The Regional Plan Association (RPA) is a planning organization for the New York Metropolitan Area including New York City, Westchester County, eastern New Jersey, and southwest Connecticut. Since its founding a century ago, the RPA has released a total of four major regional plans related to transportation, land use, and economic development. The Fourth Regional Plan, the group’s most recent comprehensive publication from 2018, provides a framework for equitable growth and development in the region. In July 2020, RPA published Be My Neighbor, a supplemental report within the larger Regional Plan.
Be My Neighbor calls for creating hundreds of thousands of new residential rental units in the New York Metropolitan Region over the next several years through new construction, additions, and conversion projects on existing single-family residential properties. By creating new units and legalizing existing unpermitted units in communities with higher opportunity and transit access in the region, RPA believes that positive health, education, social, and economic outcomes will materialize for lower-income residents of the New York Metro area. Allowing Accessory Dwelling Units (ADUs) by right in residential neighborhoods and providing technical assistance are seen as ways to help increase housing production through conversions.
One of the stated goals of the RPA’s Be My Neighbor report is to increase the diversity of housing products available on the marketplace. RPA cites demographic changes as a major driver of demand for rental apartments in low density residential areas. Increasing production, it is thought, will increase housing options for low- and moderate-income residents. Curiously, the report’s sole focus is on increasing the number of just one type of housing: dwelling units. In addition to representing only one of the many different ways to house people, dwelling units are also the most expensive.
The Costs of Dwelling Units
Buildings that contain up to two dwelling units are regulated under the International Residential Code (IRC). Multifamily construction, on the other hand, must adhere to the International Building Code. The IBC sets far more stringent standards and often requires hiring an architect. Multifamily buildings must have fire separation between units and common spaces, fire suppression systems like sprinklers, two means of egress, handicap-accessible units, and elevators in multistory buildings.
Even two-family houses require a minimum of 200 amp electrical service, whereas 100 amps is sufficient for a single-family dwelling. All dwelling units must contain full kitchens and bathrooms. Detached back yard dwellings require extending existing sewer, water, and electric service from the main house to the new unit, or establishing new connections to the street.
The construction of additional dwelling units can be very expensive – ranging from tens to hundreds of thousands of dollars per unit.
Obstacles to ADU Development
The significant costs and physical changes associated with creating new dwelling units limits their adaptability. As a result, removing or modifying a dwelling unit to quickly accommodate changing household demands can be difficult. A homeowner’s ability to pay their mortgage may depend on rental income from a tenant since an ADU can significantly raise the value of a single-family property, for instance. As another example, the plumbing and electrical requirements of full kitchens in dwelling units may similarly limit the flexible use of rooms.
Financing the creation of ADUs represents another obstacle for many homeowners. While lending products to fund home conversions are increasingly available, many places still lack access to appropriate financing tools to fund the design and construction of ADUs. As a result, ADU construction has largely been reserved for wealthier homeowners who have access to home equity loans, personal savings, and other sources of funding for home improvement work.
Ways of Financing ADUs
One way to encourage more funding options for ADUs is to subsidize the provision of technical assistance to homeowners. Nonprofit, governmental, or other community entities can help single family property owners to plan, design, and finance individual projects. Alternatively, pre-approved plans for ADUs can be created by architects and made available to homeowners as another strategy to reduce costs, save time, and attract financiers.
Another way to make ADUs attractive to lenders is by liberalizing and universalizing land use regulations across a metropolitan area. By removing restrictions like owner-occupancy requirements, and lowering minimum lot sizes and coverage, and shrinking setbacks local governments and states can make ADUs more viable for longer-term financing. These practices have been implemented in places like Austin, TX, Denver, CO, Los Angeles, CA, Seattle, WA, and the State of Oregon.
Concerns with Liberalizing Land Use Regulations
Unlike the Western United States, the Northeast region is home to many small municipalities whose boundaries were established in the 18th century. Each of the hundreds of local governments located within the New York Metropolitan Area administers their own zoning regulations. Moreover, Connecticut, New York, and New Jersey each have their own State Building Codes. Any attempt to liberalize and universalize ADU regulations across the region would likely require unified state legislative action.
ADUs and home conversions may help property owners and financiers to create wealth, generate passive income, and build equity while increasing housing options for moderate-income households. However, this will not address the affordable housing crisis facing low-income renters. Furthermore, removing owner-occupancy requirements from ADU regulations may attract rental property investors.
Since the Great Recession, institutional investors, acting through real estate professionals, have spent billions – often in cash – to amass vast portfolios of residential rental properties in the New York Metro. Upzoning residential neighborhoods may increase the value of properties and encourage large-scale investment firms to acquire residential properties many of which are currently owned by their occupants or hyper-local landlords.
This could further exacerbate income inequality, concentrate real estate wealth, and expand the rental class.
A Different Approach
In Be My Neighbor, the RPA is promoting the rezoning of single-family residential neighborhoods in the New York Metropolitan Area to allow for the creation of additional dwelling units on existing properties. This would be accomplished by permitting Accessory Dwelling Units and multifamily conversions. For the reasons stated above, this approach may produce undesirable outcomes, including attracting rental property investors, burdening homeowners with higher taxes and mortgage payments, and limiting the adaptability of residences over time.
It may very well be that encouraging multiple additional dwelling units on single-family properties throughout the region must eventually play an important role in comprehensively addressing housing issues. Growing preferences for renting and declining rates of homeownership may become a permanent trend in the housing market. Still, the first step in reforming land use regulations needn’t be abolition of single-family zoning districts. A more incremental approach may achieve many of the desired goals while avoiding political opposition.
Rather than encourage the addition of multiple dwelling units to single-family properties, the RPA might instead support the gradual upzoning of low-density residential neighborhoods. Eventually, single-family zones could allow multifamily housing, but not as an initial step. At first, property owners might be allowed to create an additional rental housing unit for a guest within their existing single-family dwelling. After evaluating the impact of this lower costs, less permanent, and more easily adaptable densification strategy, an accessory dwelling unit for a relative could be allowed. Next, two-family housing could be allowed, then multiple guest or accessory dwelling units followed by detached backyard dwellings, multifamily, and so on.
At every step, residents and homeowners, not planners or developers, ought to be guiding incremental upzoning processes.