Mary Owens: Housing option diversification in Nevada County
The State of California recently made changes to regulations governing “Additional Dwelling Units,” otherwise known as “ADUs” or granny flats. ADUs are a smaller, second residential dwelling on a single parcel.
Nevada County currently allows them, however they are in the process of updating their regulations to reflect the new rules the state has legislated. The new law allows each county to make rules more stringent than the state version, but not more lenient.
There are many pros and cons with granny flats. Drafting public policy for this issue will be challenging.
There are at least four main areas of public policy concern and consideration:
Who will be allowed to occupy the second residence?
Those in favor of building second units for low-income housing alternatives want the structures to be limited to low-income tenants. While this might sound like a good option for creating more affordable living space, it could back fire with such a restriction.
Those who would consider building a structure such as this may think twice about making the investment if the low-income limitation creates such a low return on investment that it financially does not make sense.
Secondly, limiting it to low income only would create a secondary enforcement issue for a potential landlord. Would a homeowner be able to successfully gather the necessary information to ascertain proper compliance with the law?
Limiting the ADUs to low income would also create a third issue; neighborhood objections. High-end and moderately priced housing developments are most likely to retain residents who are able to afford the financial commitment of building an ADU.
Many of these neighborhoods have CCRs that restrict these types of rental units and would consider amending the governing documents to address neighborhood objections if only low-income individuals can be a tenant.
This defeats the purpose of the more lenient restrictions for building granny units. Encouraging the construction of granny units must be in the forefront of the minds of those wanting to see more affordable options.
Other proponents want an ADU to be rentable to the general public only if the main residence is owner occupied. The purpose of this restriction is to increase the likelihood of the owner expelling a loud or troublesome tenant.
If the owner lives in close proximity to a poorly behaving tenant there would be less of a chance of poor behavior. This would also reduce the concerns of the neighborhood and the chance of neighborhood backlash.
Whatever the restrictions being considered, one major economic principal must be remembered. The more ADUs built, the more relief on the rental market as a whole. The ADU does not necessarily have to be the cheapest unit available for the lower income tenant to benefit.
As increasing competition enters the rental market in the form of more rental unit availability, pressures on rising rents decrease.
Benefits of multiple generational living environments
With rising living costs relative to slower wage growth and more restrictive lending requirements, multi-generational living arrangements are becoming more common. The option of the younger generations living in close proximity to older generations has its advantages.
Younger couples can provide services in lieu of rent that the older generation can no longer perform. Yard work, repairs, house cleaning, and the security of having someone close in a health emergency is an unmeasurable benefit.
For those older couples who want to travel, having someone at home to feed animals, water the yard and provide security is very attractive. As the couple ages, the second residence also allow the aging senior to stay in the “home of their heart” longer.
Many couples sell a house they still love and desire to continue to living in because the maintenance becomes overwhelming. This is particularly true of widows who have lost a spouse and don’t feel secure without someone close by.
With dual working parents becoming the norm, not the exception, child care coordination is becoming ever so pressing. Young couples who live next door to a grandparent have a built in baby sitter that is reliable and loving.
Not only does the child not have to go to child care every day, but they get to be at their home with supervision.
Furthermore, the savings from reduced child care costs allows the couple to save more for their own financial security. If child care savings were redirected to a College Savings plan, the youngest generation is benefitting two-fold: Better care and supervision and less debt from educational costs as they enter their new lives.
Aging seniors need long-term care housing for health aides
Most of us may someday face the need for in home-care assistance. Some seniors want health-care workers to live in their home, however most health-care workers prefer to have a space of their own.
Home health-care aides frequently work long hours and need a break from those they are caring for on a daily basis. ADUs offer an ideal living option for those needing on site care.
Not only does the health-care worker enjoy the additional privacy, but the senior does as well. Having on-site health care also reduces the need to sell a home unnecessarily.
The spouse in good health can continue to live in their home and have greater access to in home health care. The need to move to an assisted living facility is mitigated. Emotionally both spouses are happier. For widows and widowers, this option is an answer to their prayers.
SECOND UNITS Diversify OUR neighborhoods, school districts
As neighborhoods age, the residents within it age as well. When new housing developments are built, school construction soon follows. But decades later, the amount of children in a given neighborhood starts to fall as the young children grow up and move out.
It is not uncommon for 10 to 15 years or more to pass before first generation residents move out, allowing young families to move into the neighborhood again as homes slowly come up for sale.
This creates challenges for schools attempting to manage facilities and the distribution of resources. The level of impact on school districts varies widely. Neighborhoods with higher levels of downsizing seniors feel the effects more significantly.
An ideal situation for any neighborhood to maintain its vibrancy and quality of life is to have generational diversity. Creating more housing options would reduce the concentration of young families in apartments and high density neighborhoods.
ADUs can be used in the reverse situation where the senior moves into the smaller house, allowing the young growing family to move into the main home.
This diversifies the neighborhood, adds children to the school system faster and allows the senior to enjoy the security of loved ones close by.
The challenges of drafting public policy
Granny flats provide affordable living options for more than just low income individuals. All generations derive benefits from ADUs. Public policy makers will need to consider all of the benefits of ADUs when drafting regulations.
Over-regulation can significantly reduce the potential unseen positives. Under-regulation can create public backlash. There is much to consider and drafting great public policy will require significant forethought.
Thank you Nevada County Supervisors for your work ahead.
Mary Owens, CPA, MS, Principal, President of Investments, Branch Manager RJFS with Owens Estate and Wealth Strategies Group, located at 426 Sutton Way Suite 110 Grass Valley, CA 95945 | (530) 272-7500. Securities offered through Raymond James Financial Services, Inc. Member FINRA/SIPC. Investment advisory services offered through Raymond James Financial Services Advisors, Inc. Owens Estate and Wealth Strategies Group is not a registered broker/dealer and is independent of Raymond James Financial Services. The information provided does not purport to be a complete description of the developments referred to in this material, it has been obtained from sources considered to be reliable but we do not guarantee that it is accurate or complete. Any opinions are those of Mary Owens and are not necessarily those of Raymond James.
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