New ADU bill passed in Seattle & opportunity zones

[Edward Seid]

Last week, the new bill was passed by city council to address housing affordability.

Here's a summary of the changes to existing ADU laws in Seattle.

https://www.seattle.gov/council/adu-eis

- Allowing two ADUs on one lot 

» Removing the off-street parking requirement 

» Allowing DADUs on lots of at least 3,200 square feet 

» Removing the owner-occupancy requirement 

» Requiring one year of continuous ownership to establish a second ADU

» Allowing DADUs of up to 1,000 square feet, the same size currently allowed for AADUs 

» Increasing DADU height limits by 1-2 feet, with flexibility for green building strategies 

» Providing flexibliity for one-story DADUs accessible to people with disabilities or limited mobility, with limitations on tree removal 

» Establishing a new floor area ratio (FAR) standard that limits the maximum size of new single-family homes (2500sqft) and encourages ADUs

In the past, opportunity zones deals were not very lucrative because of the $$ requirement to double the improvement value ($200k-400k+?). By adding a detached ADU, you could double the improvement value easily if you add in cosmetic upgrades from the main part of the home.

Regardless of combining OZ with this new bill, I think its very lucrative for investors to start snagging properties with intention to build a DADU rental. Essentially, a SFH can now be a "triplex" though you will need to live in the home for 1 year+. Works only for house hackers.

Sadly, I think city council didn't thoroughly analyze the effects of this bill very well because many affordable housing advocates LOVE it. One thing I learned from this most recent economic boom is NEVER underestimate RE investors... we will take advantage of this new bill and renters aren't going to benefit much at all. It's not going to provide more affordable housing... just more opportunities for investors to make $$. This will exacerbate the net worth/affluence of renters vs home owners, the income gap, the rich vs poor, etc. 

BPers, especially those in Seattle, what do you think of this new bill? Will it provide more affordable housing and will investors end up benefiting the most?

[Christian Nossum]

You had one item incorrect. They didn't actually add in the 1 year of owner occupancy requirement. It was proposed at the end, but that part of the bill failed to make it in (it was voted down 7-1). That makes this a lot better for us investors. 

Another item that I'd love to clarify is that the new max size of homes only deal with the "above ground" portion of the home, so anything that's below ground doesn't count toward that total.

I do think that this will provide some more affordable housing. I also think it will also be a big win for investors. I live in Seattle, own rentals, and I can now add an additional unit to two of my homes. 

Another item of note:

• Increases the maximum household size permitted on a single-family lot from 8 to 12 unrelated people only if the lot includes two ADUs

I own a duplex near the University of Washington that I could add a DADU (detached accessory dwelling unit). Had this household size limit not been increased, I couldn't have added a DADU to this rental. Now that they did I can.

I could see this opening up some nice studio and 1 bed DADU's in neighborhoods that don't have many rentals in them currently, which would help tenants. In terms of rentals for us landlords, I could see this opening up some opportunities for current landlords to add an additional unit or two to a rental property, and also to turn a property that wouldn't generate enough cashflow with the single unit currently on-site, to producing a positive cashflow with the addition of 1-2 more units.