Salt Lake City gears up for a final showdown on new rules for ADUs

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The fate of Salt Lake City’s approach to backyard homes might fall on one member of the City Council, as the group moves closer to a final decision on new rules for accessory dwelling units in the next two weeks.

After months of discussion about how the capital city should treat ADUs, the City Council is set to hold two more discussions on its updated ADU ordinance, a public hearing on March 21 and a possible vote that same night.

The Council has already signaled it would make a slew of changes that are widely believed to make it easier to build an ADU on more properties in the city. That includes allowing bigger and taller ADUs without regard for the size of the primary home on the property, and with smaller setbacks from adjacent properties.

The city is also likely to remove the requirement that property owners obtain a conditional use permit, given those seeking approval for ADUs have obtained approval 100 percent of the time. That change will save time and money for property owners trying to build the new housing unit, and free up the time of nearly two full-time city planners.

But after months of public and private debate among members of the Council, the primary outstanding question is whether the city will remove the requirement that a property owner must live in either the primary dwelling or ADU when they have the additional unit, or if they can rent both out to people outside their families on a long-term basis.

Cities and states that have removed that so-called owner-occupancy requirement have seen an immediate increase in the number of ADU housing created, with data indicating the new housing costs less than market-rate.

The Council is balancing how it can prevent ADUs from being used as short-term rentals, how it can add much-needed moderate-income housing in Salt Lake City, and whether a potential uptick in investors buying homes to add two streams of income per property outweighs the need for more housing.

“We are really scared about the hypothetical ADU that turns into a really bad housing unit with parties,” said Alejendro Puy, who represents one of two west side districts on the Council. “But I think that we really need to see this as a tool to create gentle density in all parts of town — including areas of the city that are not getting any density.”

Some of the wealthiest neighborhoods in the city are fighting against any liberalization of the ADU ordinance, but there are indications the Council might go all the way.

The mayor weighs in

The talk of liberalization has inflamed parties on both sides of the issue: housing advocates who view ADUs as a source of homes that would likely rent for less than market-rate, and wealthy homeowners who view affordable housing as a threat to neighborhood character.

At a Council meeting on the issue Tuesday night, Mayor Erin Mendenhall weighed in.

She said she feared corporate investors would be incentivized to buy homes if they were allowed to rent two units per property. She said she viewed ADUs as a wealth-building tool that could be paid for with the equity homeowners have gained if they bought before 2022.

Salt Lake City Mayor Erin Mendenhall

“In some ways it’s actually antithetic to Thriving in Place, which is contemplating ways that we can increase wealth-building and community stability in the neighborhoods and the residents that are already here,” Mendenhall said. “When you make it easier for a corporate entity and a corporate investor to buy that house in that neighborhood and turn it into two for-profit residential units…we lose the neighborhood stability that would otherwise be easier to achieve with the ADU ordinance.”

Opponents to removing the owner-occupancy requirement have provided no evidence that such a change leads to displacement or housing instability. It’s also not clear how homeowners with equity could tap that equity given rates for home equity lines of credit and cash-out refinances have spiked well above what rates were early last year.

“In previous conversations, it was said the market created this housing crisis. The market didn’t create this housing crisis by itself. Zoning and our city also added to this by downsizing our zones. So we are creating this housing market, this crisis that we have. And we have a tool here that can help.” 

Alejandro Puy, District 2

It’s also generally more difficult to finance an ADU construction through a conventional loan, and the typical methods are a HELOC, cash or a cash-out refi.

Meanwhile, research from California and Seattle show that the change would increase the number of housing units built that are widely viewed as a source of moderately affordable housing.

Just this week, Seattle released a new report showing that in the three years after the city removed its owner-occupancy requirement, its number of permitted ADUs jumped by 252 percent.

Eight out of 10 recently constructed ADUs in Seattle charged less than the average monthly rent for the city, and more than half (56 percent) charged rent that was 75 percent or less than average, according to a survey of owners who built ADUs in Seattle. 

Eleven percent of ADU owners reported renting out their units on a short-term basis, according to the report, while the remaining respondents said they used their ADUs for long-term rentals or another use.

Those findings were similar to research out of California, which found a small percentage of ADU owners rented their new units on a short-term basis while the vast majority used them for either long-term rentals or another purpose.

At a time when the city faces a shortage of even market-rate housing, the Council must decide if the ADU policy is a wealth-building tool or a home-building tool.

An accessory dwelling unit over a garage on an alley in Salt Lake City. Photo courtesy SLC Planning Division.

Where do things stand?

The decision on the ADU ordinance is up to the City Council, rather than the mayor.

During a public hearing on the topic last month, a majority of residents who spoke said they supported broad liberalization of the city’s ADU ordinance, including removing the owner-occupancy requirement.

Eight out of 10 recently constructed ADUs in Seattle charged less than the average monthly rent for the city, and more than half (56 percent) charged rent that was 75 percent or less than average, according to a survey of owners who built ADUs in Seattle.

Two members of the council — Dan Dugan, in District 6, and Chris Wharton, in District 3 — appear staunchly opposed to making it easier to build an ADU on more properties in the city. Amy Fowler, District 7, also appears opposed to removing the owner occupancy requirement.

Wharton suggested it would be too difficult to undo whatever the council’s action if it moves to allow property owners to build more housing.

“If we were effectively doing away with single-family, single-use structure zoning, that sounds like a big change to me,” Wharton said. “Probably one of the biggest land use changes that I’ve seen in my time on the council.”

Darin Mano, in District 5, and Alejandro Puy, in District 2, are the most adamant supporters of broad liberalization of Salt Lake City’s ADU policy. 

Puy countered Wharton’s line of questioning by pointing out policymakers down-zoned much of the city in the mid-1990s, a period preceding the ongoing affordability crisis.

Councilman Alejandro Puy, District 1

“In previous conversations, it was said the market created this housing crisis,” Puy said. “The market didn’t create this housing crisis by itself. Zoning and our city also added to this by downsizing our zones. So we are creating this housing market, this crisis that we have. And we have a tool here that can help.” 

Zoning is viewed as a determining factor on whether housing will be expensive or not. So does the minimum amount of land the city requires for any home. That’s where ADUs come into play. 

Victoria Petro, District 1, appears tentatively supportive of removing the requirement. Petro pointed out the city has a dearth of housing units that are affordable for people making between 80 percent and 125 percent median income. (Much of what’s been built in recent years is low-income or luxury.)

Ana Valdemoros, whose district includes Downtown and Central City, said she was “still analyzing” the options.

“I see the biggest obstacle for ADUs and the reason why we haven’t had any is the price point,” she said Tuesday. (Construction of a detached ADU can easily surpass $250,000 per unit.)

Yet she said she didn’t want another multi-year period to pass when few ADUs were built. 

“For the public, I’m in the middle,” she said. “I see everything. I just want to be a little bit bolder about how to go about ADUs.”

Email Taylor Anderson

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Posted by Taylor Anderson

Taylor Anderson grew up near Chicago and made his way West to study journalism at the University of Montana. He's been a staff writer for the Chicago Tribune, Bend Bulletin and Salt Lake Tribune. A move from Portland, Oregon, to Salt Lake City opened his eyes to the importance of good urban design for building strong neighborhoods. He lives on the border of the Liberty Wells and Ballpark neighborhoods.