpls2040 was overblown and largely postured out of bad faith. Neighborhoods evolve, they don’t get demolished and rebuilt overnight. Second, we need more housing any way we can get it. The easiest way we can get more housing is to simply legalize it once again. Mpls 2040 is another great step forward down that path.
Dude, how long as the 2040 policy been in force? Little early to declare success don’t you think?
The problem isn’t that people can’t FIND housing, the problem is that they can’t AFFORD housing because it’s too expensive. We don’t actually have a housing shortage, we have an affordability crises. Please, before circling back to supply and demand note the previous comments.
Anyways, for some reason the authors fail to answer the question they themselves raise: How’s this ADU thing working out? It’s clear at this point that thus far ADU’s have had zero impact on either the housing “crunch” or affordability. Obviously proponents hope there will be more impact in the future but it’s a dubious proposition on the face of it. It remains to be seen whether or not ADU’s build neighborhoods that more people want to live, or ones that people will avoid.
I live in Prospect Park, and I can assure you that the presence of multiple houses or housing units on small, often odd-shaped city lots haven’t depressed property values here. People use these units in a variety ways: affordable housing for students and families, furnished rental for visiting scholars, flexible space for family and friends to visit, and Airbnb. I’m all for relegalizing housing forms that city neighborhoods were built on.
Just out of curiosity Ms. Scheel, exactly how many of these unit do have in Prospect Park? There are only 88 in the entire city thus far.