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An exploration of accessory dwelling units as affordable housing in Colorado

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Title:
An exploration of accessory dwelling units as affordable housing in Colorado
Creator:
Sloan, Melanie Laurel ( author )
Place of Publication:
Denver, CO
Publisher:
University of Colorado Denver
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Language:
English

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Accessory apartments -- Law and legislation ( lcsh )
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bibliography ( marcgt )
theses ( marcgt )
non-fiction ( marcgt )

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Accessory Dwelling Units (ADUs) are thought to offer many benefits, including affordable housing, and income generation. Planning departments across Colorado have or are implementing ADU ordinances, with differing requirements and intents, which may be the reason for variations in their ADU implementation outcomes. Some point less to regulatory permission and more to homeowner financial need, willingness to be an ADU landlord, development capacity, and finances, and cite the lack of appraisal and financing for ADUs as limiting ADU development. To understand what the barriers are, this study uses: homeowner surveys in California and Oregon for information on ADU homeowner characteristics and experience; interviews with 49 ADU actors for insight and attitudes on ADUs and barriers to their affordable development; and analysis of 31 Colorado zoning codes to assess the presence of the survey and interview identified barriers. Colorado lacks state level ADU policy, so jurisdictions rely on readily available codes, and avoid "Not in my backyard" complaints and other political pressures. This implies many communities have not analyzed their homeowner needs and capacity for ADUs, who could need tailored ADU zoning codes, and technical and financial assistance. Thus, despite the presence of ADU zoning codes, specific regulations are not supportive to homeowners who may be most willing to develop an ADU, and may even be completely prohibitive. Prohibitive regulations include limiting residential zones and ADU types; requiring minimum lot sizes, off-street parking, and homeowner occupancy; and prohibiting the sale of the ADU. ADUs that have been constructed in California and Oregon offered some level of affordable housing, and provide income for the ADU homeowner. Despite these benefits, the few ADUs being constructed in Colorado suggests the combination of zoning barriers and limited financing policies outweighs the hypothesized benefits. In contrast, homeowners who are able to develop without support are less likely to develop ADUs for rent as affordable housing. Further research is needed to confirm this thesis' hypothesis of homeowner barriers: permission, need, willingness, and capacity. Particular attention should be given to underrepresented groups: low and moderate income, and racial and ethnic minority households.
Thesis:
Thesis (M.U.R.)--University of Colorado Denver. Urban and regional planning
Bibliography:
Includes bibliographic references.
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System requirements: Adobe Reader.
General Note:
Department of Urban and Regional Planning
Statement of Responsibility:
by Melanie Laurel Sloan.

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University of Colorado Denver
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|Auraria Library
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All applicable rights reserved by the source institution and holding location.
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900732020 ( OCLC )
ocn900732020

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AN EXPLORATION OF AC CESSORY DWELLING UNI TS AS AFFORDABLE HOU SING IN COLORADO By MELANIE LAUREL SLOAN B.A., Keene State College, 1998 A thesis submitted to the Faculty of the Graduate School of the University of Colorado in partial fulfillment of the requirements for the degree of Master of Urban and Regional Planning Urban and Regional Planning Program 2014 APPROVAL PAGE

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This thesis for the Master of Urban and Regional Plan ning degree by Melanie Laurel Sloan has been approved for the Urban and Regional Planning Program by Carrie Makarewicz, Chair Jennifer Steffel Johnson Alex Schafran Date : May 1, 2014

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Sloan, Melanie L (MU RP Urban and Regional Planning) An Exploration of Accessory Dwelling Units as Affordable Housing in Colorado Thesis directed by Assistant Professor Carrie Makarewicz ABSTRACT Accessory Dwelling Units (ADUs) are thought to offer many benefits, including affordable housing and income generat ion P lanning departments across Colorado have or are implementing ADU ordinances with differ ing requirements and intents which may be the reason for variations in their ADU implementation outcomes. Some point less to regulatory permission and more to homeown er financial need, willingness to be an ADU landlord development capacity and finances and cite the lack of appraisal and financing for ADUs as limiting ADU development To understand what the barriers are this study uses: h omeowner surveys in Califo rnia and Oregon for information on ADU homeowner characteristics and experience ; i nterviews with 49 ADU actors for insight and attitudes on ADUs and barriers to their affordable development ; and a nalysis of 31 Colorado zoning codes to assess the prese nce of the survey and interview identified barriers. Colorado lacks state level ADU policy so jurisdictions rely on readily available codes and avoid political pressure s This implies many communities have not analyzed their homeowner needs and capacity for ADUs who c ould need tailored ADU zoning codes, and technical and financial assistance Thus, despite the presence of ADU zoning codes specific regulations are not supportive to homeowners who may be most w illing to develop an ADU and may even be completely prohibitive Prohibitive regulations include limiting residential zones and ADU types; requiring minimum lot sizes, off street parking, and homeowner occupancy; and prohibiting the sale of the ADU ADUs that have been constructed in California and Oregon offer ed some level of affordable housing, and provide income for the ADU homeowner. D espite these benefits, the few ADUs being constructed in Colorado suggests the combination of zoning barriers and lim ited financing policies outweighs

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the hypothesized benefits In contrast, homeowners who are able to develop without support are less likely to develop ADUs for rent as affordable housing Further research hypothesis of homeowner barriers: permission, need, willingness, and capacity. Particular attention should be given to underrepresented groups: low and moderate income and racial and ethnic minority households The form and content of this abstract is approved. I recommend its publication. Approved: Carrie Makarewicz

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DEDICATION The Orchard By: Mary Oliver I have dreamed Of accomplishment. I have fe d Ambition. I have traded Nights of sleep For a length of work. Lo, and I have discovered How soft bloom Turns to green fruit Which turns to sweet fruit. Lo, and I have discovered All winds blow cold At last, And the leaves, So pretty, so many, Vanish In the great, black Packet of time, In the great, black Packet of ambition, And the ripeness Of the apple Is its downfall.

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ACKNOWLEDGMENTS I would like to thank my Thesis Advisor, Carrie Makarewicz, for helping me to shape my thoughts into a thesis. I would like to thank Alex Schafran for introducing the topic to me and encouraging me to explore it I would like to thank Jennifer Steffel Johnson for offering advice and guidance. I am especially grateful to the numerous interviewees who graciously offered their time to my research, without which this thesis would be much less I would like to offer great gratitude to Jake Wegmann for his contributions to my knowledge on Accessory Dwelling Units and their homeowners. I am equally grateful to the Oregon Department of Environmental Quality for sharing their knowledge and data. Lastly, I am especially thankful to Lance Smith for supporting me in many tangible and intangible ways, without which I would not have been so successful.

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CHAPTER TABLE OF CONTENTS CHAPTER I : INTRODUCTION ................................ ................................ ................................ ................................ .... 15 Introduction ................................ ................................ ................................ ................................ 15 Statement of the Problem ................................ ................................ ................................ ........... 21 Research Question & Design ................................ ................................ ................................ ..... 22 Significance to the Field ................................ ................................ ................................ ............. 24 Limitations ................................ ................................ ................................ ................................ 24 II : REV IEW OF THE LITERATURE ................................ ................................ ................................ ......... 25 Introduction ................................ ................................ ................................ ................................ 25 Literature ................................ ................................ ................................ ................................ .... 25 Homeowner Demographics, Housing Preferences, and ADU Interest ................................ ... 25 Financial Need ................................ ................................ ................................ ........................ 26 Homeowner Capacity ................................ ................................ ................................ ............. 27 Affordable and Relatively Affordable Housing ................................ ................................ ..... 27 ................................ ................................ .............. 29 Appraisal and Finance for ADUs ................................ ................................ ........................... 30 Target Populations and Social Construction in Planning Policy ................................ ............ 31 Summary ................................ ................................ ................................ ................................ .... 31 III : METHODOLOGY ................................ ................................ ................................ ................................ 33

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In troduction ................................ ................................ ................................ ................................ 33 Setting ................................ ................................ ................................ ................................ ........ 34 Interview Participants ................................ ................................ ................................ ................. 35 Measurement Instruments ................................ ................................ ................................ .......... 36 Data Collection/Procedures ................................ ................................ ................................ ........ 37 Data Analysis ................................ ................................ ................................ ............................. 37 Ethical Considerations ................................ ................................ ................................ ................ 38 IV : HOMEOWNER ATTITUDES: ANALYSIS OF SURVEYS FROM THE EAST BAY REGION OF CALIFORNIA AND THREE CITIES IN OREGON ................................ ................................ ................... 39 East Bay Region of California ................................ ................................ ................................ .... 39 Albany, California ADU Zoning Code ................................ ................................ .................. 41 Berkeley, California ADU Zoning Code ................................ ................................ ................ 41 El Cerrito, California ADU Zoning Code ................................ ................................ .............. 41 Oakland, Calif ornia ADU Zoning Code ................................ ................................ ................. 42 Richmond, California ADU Zoning Code ................................ ................................ .............. 42 Ashland, Eugene, and Portland, Oregon ................................ ................................ .................... 42 Ashland, Oregon ADU Zoning Code ................................ ................................ ..................... 43 Eugene, Oregon ADU Zoning Code ................................ ................................ ...................... 43 Portland, Oregon ADU Zoning Code ................................ ................................ ..................... 43 Combined ................................ ................................ ................................ ................................ ... 44 44 Introduction ................................ ................................ ................................ ............................ 46

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ADU Acquisition ................................ ................................ ................................ .................... 46 Impetus for ADU Acquisition or Creation ................................ ................................ ............. 47 Construction of the ADU ................................ ................................ ................................ ....... 48 Homeowner Disinterest in ADUs ................................ ................................ ........................... 49 Homeowner Demographics ................................ ................................ ................................ .... 51 Homeowner Identi fied Challenges to ADU Development ................................ ..................... 52 ADU Construction Finance ................................ ................................ ................................ .... 52 Cost To Construct an ADU ................................ ................................ ................................ .... 54 Rent Charged By ADU Configuration ................................ ................................ ................... 55 Cost of Construction by Size ................................ ................................ ................................ .. 56 Rent Charged By ADU Type ................................ ................................ ................................ 58 Tenant Demographics ................................ ................................ ................................ ............. 59 Homeowner and Tenant Relationship ................................ ................................ .................... 60 Rents Charged Based On Homeowner Tenant Relationship and Homeowner on Site .......... 61 Rents Charged Based On Homeowner Tenant Relationship & Homeowner on Site ............. 63 Summary ................................ ................................ ................................ ................................ .... 64 V : INTERVIEWS OF PLANNERS, REAL ESTATE PROFESSIONALS, AND ADU ADVOCATES ... 69 Introduction ................................ ................................ ................................ ................................ 69 Planners ................................ ................................ ................................ ................................ ...... 69 Demand ................................ ................................ ................................ ................................ .. 69 Affordability & Policy ................................ ................................ ................................ ............ 70 Barriers to ADU Development ................................ ................................ ............................... 71 ADUs as Affordable Housing ................................ ................................ ................................ 73 Appraisal and Finance of ADUs ................................ ................................ ............................. 73

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Summary of Planners ................................ ................................ ................................ ................. 73 Real Estate Professionals ................................ ................................ ................................ ............ 78 De mand ................................ ................................ ................................ ................................ .. 78 Perceived Barriers to ADU Creation ................................ ................................ ...................... 78 ADUs as Affordable Housing ................................ ................................ ................................ 78 Appraisal and Finance of ADUs ................................ ................................ ............................. 79 Summary of Real Estate Professionals ................................ ................................ ....................... 80 ADU Advocates ................................ ................................ ................................ ......................... 80 Demand ................................ ................................ ................................ ................................ .. 80 Perceived Barriers to ADU Creation ................................ ................................ ...................... 81 ADUs as Affordable Housing ................................ ................................ ................................ 82 Appraisal and Finance of ADUs ................................ ................................ ............................. 82 Summary of Advocates ................................ ................................ ................................ .............. 83 Interviews Summary ................................ ................................ ................................ .................. 83 Demand ................................ ................................ ................................ ................................ .. 83 Affordability & Policy ................................ ................................ ................................ ............ 83 Perceived Barriers to ADU Creation ................................ ................................ ...................... 84 Appraisal and Finance of ADUs ................................ ................................ ............................. 85 Best Practices ................................ ................................ ................................ ......................... 85 Conclusion ................................ ................................ ................................ .............................. 86 VI : ANALYSIS OF ZONING CODES FOR ADUS IN 31 JURISDICTIONS IN COLORADO ............... 87 ADU Specific Documents ................................ ................................ ................................ .......... 87 ADU Planning Review Process ................................ ................................ ................................ .. 88

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Permitted Zones and Types of ADUS ................................ ................................ ........................ 90 Prohibitive Zoning Codes ................................ ................................ ................................ ........... 92 Minimum Lot Sizes ................................ ................................ ................................ ................ 92 Off Street Parking Requirements ................................ ................................ ........................... 94 Homeowner Occupancy Requirements ................................ ................................ .................. 95 Selling the ADU ................................ ................................ ................................ ..................... 95 Summary ................................ ................................ ................................ ................................ .... 96 VII : ANALYSIS OF FINDINGS ................................ ................................ ................................ ............... 100 Demand ................................ ................................ ................................ ................................ .... 100 Affordability and Policy ................................ ................................ ................................ ........... 101 Barriers to ADU Creation ................................ ................................ ................................ ......... 102 ADUs as Affordable Housing ................................ ................................ ................................ .. 103 Appraisal and Finance of ADUs ................................ ................................ .............................. 104 Target Populations ................................ ................................ ................................ .................... 105 Financial Need ................................ ................................ ................................ ...................... 105 Willingness to Develop and Be an ADU Landlord ................................ .............................. 106 Development Capacity ................................ ................................ ................................ ......... 106 Regulatory Permission ................................ ................................ ................................ ......... 107 Findings for Colorado ................................ ................................ ................................ .............. 107 Outliers ................................ ................................ ................................ ................................ 109 VIII : CONCLUSION AND RECOMMENDATIONS ................................ ................................ .............. 112 Future Research ................................ ................................ ................................ ........................ 114

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Recommendations: ................................ ................................ ................................ ................... 115 REFERENCES ................................ ................................ ................................ ................................ ............ 116 APPENDIX A ................................ ................................ ................................ ................................ ............. 120 Definitions ................................ ................................ ................................ ................................ 120

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LIST OF TABLES TABLE 1.1: Research Question, Hypothesis, and Methodology Matrix ................................ ................................ ... 23 1.2: Demographics Comparisons, Berkeley, California, Portland, Oregon, and Cities in Denver (Source: US Census) ................................ ................................ ................................ ................................ .......................... 24 3.1: Interview Themes and Sub Themes for Personal Interview Coding and Analysis ............................... 36 4.1: ADU Zoning Codes of the East Bay Region of California and Three Cities in Oregon ....................... 45 4.2: Acquisition of the ADU by Respondents, East Bay, California and Three Cities in Oregon ................ 46 4.3: Homeowner demographics, East Bay, California and Three Cities in Oregon ................................ ..... 51 4.4: Homeowner reported challenges to ADU development East Bay, California and Three Cities in Oregon ................................ ................................ ................................ ................................ ................................ ....... 52 6.1: ADU Specific Documents from Community Zoning Code Reviews in Colorado ................................ 88 6.2: ADU Planning Review Process from Community Zoning Code R eviews in Colorado ........................ 89 6.3: Permitted Zones and Types of ADUs from Community Zoning Code Reviews in Colorado ............... 92 6.4: Minimum Lot Size Requirements from Community Zoning Code Reviews in Colorado .................... 93 6.5: Owner Occupancy Requirements from Community Zoning Code Reviews in Colorado ..................... 95 6.6: Permitted Sales of ADUs from Community Zoning Code Reviews in Colorado ................................ 96 6.7: Zoning Codes Summary of Potentially Prohibiting Regulations, Colorado ................................ .......... 98 8.1: Methodology Matrix with Research Findings Using the Hypothesis ................................ .................. 113

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LIST OF FIGURES FIGURES 4.1: Why Homeowners Built an ADU, Three Cities in Oregon ................................ ................................ ... 48 4.2: Identification of Who Constructed the ADU, East Bay, California and Three Cities in Oregon .......... 49 4.3: Why Respondents Lack an ADU, East Bay, California ................................ ................................ ........ 50 ................................ .. 53 4.5: Cost of Construction by Configuration of ADU, Three Cities in Oregon ................................ ............. 55 4.6: Rents Charged by ADU Configuration, East Bay, California and Three Cities, Oregon ...................... 56 4.7: Cost to Construct an ADU by size (sqft), Three Cities in Oregon ................................ ........................ 57 4.8: Rents Charged b y ADU Type, East Bay, California and Three Cities in Oregon ................................ 58 4.9: ADU Tenants by Gender and Age, Three Cities in Oregon ................................ ................................ .. 60 4.10: Relationship between the Homeowner and ADU Tenant, East Bay, California and Three Cities in Oregon ................................ ................................ ................................ ................................ ........................... 61 4.11: ADU Rent Charged by Tenant Relationship to the Homeowner, Three Cities in Oregon .................. 62 4.12: Rents Charged by ADU Configuration, Three Cities in Oregon ................................ ......................... 64

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15 CHAPTER I INTRODUCTION Introduction Accessory Dwelling Units (ADUs) are dwelling units on the same lot as and subsidiary in design and often size to a primary residence. ADUs have historically been prevalent in communities across the nation, with Colorado being no exception (Antoninetti, 2008; Personal Interviews, 2013 ). Affordable housing shortages and demographic changes often stimulate demand for ADUs. Currently r isin g home values, due to housing shortages and increased demand, coupled with wage stagnation have increased housing affordability shortages of both rental and for sale units T he Great Recession and rising transportation costs have also impact ed household finances (Nelson, 2013 & Lipman 2006) Af fordable housing in Colorado is, and is projected to continue to be, particularly acute: The H + T Affordability Index finds 34.1% of all households in the Denver Aurora Broomfield, Colorado metropolitan region pay more than 30% of their income on housing costs and 58.5% of these households pay & A 2013 report by Bolton (for the National Low Income Housing Coalition) using 2011 American Community Survey data found 77% of all Extremely Low Income households ( earning <30% of A rea M edian I ncome ) and 28% of Very Low Income ( earning 30% 50% A rea M edian I ncome ) households in Colorado were severely housing cost burdened, that is they spend more than 50% of their income on housing costs (Bolton, 2013, p. 5). Kneebone and Garr ranked the Denver Aurora M etropolitan S tatistical A rea (MSA) ninth out of 95 MSAs nationally for top rates of poverty rate change from 2000 to 2008 in the primary city and associated suburbs : 4.9 percentage points (Kneebone and Garr, 2010, p. 8) The Joint Center for Housing Studies (JCHS) (2013) points out Denver as experiencing both job growth and lo w housing inventories, meaning housing pressures and cost burdens are specific ally significant for Denver

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16 with population projected to reach six million by 2020 (a 20% increase from 2010) and seven million by Other changes have also exerted pressure on housing affordability. Greater demand for in town residency has i ncreased demand f or smaller and/or rental and/or affordable housing (Molloy and Shan, 2010) ; decreases in household size and income or net wealth have had similar effects Housing, 2013) ; and so has the increased desire and practice to age in place for the large Baby Boomer cohort. E nvironmental concerns with sprawling residential development have made ADUs an attractive alternative: smart growth and p lanners of ADUs promote them for environmental and/or fiscal pragmatism and economic sustainabili ty the former for preservation of agricultural land, open space, wildlife habitat, and resource conservation and the latter for efficient use of already developed land and infrastructure For all these reasons, ADUs are considered to be r elative ly a ffo rdable ho using, such as for households that wish to age in place Relative ly affordable housing is a term I have developed and applied here to reflect the growing trend in public and private affordable housing circles to create housing affordable to all ( including income levels who may not qualify for subsidies or fall within HUD defined low income categories ) and to place an emphasis on the total affordability of the housing unit ( vis a vis its size, incorporated amenities, and location ) by adjust ing the valuation of housing affordability from just the housing price or rent to the entire housing package with associated travel cost savings due to location (Haas, Makarewicz et. al, 2008 ; Lipman, 2006 ), inclusion of amenities, such as utilities (Wegman n, and Chapple, 2012) and the reduction in utility costs due to a smaller size d unit (Personal Interviews, 2013) S tudying the barriers and enablers of ADUs as a relative ly a ffordable h ousing strategy is particularly relevant and important for Colorado at this time due to several significant recent and projected changes as noted above, for Colorado as well as the United States including: Historically large numbers of retiring Baby B oomers at both ends of the income scale Th is is the greatest population o f seniors that the US has ever experienced and their retirement will impact housing for 40 50 years as they begin and continue to retire for

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17 the next two decades (Nelson, 2013) In Colorado, the proportion of the population that are seniors ( aged 65 to 90 ) will triple by 2030, from 11% Many seek to age in place, creating the need for more flexible housing in communities so aging adults can remain in their community but find a smaller home; others may seek to build an ADU to which they wi ll move into and then rent the primary residence ( Kochera and Koppen, 2005) Many seek to retire to their second homes often in sun belt retirement communities or rural resort mountain towns in Colorado. These moves have implications for increased housing costs and decreased housing inventory for receiving com munities ( Personal Interviews, 2013 ) Many others with substantial retirement savings and wealth seek to move to in town locations, such as downtown Denver, Glenwood S prings, and Durango, which may cause displacement of moderate and lower income households who cannot afford the resulting increased housing costs (Nelson, 2013) Many will need in town locations due to their health and lack of retirement savings and will need the affordability and city services, including public transit, that an in town location can provide Shrinking household size (Nelson, 2013). In Colorado, the average household size is 2.51, and 2.26 in Denver, 2.20 in Boulder, 2.28 in Grand Junction, and 2.19 in Durango (US Census, 2008 2010). Younger people are choosing to live alone for longer than prior generations Couples choosing to start a family later than prior generations More couples choosing not to have children at all, or to have fewer children Baby Boomers, with longer life expectancies on average, losing a spouse or partner

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18 Rising housing prices coupled with declining wages and shrinking incomes (Nelson, 2013) Trends in suburbanization of poverty may cause an increase in non permitted ADUs in areas where homeowners seek additional income to afford the existing larger housing stock of the suburbs, coupled with suburban tenants requiring greater housing affordability given the highe r rates of poverty. (Kneebone & Garr, 2012 ; Personal In terviews, 2013 ; and Nelson, 2013). In some communities in Colorado, planners asserted there were several non permitted ADUs within their community, which supplied affordable housing to the household through the additional rental income (Personal Interview s, 2013). Shrinking municipal budgets that require more efficient use of funds for roads, sewer, and wastewater infrastructure Rising transportation costs due to i ncrease d gas prices can impact h ousing location choice (Molloy and Shan 2010) In Denver, home values near the light rail transit stations and closest to the city center are rapidly rising. The political landscape in Colorado is also impactful for ADU development in the state in general, and ADUs as affordable, and relatively affo rdable, housing, specifically. Constitution coming within its provisions the full right of self government in both local and mu nicipal matters . defining Colorado as a home rule state (CO Const. art. XX, §6, cl. h ). As a home rule state, each jurisdiction or municipality that has elected for home rule status (representing thirty of the 31 jurisdictions interviewed and zoning codes reviewed for this thesis) is bestowed with the power of self determination regarding whether or not to enable ADUs and what level and type of regulatory treatment to apply to them Given this political landscape state driven legislation mandating the enablement of ADUs as California, Florida, and Washington have done, is currently non existent and unlikely to occur in Colorado Despite this lack of state direction, A DUs have returned to housing conversations i n many Colorado jurisdictions : one quarter of the

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19 communities reviewed here are or just completed revising and/or adopting ADU codes In some communities, planners and ADU advocates triggered the renewed focus on ADUs mainly in the context s of sustainable land use practices and housing affordability. Yet, ADU policy is only as effective as the regulatory environment within which it exists. An understanding of the real and perceived barriers and costs to ADU production is therefore necessa ry. Wegmann and Nemirow (2011), Rudel (1984) and Gratton (2011) all find ADUs to offer some measure of affordability and Infranca (2013) attests to ADUs capacity to offer r elatively a ffordable h ousing. But, Action Media (2008), Hart (2005), Homes for W orking Families (2005), and Lang, Anacker, and Homburg (2010) also be its downfall: negative public perception and reaction to affordable housing may cross over to ADUs Drew (2013) confirms social construction of target populations is a determinant of the policy design and success of its implementation. Gellen (1985), Pelham (2007), Stege (2009), and Laurian, Day, Backhurst, Berke, Ericksen, et al. (2004) point to the planner as enabling or inhibiting ADU development through zoning codes, administrative requirements, and/or a lack of technical support. Brown and Watkins (2013) and Infranca (2013) identify conventional appraisal valuation and financial len ding practices as market barrier s to ADU production due to the lack of available real estate market valuations vis vis comparable sales data. For this study, I sought to further investigate each of these claims in the Colorado context: whether there is demand for ADUs and by whom; whether or not ADUs offer affordable or relatively affordable, housing; and whether and how perception, planning restrictions, or financial and appraisal techniques are barriers. I used available s urvey data of homeowners f rom the East Bay Region of California ( Albany, Berkeley, El Cer r ito, Oakland, and Richmond) (Wegmann and Chapple, 2012) and three cities in O regon

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20 (Ashland, Eugene, and Portland) ( Horn, Elliot, and Johnson, 2013) to serve as a proxy 1 for lack of homeowner data in Colorado. These surveys shed light on both homeowner and renter target populations and the influence of the context for the ADU planning policy and regulations. Specifically, I study three aspects from these states that provide lessons for Colorado : 1) homeowner demographics (including household income) and their intentions and use of the ADU; 2) barriers and costs for ADU development; and 3) ADU tenant data (including demographics, homeowner tenant relationships, and rents paid). Persona l interviews conducted with p lanners, ADU a dvocates, and r eal e state p rofessionals working in Colorado and nationally built upon the literature, and provided insight into the development of ADU regulations, knowledge of ADU and policy implementation of ADU policies, and the creation of ADUs in their communities Several interviewees spoke to the cost and financial barriers to ADU development, and the conundrum between homeowners who could develop ADUs and homeowners who want to develop ADUs S pecifically, they stated those with sufficient financial capacity (via home equity or personal capital ) were the ones currently develop ing ADUs in their community but not always as rentals, but in some communities those with financial capacity have the least amount of willingness to develop and rent these units On the other hand, younger and/or newer residents that have the financial need for and are more willing to develop an ADU have the least financial capacity to do so ( P ersonal I nterviews, 2013). This sugges ts that the hypothesis that a combination of regulatory permission, financial need, willingness to develop and rent an ADU, and development capacity is necessary for optimal ADU target populations. Lastly, to tie together the literature, homeowner survey s, and my interviews to specific contexts in Colorado, I analyze the loc al planning context in 31 Colorado cities and counties through a review of their jurisdictional zoning codes and ADU specific documents This analysis provide s insight into how ADUs are enabled or inhibited across the state, generally, and as affordable (or relatively affordable) housing 1 Given a lack of data (and time and money to gat her it) on Colorado homeowners who own or constructed ADUs, the homeowner survey data from the East Bay Region of California and in Oregon offers potential to understand how to craft ADU policy to reach theoretically optimal target populatio ns. These two homeowner surveys will be further explained in Chapter IV : Homeowner Attitudes.

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21 specifically A general lack of ADU development in Colorado communities suggest s the perceived ADU benefits to homeowners ma y be beneficial in theory but not in application. It also may indicate that zoning requirements nested within seemingly enabling zoning codes make more prohibitive the conversion or construction of an ADU These prohibitive zoning codes may reflect a l ack of analysis by planners of how the proposed zoning codes Instead, planners may rely on peer jurisdiction zoning codes to guide their ADU code. Without understanding the local con text and need, planners are more susceptible to resident not in my backyard (NIMBY) resistance w hich is often laden with social construction of ADU s and their tenants. By com bining the existing literature and homeowner surveys from contexts outside of Colorado with interviews and planning and regulatory analysis from within Colorado thesis add s to the knowledge of the roles regulatory permission, financial need willingness to be an ADU landlord and development capacity, play in ADU development for af fordable and relatively affordable housing In doing so, this thesis will help validate and expand knowledge o f barriers to their development including the role of social construction on ADU policy and the most appropriate target populations for ADU homeowners and tenants The findings may also be relevant to other cities and states throughout the U.S. Statement of the Problem Numerous population and urban development trends suggest ADUs are optimal and should be in demand by homeowners via permit r equests for ADUs: c urrent and projected household d emographic s and changing housing needs and preferences such as decreasing household size disparity in household income and net wealth housing choice preferences for more urban and transit accessible lo cations increa se in demand for rental housing and a range of affordable housing issues However, homeowner surveys, p ersonal i nterviews with planning and real estate professionals and reviews of z oning c ode s and ADU development rates in Colorado suggest supply and demand of ADUs is lacking. Housing affordability has been theoretically and practically linked to ADU development programs,

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22 r eceptivity to affordable housing and its tenants are also inhibit ing ADU creation because of resident NIMBY exclusionary ADU zoning regulations. Therefore, ADU messaging as affordable and relatively affordable hous ing may be one of many potential barriers to their creation. Beyond issues of affordable housing perception, other planning policies and financing may also enable and/or impede ADU development, but understanding of this requires a finer grained analysis o f these contexts. Municipalities may appear to enable ADUs, but zoning code regulations (such as minimum lot sizes) may actually impede their development. Likewise, alt hough disparity and reduction in household net wealth and income (due to the recent Gr eat Recession and longer term economic trends ) may produce demand among some homeowners for ADU development, the lack of conventional appraisal and finance practices may be another inhibit or to ADU development. M any Colorado jurisdictions have adopted ADU ordinances, despite a lack of state mandate to do so presumably to increase supply A small percentage of homeowners have responded by develop ing ADUs through both permitted and non permitted channels demonstrating there is some homeowner and tenant demand for ADUs However, understanding the extent of this demand, and how it is affected by the motivation of homeowners and the perceived and realized barriers to ADU develop ment, including personal, regulatory, and financial facets requires additiona l research Research Question & Design What circumstances inhibit the creation of ADU s as affordable, and relatively affordable, housing ? I hypothesize that households with a combination of four characteristics: regulatory permission, financial need, willingness to be an ADU landlord and development capacity would be optimal ADU implementers If correct, planners in Colorado could target these homeowners with appropriate information, policies, and technical assistance, and therefore be more likely to achieve one or more of the stated benefits of ADUs: affordable housing, efficient use of existing infrastructure, and infill development.

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23 To test this hypothesis, three methods were used: homeowner survey data; interviews with planners, ADU advocates, and real estate professionals in Colorado ; and analysis of zoning codes from Colorado jurisdictions T he below matrix was designed to s how what I found when I use d these methods to test the research question given my hypothesis (Table 1.1) 2 Table 1.1: Research Q uestion, H ypothesis, and M ethodology M atrix Homeowner Surveys Interviews Zoning Codes Regulatory Permission Do homeowners state prohibitive policies as the reason they were unable to develop an ADU? Do planners acknowledge or believe that regulations within their zoning codes could limit ADU development ? W hat reasons do they provide for not making them more permissive? What types of ADUs and with what restrictions or design requirements are allowed within ADUs codes? Financial Need Do h omeowners report rental income as a reason for ADU development? Do practitioners believe or confirm that homeowners need or are interested in the ADU rental income? Do zoning codes permit affordable ADU construction or do certain regulations make ADUs cost prohibitive Willingness Is there a demographic pattern among ADU homeowners ? W hich types of homeowners express interest in ADUs? Does the development of non permitted (also known as illegal or bandit) ADUs indicate homeowner willingness to be an ADU landlord? W interest translated into more permitted units, especially in towns with concerted efforts to promote ADUs? Do zoning districts target or restrict ADUs in areas that would have the hypothesized willing home owners? Development Capacity Was it necessary for ADU homeowners to have personal development expertise and financial resources to develop their ADUs, and to what extent ? In their experience, did ADU homeowners require particular financial or development skills and capacity to develop the ADU? Do zoning codes and regulations require more sophisticated and high cost designs and construction management from the homeowner? 2 There are limitations to this interpretation due to a lack of Colorado homeowner survey data, limited data on low and moderate income ADU owning households, a lack of data on racial and minority ADU owning households, and a lack of quantitative data on the inhibiting impact of individual zoning code regulations (limited residential zones, limited types, minimum lot size requirements, off street parking requirem ents, homeowner occupancy requirements, and the ability to sell the ADU).

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24 Significance to the Field This thesis will provide greater understanding of ADU policy and practice for jurisdictions in Colorado and ADU advocate s in general; better inform ed ADU policies may yield greater numbers of ADU s through strengthen ing the enabler s and resolving the inhibitors to ADU development. Limitations Given time and fund ing constraints, homeowner surveys could not be conducted of communities in Colorado. It is understood that homeowner attitudes and experiences in the two regions surveyed may not represent Colorado homeowners. However, these homeowner surveys are still useful for understanding ADU development in Colorado because some jurisdictions in Colorado have similar demographics, such as income and poverty rates, and housing and cost of living characteristics with the two survey regions ( Table 1.2 ) However, none of the Colorado jurisdictions have even half the density of Berkeley, CA, measured by persons per square mile. Table 1.2: Demographics Comparisons, Berkeley, California, Portland, Oregon, and Cities in Denver (Source: US Census) City Population : Median Household Income ($) Persons Below Poverty Line (%) Home ownership Rate (%) Median Value, Owner Occupied Housing Unit (%) Persons per Square Mile Berkeley, CA 112,580 63,505 18.1 43 707,700 10,753 Portland, OR 583,776 51,238 17.2 54 288,300 4,375 Arvada 106,433 68,017 7.3 74 241,000 3,029 Aspen 6,658 71,284 5 64 608,000 1,719 Boulder 97,385 56,206 21.6 49 489,500 3,948 Colorado Springs 416,427 54,351 13.7 60 213,400 2,141 Denver 600,158 49,091 18.9 50 246,300 3,923 Durango 16,887 53,173 13.9 51 357,700 1,702 Fort Collins 143,986 53,359 18.1 56 244,900 2,653 Glenwood Springs 9,614 54,905 19.1 60 409,900 1,692 Grand Junction 58,566 47,598 16.1 62 226,200 1,532

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25 CHAPTER II REVIEW OF THE LITERATURE Introduction This chapter summarizes literature pertinent to household demographics and their housing size and location preferences; homeowner need and capacity for ADU development ; affordable, and relatively affordable, housing policy; ADU zoning code reg appraisal and finance practices for ADU construction or purchase; and the role of social construction in policy development, in general ; and planning policy and practice in regards to ADU promotion and de velopment specifically Literature Homeowner Demographics, Housing Preferences, and ADU Interest Several recent studies note both the increased demand for rental housing and the declining supply of it, particularly the supply of affordable rental housing Nelson (2013) predicts shrinking household size, declining homeownership preferences, and increased demand for rental housing from 2010 to 2040. Bolton (2013) documented overall growth in renting households and simultaneous decreases in rental housing for Extremely Low Income households ( those earning <30% of the A rea M edian I ncome ) and Very Low Income households ( those earning 30% 50% of the A rea M edian I ncome ) nationally, and in Colorado, specifically. Kneebone and Garr (2010) found a 15.4% growth in the population living in poverty between 2000 and 2008, with the Denver Aurora MSA ranked ninth (out of 95 MSAs) for top rates of poverty rate change in the primary city and associated suburbs. The Joint Center for Housing Studies (JCHS) (2013) found a n increase in severely burdened (those paying more than 50% of their income on housing) renting and owning households between 2001 and 2011, and points to Denver as experiencing both job growth and low housing

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26 inventories, meaning housing pressures and cos t burdens discussed generally are specific ally significant for Denver and Colorado In addition to the mismatch between supply and demand for affordable rental and owned housing Infranca (2013) states demographic and cultural changes in the use of spac e and changing preferences for housing size s requires different housing choices. The National Association of Realtors (NAR) (2013) found small home preference was prioritized more greatly by African American and college graduates (both recent and those under 45 years old) and Brinig and Garnett (2013) also found a desire by non white households for smaller housing units The JCHS (2013) found disparity in net wealth of renting households and in the amount of home equity lost during the Great Recession by race, with African Americans having the least and suffering the most. These findings suggest that racial and ethnic minority owning and renting households should be adopting ADUs for their flexibility, size, and income producing characteristics. Some authors point to this potential for development and benefits accrued to ethnically diverse households, and highlight the absence of these households in existing homeowner surveys Rudel (1984) received only responses from white households, and Wegmann an d Chapple (2012) received responses from only English speaking homeowners in their respective surveys, which both authors noted was disproportionate for their respective study regions. Brinig and Garnett (2013) found a statistical correlation between the percent of Mexican immigrants and the level of restriction of ADUs across jurisdictions. This is important to this thesis because some racial and ethnic minority households are found to desire characteristics of ADUs and these same households could benef it from ADU creation but this literature suggests that they are under represented in, and possibly willfully excluded from, ADU development. Financial Need Household incomes and market rents matter, according to Nordvik (2000) who found that lower income households are more likely to develop and rent ADUS, given market rents, than higher income households; though higher income households do demonstrate some sensitivity to market rents (and thus will e point). Further, Krass (2013) found that

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27 neighborhood wealth is an important factor to ADU creation but is not sufficient in and of itself for their development. Ruud and Nordvik (1999) find that the financial need of the homeowner is more likely (than excess space) to spur ADU development and that non financial factors may be equally important in the decision to develop and rent an ADU. Grzeskowiak, Sirgy, Lee, and Claiborne (2005) research homeowner housing satisfaction and find a correlation between quality of life and home use, though no correlation was found between quality of life and home ownership. appropriate mix of permission, need, willingness, and capacity for ADU development, and off er critique for policy that relies strictly on homeowners with wealth and equity to do so. Homeowner Capacity Design is another issue inhibiting ADU development. Wegmann and Nemirow (2011) cite design constraints as negatively impacting ADU affordability. Ironically, Antoninetti (2008) suggests the income from ADUs could aid the homeowner in paying for the design of a renovation and rehabilitation. At a sufficient scale within a single neighborhood, ADUs could help to rehabilitate existing neighborhoods Duff (2012) and Howe (2007) suggest another approach to enable ADUs through designs appropriate for existing or proposed single family residences that would enable the eas y and affordable accommodation of ADUs. Rudel (1984) analysis of design and costs determined split level ranch homes (a common housing style of inner ring suburbs) accommodate ADUs more cheaply than other styles. These findings and example drawings can aid the homeowner in developing lower cost ADUs, and ca n aid the planner to target appropriate households for ADU promotion by their housing built form Homeowner interest, capacity, and willingness to develop and rent ADUs are explored further in Chapter IV: Homeowner Attitudes. Affordable and Relatively Aff ordable Housing Nemirow and Chapple (2012) found ADUs could provide 8% of urban infill of the East Bay Region in California. Nelson (2013) estimates ADU infill development could provide approximately 10% of the projected rental housing demand. Such units could fulfill some housing diversity and choice by providing

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28 rental units for small households that Fishman (2006) states are a necessary part of the Mt. Laurel New Jersey Supreme Court cases. Farris (2001) cautions against using urban infill as a strate gy because it is limited by scale, largely due to land assembly costs. ADUs as infill help to address his concern since land assembly is avoided. Although ADUs are an advantageous type of urban infill they are not inherently affordable. Schafran (2012) recognizes the promotion of ADU s as affordable housing being dependent on the individual homeowner investing in and taking financial risk in the development of the ADU making it a unique (and potentially uncertain) m ethod for the provision of affordable housing. Some research supports the ADU as offering some measure of affordability. Gratton (2011) found measures in exchange for five years of rent controls for the ADU. and Rudel (1984) found ADUs to have some measure of affordability due to homeowner ADU tenant relationships Wegmann and Nemirow (2011) also found of homeowner as landlord provide s some measure of affordability Infranca (2013) supports ADUs as relatively affordable housing from their presence in otherwise unattainable neighborhoods (due to a lack of rental housing lack of developable land, and/or high housing costs). This is important to those between 35 and 54, which had real income declines to the same levels as those in 1971, and near retiree populations, who (JCHS, 2013, p. 16). Harri s Interactive (2007) and Moll o y and Shan (2010) both posit transportation costs impact housing affordability with potential to impact household location choice for the 10% of households that move annually. Nordvik (2000) claims the cost to develop and ren t an ADU is equivalent ( or less ) in cost to that of moving to a new location suggesting ADU conversion may extend homeowner tenure in their neighborhood, promoting more stable communities. These findings support the potential for ADUs to offer relatively affordable housing from their location in amenity rich neighborhoods, and proximity to employment, service, and transportation centers and the potential for ADUs to stabilize homeowners in the community as well

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29 Action Media (2008), Hart (2005), HFW (2006 ), and Lang, Anacker, and Homburg (2010) all identify working class professionals as appropriate target populations for affordable housing programs. ( greater than 29 minutes), those earning $50,000 or less a year, and those 18 34 years old as potential target populations for ADU tenancy. The JCHS (2013) findings of real income declines for those 35 54 years old suggests a broader age demographic for ADU targeting than the Harris Interactive projection. The link between correctly targeted populations to ADU development is further supported by Retsinas and Retsinas (1991) and Wegmann, Nemirow, and Chapple (2012 ). These findings support the importance of identifying the t arget populations for ADU development and tenancy for ADU policy. A significant issue for promoting ADUs as affordable housing is public perception of affordable housing Action Media (2008), Hart (2005), HFW (2005), and Lang, Anacker, and Homburg (2010) caution affordable housing and its tenants and suggest using messagin g that is locally relevant and emphasizes the issue as housing that is affordable to all. The National Low Income Housing Coalition (NLHC) (2012) also created a guide to assist local governments in the development of affordable housing. Hart (2005) and t he NAR (2013) do find support from the public for affordable housing, with Hart finding greater support from residents living nearer to it. These findings are important for jurisdictions seeking to develop ADUs as affordable, and relatively affordable, ho using policy, by offering ways to frame the issue, craft acceptable messaging, and build political will among public officials. ADU R egulations and t he P R ole Recognizing the potential benefit of ADUs for senior and retiring population s t he A meric an A ssociation of R etired P ersons (2000) produced model legislation and ordinances for ADUs in an effort to make them more easily adopted by communities. The AARP model ordinance included several recommendations, of which these are a few examples: off str eet parking, minimum lot size, maximum square footage, and design elements. The AARP effort may be in response to the findings on prohibitive ADU ordinances that were contrary to stated community goals for ADUs. Pelham (2007) found variance between

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30 the g oals for ADUs planners stated they had and the actual practice of planning towards them. Brinig and Garnett (2013) and Stege (2009) identify onerous zoning codes, lack of promotional programs, and ties to affordable housing as inhibiting factors to ADU de velopment. For example, Wegmann, Nemirow, and Chapple (2012) find that the zoning code requirements for off street parking and minimum lot size s had the potential to inhibit 70% 75% of ADU development due to parcel constraints in their study of the East Bay Region of California For ADUs, then, ADU zoning codes and ordinances may be commonly enacted but specifically prohibitive. Additionally, Gellen (1985), Pelham(2007), Stege (2009) and the Colorado Department of Housing (2013) all call on planners to take a more active role in promoting the ADU in their communities, through less regulation, homeowner education, and/or financial supports. Pa rk and Oh (2012) suggest development of a government plan to support the rehabilitation and continued use of existing housing stock through technical and financial assistance programs. This role of the planner in enabling and promoting ADUs is discussed further in Chapter V: Interviews of Planners, Real Estate Professionals, and ADU Advocates. The issue of ADUS vis vis Colorado jurisdiction zoning codes is explored more in Chapter VI : Analysis of Zoning Codes for ADUs in 31 Jurisdictions in Colorado. Appraisal and Finance for ADUs Beyond planning ordinances, Infranca (2013) suggests a lack of financial lending products for ADU construction as the barrier to ADU development. Conventional lending for ADUs relies on the equity of the Brown and Watkins (2012) propose that ADUs should be valued using income based methods of evaluation, w hich are based on the ADU rental income instead of the current method of using comparable sales based data f or valuation and underwriting of ADUs The authors state that doing so would open other loan types to homeowners and would be acceptable under cur rent Fannie Mae underwriting procedures. It is possible that the limits conventional appraisal and finance practices place on ADU development is prohibiting homeowners from

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31 developing them, including racial and ethnic minorities, who have already been fou nd to have lost more equity (due to the Great Recession) and have lower household net wealth, than their Caucasian peers. More generally, planners must be aware of the market into which their policies fall so that expectations and policy can be better cra fted. Target P opulations and S ocial C onstruction i n P lanning P olicy Other authors speak more about policy implementation and learning, which is important to the creation of effective ADU policies. For instance, Schafran (2012) notes planners and ADU advocates idealize the ADU and its tenant in ADU promotion and policy by minimizing the ir negative impacts upon the receiving neighborhood. Drew (2013) analyzes the impact the Great Recession had on low income households and finds that h omeownership policies incorrectly imbued homeownership with benefits. Further, Drew (2013) found that the lack of education and technical assistance for low income homeowners was proof of the lack of intention in the policy implementation and was, thus, t he reason for its failure. Laurian, Day, Backhurst, Berke, Ericksen, et al (2004) determined that planning implementation was more dependent on planners and their capacities than on developers. This body of literature offers caution to planners to avoid in determining policy success through the policy tools chosen and capacity devoted to policy implementation. Summary The literature substantiates the potential fo r ADUs to achieve many of their stated benefits through demonstrating demand for the housing form within home owning and renting households, with specific potential for benefit realization for racial and ethnic minority households. ADUs were found in some research to offer affordable housing for some (HUD defined) l ow i ncome households. T he literature also speaks to the ability of ADUs to offer relatively affordable housing for moderate income households Relatively affordable housing is found to have tr action with the public as well, and affordable housing messaging can translate to ADU messaging and positively impact implementation application was found to both assist and complicate development of them. This was foun d to be true for

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32 numerous reasons, th r ough the zoning codes adopted level of staff and department resources assigned to ADU promotion, and the lack of development of technical and financial support to bridge administrative and contextual gaps in ADU devel opment. These constraints may be more prohibitive to racial and ethnic minorities, which would preclude their proportion in ADU development and, therefore, obstruct ADU benefits from reaching these households. Homeowners were found to be motivated to develop ADUs by financial need and current market rents The lack of appraisal and finance practices for ADUs was also cited in the literature as prohibiting ADU development. The l iterature spoke to the role policy creation and social construction of tar get populations has on policy success, and highlighted the need to critique intention and

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33 CHAPTER III METHODOLOGY Introduction To answer the major research question of this thesis ( wh at circumstances inhibit the creation of ADUs ?), five themes three methods and types of data were used to explore each : 1. Demand: What are the perceptions of household demographic, housing preferences by planners, real estate professionals, and ADU advocat es interviewed, in general, and Colorado, specifically? H ow do th ese perceptions impact identification of optimal target population s for ADU creation and adopted zoning code regulations ? Who is driving the focus on ADUs in Colorado communities? 2. Affordability and Policy: How does the concept of affordable, and relatively aff ordable, housing get defined by Colorado planners and r eal e state d evelopers and how is the definition of affordable housing and subsequent development received by the community? 3. Barriers to ADU Development: experienced barriers to ADU development (including costs of construction, planning codes, design requirements, financing, etc.)? 4. ADUs as Affordable Housing: What are the perceptions of planners, real estate professionals, and ADU advocates towards ADUs as affordable, and/or relatively affordable housing? How do the se barriers impact an ADU s affordability? How does the impetus for ADU construction whether financial ne ed of the homeowner, intended use of the ADU, or mitigation option of government regulation affect its rental price and affordability ? Does the homeowner ADU tenant relationship impact on affordability ?

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34 5. Appraisal and Fi nance of ADUs : How does the real estate industry appraise and underwrite ADUs, either for purchase or construction, and how do these practices individually and/or collectively influence the production of ADUs? This study use d an inductive approach and mixed methods to an swer the above identified research questions. Q uantitative analysis was used to analyze homeowner survey data from two reports: the Berkeley (2012) and the State of Oregon Department of Environmental Quality and Portland State University Survey Research L (2013). This analysis provided preparatory understanding of homeowner experience with ADUs and their development. Understanding of the theoretical, regulatory, and financial contexts within which homeowners develop ADUS was informed by i nterviews with 49 planners and actors involved in ADU discussions throughout the state of Colorado and nationally I coded t hese interview narratives according to the five themes related to the research question (listed above) and interpreted with quantitative, descriptive and qualitative analysis. Lastly, I used selected Colorado documents to understand how planning policy varies by urban context and whether certain types of ADU planning policies resulted in higher or lower rates of ADU development These findings were also interpreted with descriptive and qualitative analysis. Setting The study focuses on ADU policy in Colorado, although it also draws from household data and research on ADUs from around the country. Colorado was selected because, as noted above, it faces many of the sa me demographic trends driving the need for smaller and more affordable housing in in town locations and the need for homeowners to have income for various reasons. Colorado also offers a range of community types from rural to urban The 31 Colorado juri sdiction s in this study were selected for the presence or recent development of ADU enabling zoning codes and to represent some of the diversity in communities common to the state, including metropolitan and suburban municipalities along the Front Range, R ural Resort

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35 mountain communities, and communities in the West Slope portion of the state For each community, I conducted at least one interview, and the ir zoning code was analyzed. Interview Participants I used convenience sampling to develop the pool of interviewees. An initial list of potential interviewees was derived from a list of contacts developed by Schafran (2012) through research for: The politics of accessory dwel ling units in the United States which were made available to me by the author. Interview participants were sought in three areas: p lanners, r eal e state p rofessionals and ADU advocates All were identified through snowball sampling of interviewees and internet searches specifically seeking experts on ADU design, construction, appraisal, and finance A total of 49 intervie ws were conducted, representing 35 planners, six real estate professionals, and eight ADU advocates Planners are grouped based on their professional focus and th eir actions within the public or nonprofit sector of regulating and/ or promoting ADUs. The planner group consists of 23 city and eight county planners, two housing authorities, one elected official, and one executive director of a non profit organization. Real estate professionals are grouped based on their profession in the for profit arena of ADU development, including appraisal, design, development, and finance of ADUs. One architect, three contractors/developers, one appraiser, and one loan represent ative were interviewed. ADU advocates are grouped together based on their promoting ADUs within their personal and professional communities. ADU advocates work in the supply and demand side of ADU production in for profit and public sector institutions. One ADU advocate was an academic, four represented advocacy organizations, two were consultants who worked on housing, and one was an elected official.

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36 Measurement Instruments I used interviews to collect professional thought and practice relating to AD Us. Interviews were open ended, and flowed around general themes: development of the ADU zoning code, public participation and reaction to the ADU zoning code, the definition and need for affordable housing in their jurisdiction, the presence of non per mitted ADUs in their jurisdiction, the demand for smaller and/or rental housing in their community, housing pressures (including baby boomer retirement) on their community, who was building ADUs and in what numbers, and how their jurisdiction assessed the A code was developed around the five themes: demand, affordability and policy, ADUs as affordable housing, barriers to ADU development, and appraisal and finance of ADUs. Sub themes within each category were developed to capture finer grained analysis of the interview narrative. Table 3.1 shows the se themes and sub themes. Table 3.1: Interview Themes and Sub Themes for Personal Interview Coding and Analysis Theme Sub Theme Demand Demand for rental, smaller and/or location specific housing Changing community demographics and their housing preferences The lack of demand in the community for ADU housing characteristics Who drove demand for ADU zoning codes and /or ADU development Affordability & Policy Community identification and determination of affordable housing needs ADUs as Affordable Housing Receptivity of the public and/or development community to affordable housing and ADUs as affordable housing Barriers to ADU Development Homeowner demographics (higher incomes in rural resort mountain communities) Interviewee perceived and literature stated barriers to ADU development Homeowner disinterest

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37 Theme Sub Theme ADU zoning codes Costs to develop ADUs Appraisal and Finance of ADUs ADU evaluation/appraisal ADU financing Data Collection/Procedures I spoke with i nterviews in person or via phone, depending on the ir location and availability. Interviews ranged from 30 minutes to two hours, depending on the interviewee These interviews were not recorded but captured through note taking either during the interview or immediately thereafter from recall. Zoning c odes and ADU specific documents were download webpages or electronically collected from the interviewee. Anonymized h omeowner survey data for the East Bay region of California, from the Institute of Urban and Regional Development at the University of California, Berkeley (2012), and Ashland, Eugene, and Portland, Oregon through the Survey Research Lab at Portland State University (2013), were retrieved from the respective survey authors Data Analysis Quantitative analysis, using descriptive statistics, was cond ucted on the homeowner survey data for homeowner and ADU tenant demographics, costs of construction, and rents charged by size, type, and ADU configuration. Qualitative and quantitative analysis was conducted on data for ADU use, means of construction and finance, and challenges to ADU development. The results of these analyses are reported using box plots, graphs, tables, and with descriptive analysis. This is covered in Chapter IV: Homeowner Attitudes. I coded the interview narratives (using the above defined themes and sub themes), and reviewed and edited until the codes and coded content were coherent and true to its context within the larger interview.

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38 Quotes that spoke to the themes and sub themes were selected for inclusion in the discussion. Th e results of the qualitative analysis of the interview narratives were analyzed and reported descriptively. This is covered in Chapter V : Interviews of ADU A dvocate s P lanner s, and R eal E state P rofessionals Facets of the jurisdiction zoning codes and documents pertaining to ADUs and identified as relevant to this research by interviewees and/or the literature were used to create a cross tabulation. Each were qualitatively assessed for its enabling or obstructing of ADU development. The results of the analysis of the zoning codes were reported descriptively. This is covered in Chapter V I : Analysis of Zoning Codes in 31 Jurisdictions in Colorado Lastly, t he zoning codes, interviews, and homeowner survey data were c ollectively assessed to identify best practices, policy learning, and contemporary thought and practice on ADUs, specifically, and ADUs as affordable (and relatively affordable) housing generally. This is covered in Chapter VII : Analysis of Findings E thical Considerations This thesis was submitted to the Colorado Multiple Institutional Review Board (COMIRB), housed at the University of Colorado, Denver, for ethical review (protocol number 14 0408). This thesis was approved and determined to not be a h uman research study. Personal interviews with ADU advocates, planners, and real estate professionals were conducted to gather professional experience and opinion. As an extra precaution, all interviewees (and their responses) were anonymized, and are ref erenced within this document by a randomly generated identifier. The identification key is kept separate from the interview data as an additional measure of security. All homeowner survey data from California and Oregon were anonymized and scrubbed of al l identifying information prior to it being provided to me by the survey authors. I have no access to identifying homeowner information or to a key which could link the data I have to the original respondents.

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39 CHAPTER IV HOMEOWNER ATTITUDES: ANALYSIS OF SURVEYS FROM THE EAST BAY REGION OF CALIFORNIA AND THREE CITIES IN OREGON In 2012 and 2013 researchers in California and Oregon conduct e d surveys of homeowners that did and did not (in the case of California) have ADUs. This data is valuable to this thesis for its addition to the understanding of who builds what type of ADU, by what means, and under what challenges. Additionally, data from the East Bay region of California includes responses from homeowners who were willing to dev elop an ADU, though were unsuccessfu l I analyzed the reported results and raw data from each of these surveys to understand: the construction costs of ADUs and rents charged for them by configuration (garage conversion, new detached unit, addition, etc.), type (studio, one bedroom, two bedroo m, etc.), and size (via square footage); who built the ADU and how that construction was for and their perceived challenges to ADU development; and homeowner and ADU tenant demographics. East Bay Region of Californi a The Institute of Urban and Regional Development (IURD), at the University of California, Berkeley, conducted a survey of homeowners in the East Bay R egion (East Bay) of California to determine the prevalence of ADUs, the associate d socio economic dynamic s of these units, and challenges toward or resulting from their development. The East Bay region includes five cities in the San Francisco Bay Area: Albany, Berkeley, El Cerrito, Oakland, and Richmond (Nemirow and Chapple, 2012). The East Bay survey so ught to quantify the prevalence of ADUs, understand the perception of homeowners (those with and without ADUs) towards ADUs, quantify the types and configurations of ADUs, understand who lives in the primary residence and in the ADU, understand the social and economic

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40 relationships between the homeowner and the tenant, and to understand the parking demands of ADU tenants (Wegmann and Chapple, 2012). The East Bay survey focused solely on homeowners the researchers determined were living in the primary reside nce within the study region. A total of 2,529 postcards (in English and Spanish) were sent to households within the study region through two mailings. Surveys could be conducted on line or in written form, with instructions for both methods of survey com pletion provided on the postcards (Wegmann and Chapple, 2012). The East Bay survey received 515 survey responses, all completed in English (noted by the authors as cautionary since they knew first hand there were many ADUs in the area that were owned and occupied by Spanish speaking households). O f the survey responses received (from the initial 515) 81 represented statistically defensible generalizations about sec p. 7). Findings from the East Bay survey analysis which are not covered below but worth noting are: The average r eported rent for ADUs in the survey provides housing affordable to those making 62 % of AMI, where non ADU rents (per Craigslist ad searches of the broader region) are affordable to those making 68% of AMI ( Wegmann and Chapple, 2012, p. 25). 62% of homeowners without ADUs stated that they were aware of ADUs on their block and also that those ADUs had no negative impact (their) Chapple, 2012, p. 14). The context the East Bay region presents must be kept in mind when considering this riously high housing costs, infill development and densification has been practiced in East Bay neighborhoods for many years. Further, as a university town, there is a large applicant pool of undergraduate and graduate students and ADUs are a common way f or homeowners and students to save on housing costs. Q uiet, single, grad uate students might

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41 be consid ered by some as the ideal tenant, representing a positive social construction of ADU tenants, and thus acceptance, of their , presence in the se neighborhood s . In the following sections, I review the zoning codes for each of the East Bay communities in a similar manner to the review of the Colorado communities in Chapter VI : Analysis of Zoning Codes for ADUs in 31 Jurisdictions in Col orado Albany, California ADU Zoning Code ADUs (referred to as Residential Secondary Units) are permitted through Administrative Review. ADUs are allowed in limited residential districts. All types of ADUs are allowed. Minimum lot size is not specified applies to both the primary residence and the ADU. Off street parking is required. Owner occupancy is required. ADUs cannot be separated and sold from the prima ry residence. Berkeley, California ADU Zoning Code ADUs are permitted through Administrative Review. ADUs are allowed in limited residential districts. All types of ADUs are allowed. A minimum lot size of 4,500 sqft is required for new, exteri or ADUs (attached or detached). Off street parking is required, though variances may be granted. Owner occupancy is required. ADUs cannot be separated and sold from the primary residence. El Cerrito, California ADU Zoning Code ADUs (referred to as Accessory L iving Units) are permitted through Administrative Review. ADUs are allowed in all residential zones. All types of ADUs are allowed. Minimum lot size is not specified in the ADU zoning code, size applies. Off street parking is required. Owner occupancy is required. ADUs cannot be separated and sold from the primary residence.

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42 Oakland, California ADU Zoning Code ADUs (referred to as Secondary Units) are permitted through Administrative Re view. ADUs are allowed in all residential zones. All types of ADUs are allowed. No minimum lot size is required. Off street parking is required. Owner occupancy is required. ADUs cannot be separated and sold from the primary residence. Richmond, Cal ifornia ADU Zoning Code ADUs (referred to as Second Dwelling Units) are permitted through Administrative Review. ADUs are allowed in all residential z ones. All types of ADUs are allowed. Minimum lot size is not specified in the ADU zoning code, rather, street parking is required. There are no owner occupancy requirements. ADUs cannot be separated and sold from the primary residence. Ashland, Eugene, and Portland, Oregon The Sur vey Research Lab at Portland State University conducted a survey of homeowners with ADUs in the cities of Ashland, Eugene, and Portland ( three cities ), Oregon for the Oregon Department of nning Organization for the Portland region, and AccessoryDwellings.org The goals of the survey were to understand who built and lived in ADUs, how ADU construction was financed, if and how the ADUs were being used, the types and configurations of ADUs, and to ascertain construction and energy characteristics of ADUs (Horn, Elliott, and Johnson, 2013, p. 8). The survey focused strictly on homeowners with ADUs and included those who lived in the primary residence or th e ADU and investors or property developers who owned properties with ADUs. The surveys targeted 860 ADUs, representing 839 homeowners. Each homeowner was sent an introductory letter explaining the survey and its purpose and recruiting their participation via a web survey or a subsequent mailed printed survey. Homeowners who did not complete the survey online or in print were sent a third and

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43 final mailed reminder letter. A total of 369 homeowners fully completed the survey, either online or in print. T his represents a completion rate of 44.6% for all three cities combined, meaning the results are statistically significant Ashland, Oregon ADU Zoning Code ADUs (referred to as Accessory Residential Units) are allowed by Conditional Use permitting. ADUs are allowed in limited residential districts. All ADU types are allowed. Minimum lot size is not specified in the ADU zoning code, implying the underlying r esidential zone distri applies. On street parking is allowed, provided there is fifty feet of uninterrupted curb in front of the primary residence. Some districts do require off street parking, also. No owner occupancy is required. The zoning code does not specify whether or not ADUs can be separated and sold from the primary residence. Eugene, Oregon ADU Zoning Code ADUs are permitted through Administrative Review. ADUs are allowed in limited residential zones. All types of ADU s are allowed. Minimum lot sizes of 4,500 sqft, 6,000 sqft, or 13,500 sqft are required depending on the ADU type and the type of lot. Off street parking is required. Owner occupancy is required. The zoning code does not specify whether or not ADUs can be separated and sold from the primary residence. Portland, Oregon ADU Zoning Code ADUs are permitted through Administrative Review. ADUs are allowed in all residential zones. All types of ADUs are allowed. Minimum lot size is not specified in the AD U zoning code, implying the No off street parking is required. Owner occupancy is not required. The zoning code does not specify whether or not ADUs can be separated and sold from the prim ary residence.

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44 Combined East Bay Region of California and T hree C in Oregon Combined ADU Zoning Codes: Table 4 .1 condenses the jurisdictional zoning codes of the homeowner survey study regions. This is useful for comparison to the jurisdictions r eviewed in Colorado and to provide context for the survey responses. The zoning codes are represented for the potentially prohibiting zoning code regulations d iscussed in Chapter VI: Analysis of Zoning Codes for ADUs in Select Jurisdictions of Colorado.

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45 Table 4 .1: ADU Zoning Codes of the East Bay R egion of California and T hree C ities in Oregon Permit Review Zones ADU Types Minimum Lot Size Off Street Parking (Y/N) Owner Occupancy (Y/N) Separated and Sold (Y/N) California Albany Administrative Limited Residential All Types Not Specified Y Y N Berkeley Administrative Limited Residential All Types 4,500 sqft Y Y N El Cerrito Administrative All Residential All Types Not Specified Y Y N Oakland Administrative All Residential All Types Not Specified Y Y N Richmond Administrative All Residential All Types Not Specified Y N N Oregon Ashland Conditional Use Limited Residential All Types Not Specified N N Not Specified Eugene Administrative Limited Residential All Types 4,500 sqft, plus 3 Y Y Not Specified Portland Administrative All Residential All Types Not Specified N N Not Specified 3 Minimum lot size depends on the lot and underlying zone, with minimum lot sizes being 4,500 sqft 6,000 sqft, or 13,500 sqft.

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46 Introduction The East Bay and the surveys allow for comparison of findings on: homeowner demographic s ADU tenant demographic s ADU homeowner incomes proportion al representation of ADU s by size (studio, 1 bedroom etc.) and configuration (basement, garage, stand alone unit, etc.) rents charged by ADU size and configuration socio economic relationships between the homeowner and ADU tenant, and issues and challenges experienced and/or perceived by homeowners in the development of the ADUs Where there are similarities, planners in Colorado can gain an understanding of the ADU development market, craft promotional efforts tailored to optimal target populations, and inform planning practice for ADU through policy learning. ADU Acquisition The two homeowner surveys differ in the proportion of ADUs that were built by current and prior owners: 77% of East Bay homeowners purchased the primary residence with an ADU already in place, whereas 73% of homeowners built the ADU after purchasin g the primary residence (T able 4 .2). This suggests that the East Bay region is a more mature ADU market than the region. Thus, the two data sets may reflect a continuum of ADU enactment, and homeowner demographics and perceptions, from new ADU developments (in three ) to an establishe d presence (in the East Bay); however these sample sizes it im possible to conclude this, as these findings may be due to random response error Table 4 .2: Acquisition of the AD U by R espondents, East Bay, California and Three Citi es in Oregon Study Homeowner Built Prior Owner Built East Bay Region, California (n=77) 23% 77% Ashland, Eugene, and Portland, Oregon (n=290) 73% 17% It should be noted that the established presence of ADUs may reflect the presence of non permitted ADUs (also referred to as illegal or bandit ADUs, from their lack of permitting). This is likely the case as

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47 all communities are presumed to have some (if n ot many) non permitted ADUs. This may explain the pre existence of ADUs in the East Bay region survey, as the survey protocol did not select homeowners based on jurisdictionally permitted ADUs; rather it cast a broad net and pulled in, so to speak, ADUs i n the process. The survey only contacted homeowners with jurisdictionally permitted ADUs, though it is plausible that previously non by th at survey. The importance of non permitted ADUs to this thesis is their demonstration of the demand (by both homeowners and renters) for this type of housing unit, the necessity for the flexibility and/or income ghborho od and residents, through their block ( and reported there were no perceived negative impacts from them ) (Wegmann and Chapple, 2012). Impetus for ADU Acquisi tion or Creation The East Bay survey did not ask the homeowner about the impetus to develop or purchase the ADU, 23% and 77% of East Bay survey respondents respectively However, the survey did. Figure 4 .1 shows that roughly half of all t survey respondents acquired or developed the ADU for additional rental income. A portion of these respondents also stated that the rental income helped them to afford the primary residence. This is important to note because it represents the potential for ADUs to offer affordable, or relatively affordable, housing to two households: the ADU homeowner and the ADU tenant. Continuing this logic, if the approximately one quarter of respondents that acquired or constructed the ADU to accommodate a household member or helper, e.g. a nanny, to the roughly half that developed the ADU for rental income, then the affordable, or relatively affordable, housing capacity of the ADU may be expanded to roughly th ree quarters of all respondent s, since the data found reduced rents

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48 offered to tenants with some prior relationship to the homeowner (see the Homeowner and Tenant Relationship section below). Figure 4 .1: Why H omeowners B uilt a n ADU, T hree C ities in Oregon Construction of the ADU Bot h surveys gathered information on the construction of the ADU, including who did the work (the homeowner, a contractor, a friend, or some combination thereof). In both the East Bay and the region s paid contractors were the most common metho d of ADU construction, followed by the homeowner (Figure 4 .2). The survey allowed for multiple responses (paid contractor, homeowner, paid friend, unpaid contractor, unpaid friend, and other) where the East Bay survey offered discrete choices (contractor, homeowner, and contractor & homeowner). Considering these responses, it is clear that many homeowners Rental income to afford the primary residence 9% Extra income 42% Living space for household member or helper 24% Pre emptive, maybe build an ADU in the future 8% Existing ADU was not a factor in the purchase 3% Other 14% Homeowner Intention for theADU Ashland, Eugene, and Portland, Oregon

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49 in each of the survey regions paid a contractor and contributed their own labor to construct their ADU. Still, it was most common in the E ast Bay region to hire a contractor and not help (60%). These findings are significant because they suggest this hybridization of effort is common practice in ADU development. This could be due to the type of homeowner who is willing to have an ADU on the ir property, to the relative expense of constructing an ADU, or some combination of these two. Equally important is the potential impact this finding could have on policy learning and, thus, policy design: allowing homeowners to qualify to construct thei r ADU could reduce the cost of its construction, which may in turn construction and/or repair minimum qualifications is an example of this practice. Figure 4 2 : Identification of Who Constructed the ADU, East Bay, California and Three Cities in Oregon Homeowner Disinterest in ADUs The East Bay survey captured the disinterest and level of interest of homeowners without ADUs in developing or acquiring o ne (Figure 4 .3). Slightly more than 35% of these homeowners had no interest in having an ADU, roughly 30% had never considered developing or acquiring one, and just over 20% of respondents stated they may consider acquiring or developing an ADU. 0 20 40 60 Homeowner Contractor & Homeowner Paid Contractor Paid Friend Unpaid Friend Other % Responses Who Constructed the ADU? East Bay, California & Three Cities in Oregon East Bay Region, CA Ashland, Eugene, & Portland, OR (multiple answers allowed)

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50 Figure 4 3 : Why R espondents L ack a n ADU, East Bay, California Taken together, those who have never considered and those who may consider owning an ADU, if generalizable to the broader (non East Bay) ADU market suggest that approximately half of all homeowners m ay be target populations for ADU enabling and promotion programs. Equally interesting are the roughly 7% of survey respondents who reported having tried and failed to develop an ADU. These homeowners were prompted for more information on their attempt and failure. The most common reason for the failure reported by homeowners was off street parking requirements: (Wegmann and Chapple, 2013, p. 15). Unfortu nately, the data provided did not allow for the identification of the underlying jurisdiction to connect these concerns with specific zoning code regulations. For planners wishing to create ADU enabling regulations and advocates seeking to promote and ac hieve greater ADU development, these findings are of great importance. Parking is notoriously contested in ADU circles, and the East Bay survey responses validate the advocate position on the prohibitive nature of off street parking mandates (common in all but one jurisdictional ADU zoning code reviewed in Colorado). 0% 10% 20% 30% 40% Don't want one Never Considered it Tried but failed Might want to Planning on it Why a Homeowner Lacks an ADU East Bay, CA

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51 Small lots posing difficulty to ADU creation could inspire the provision of technical assistance to homeowners, such as pre approved small or odd lot ADU plans. The consideration of how t o fit an ADU on a difficult lot is important not just for the small lot owner but also for contexts not currently thought of as appropriate for ADU development, i.e.: suburban parcels. Finally, the cost of ADU construction (explored further below) is du e equal consideration as off street parking for its prohibiting power. Homeowners have limited tolerance for financial risk and there are fewer financial lending tools available to them, as a result the Great Recession and the associated mortgage lending contraction. Thus, if homeowners are targeted for ADU creation, the issue of cost must be addressed by planners and advocates, via education on return on investment or the creation of financial supports. Homeowner Demographics Table 4 .3 shows the homeowne region (using US Census data), for comparison. Immediately apparent is that the homeowner respondents in both survey regions are older than the median age of their respective region, make fro m one third to two thirds more than their respective area median household income, and have slightly smaller household size s. All of these facts imply the projections for baby boomer housing preferences, and possibly to age in place are being realized. W hat these data also suggest is that ADU homeowner respondents represent those with greater access to wealth and/or capital through higher household income and, potentially, greater equity in their primary residence (from their older age), than the median h ousehold for their respective regions. Table 4 .3: Homeowner demographics, East Bay, California and Three Cities in Oregon East Bay ( source: IURB) East Bay Homeowner Respondents ( source: IURB) Three Cities Average ( source: US Census) Three Cities Homeowner Respondents ( source: three cities OR Survey) Average Age 35.4 49.6 37.6 55

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52 East Bay ( source: IURB) East Bay Homeowner Respondents ( source: IURB) Three Cities Average ( source: US Census) Three Cities Homeowner Respondents ( source: three cities OR Survey) Household Size 1.77 1.73 2.2 2 Household Income ($) (Median for three cities Oregon ) $77.775 $105,000 $45,356 $75,000 $99,999 White non Latino (%) 34.2 70.8 81.1 N/A Male (%) 47.9 42.5 47.7 49 Homeowner Identified Challenges to ADU Development In both regions, when homeowners offered the challenges experienced in creating or converting an ADU, zoning codes, costs, and issues of design were frequently mentioned (Table 4 .4). These responses echoes Table 4 .4: Homeowner reported challenges to ADU development East Bay, California and Three Cities in Oregon Costs Design Financing Zoning Requirements Know East Bay Region, California (subset of data) 1 13 three cities Oregon (multiple responses allowed) 188 101 22 114 95 Th e reiteration of these challenges suggest that solutions for cost s to develop, onerous zoning requirements (within which off street parking falls), and design challenges are pre eminently important to crafting truly enabling ADU regulations and programs may be generalizable to Colorado ADU Construction Finance The survey gathered information on financing ADU construction or conversion (the East Bay survey did not collect this information) (Figure 4 .4) Homeowners were able to select more than

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53 one financial method, as it is reasonable that a homeowner would utilize more than one means of finance, just as they used more than one means of construction (Figure 6.2) What is striking is the prominent role cash and home equity played in the development of ADUs. Vastly under represented in these responses are financial l ending products, specifically construction loans and refinancing products. This could be due to the sample s which were much wealthier than the rest of their regions The Oregon data does not include informal ADU homeowners, and so it is unclear if they would have used financial lending products. Additionally, there may be an under representation of ADU homeowners earning at or below the median household income, and so their us e of financial products is less clear. Figure 4 M eans of F in ancing ADU C onstruction, T hree Cities in Oregon 0 20 40 60 80 100 120 Number of Responses Finance Tools, Homeowner on Site Ashland, Eugene, and Portland, Oregon (Multiple choices allowed) Homeowner Occupied Not Homeowner Occupied Eugene

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54 These findings support the suggestion offered by the research on homeowner demographics: older homeowners with greater than median income households are constructin g ADUs because they have access to the nece ssary capital and wealth to construct them. For planning professionals, real estate professionals, and ADU advocates, this finding may not be surprising but should be concerning since reliance on this market alone will not meet the expected development n umbers nor provide the perceived benefits of ADUs, which needs greater production across broader homeowner demographics to achieve the stated goals. The financial ability to develop an ADU has been noted by those who have tried and failed and those who have succeeded in developing ADUs. If increasing ADU production is a goal of any planner, real estate professional and /or ADU advocacy group this issu e must be addressed through innovation, direct assistance, and specialized loan funds. Cost To Construct an ADU Data from the region shows the broad range of costs to construct an ADU by ADU configuration ( Figure 4 .5 ) ADU development costs of the inter quartile range (which controls for extreme high and low value figures) is from approximately $30,000 to $150,000. Intuitively, conversions of existing house or garage space to ADUs represent the lowest range of costs of cons truction. This is likely due to the minimal materials needed to separate and/or convert existing space, as compared to a new addition or new build, which would require foundation, framing, and utility expansion. The whis kers in the box plot of Figure 4 5 should be noted, also. Some homeowners reported cost of construction estimates as high as four times the median for their ADU configuration. This could be due to many things but may be due to higher income and more affluent households being the only on es able to construct or convert an ADU, given the lack of financial instruments to fund ADU development These more affluent households may be utilizing more expensive construction materials and finishes, thus incurring higher costs of construction. Thi s is not a question that can be answered here using this data but is worthy of future research.

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55 Figure 4 .5: Cost of Construction by C onfiguration of ADU, T hree Cities in Oregon 4 Rent Charged By ADU Configuration The East Bay and surveys ca ptured rents charged by ADU configuration. Figure 4 .6 shows the averages of these rents and compares them to the median rent for the respective metropolitan area (Berkeley, California and Portland, Oregon ). The median rents are not differentiated by rent al type, due to American Community Survey protocol. It is interesting to note that the East Bay ADUs, found to be a mature ADU market (Figure 4 .2), rent at or below the median rent for that region. 4 The East Bay, California homeowner survey did not collect data on ADU cost of construction. $0 $50,000 $100,000 $150,000 $200,000 $250,000 $300,000 Converted Interior Space Attached Addition Garage Conversion Addition to Garage Stand Alone Unit Cost to Construct an ADU by Configuration Ashland, Eugene, and Portland, Oregon Second Quartile Third Quartile Mean Construction Cost

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56 Figure 4 .6: Rents Charged by ADU C onfiguration, East Bay, California and Three Cities Oregon Cost of Construction by Size Figure 4 .7 shows the responses from the survey for cost of construction by ADU size (determined by square footage), and the homeowner reported median rent by ADU size. $0 $500 $1,000 $1,500 $2,000 $2,500 Converted Interior Space Attached Addition Garage Conversion Addition to Garage Stand Alone Unit Rent Rent Charged by ADU Configuration East Bay, California & Three Citie in Oregon Median Rent, East Bay, CA (n= 33) Median Rent, A/E/P, OR (n=235) Median Rent, Metropolitan Berkeley CA (ACS 2008 2012) Median Rent, Metropolitan Portland, OR (ACS 2008 2012)

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57 Figure 4 .7: Cost to Construct an ADU by size (sqft) Three Cities in Oregon 5 Intuitively, the cost of construction of the ADU increases with the square footage of the ADU in a somewhat linear fashion. Units sized from 200 sqft to 400 sqft, sometimes ter med micro units, deviate slightly from this linearity as do units greater than 800 sqft, though likely for different reasons. For micro units, this may be due to the critiques of ADUs as affordable housing: kitchens and bathrooms have fixed costs to deve lop and these costs are spread across small square footages, rendering disproportionate costs to construct. As with the variations of reported costs of construction for all ADU configurations observed in Figure 4 .5, the slight deviation in Figure 4 .7 for ADUs greater than 800 sqft may also be symptomatic of cause(s) unidentified in this research The median rents reported by ADU size also follow, more or less, a linear fashion, reflecting higher rents as the square footage of the ADU increases. Slight dev iations are seen for units of 601 700 square 5 The East Bay, CA homeowner survey did not collect data on ADU cost of construction. $0 $100 $200 $300 $400 $500 $600 $700 $800 $900 $1,000 $$50,000 $100,000 $150,000 $200,000 $250,000 $300,000 $350,000 200-400 401-500 501-600 601-700 701-800 >800 Median Rent Cost to Construct an ADU by Size (sqft) Ashland, Eugene, and Portland, Oregon Second Quartile Third Quartile Mean Construction Cost Mean Rent

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58 feet. It is difficult to determine why this is so. One possibility may be lower rents typically associated with basement conversions, as 601 700 square feet reported is similar to the typical primary resid ence footprint of an urban home. Rent Charged By ADU Type Figure 4 .8 shows the average rents charged for ADUs by their type (Studio, 1 Bedroom, 2 Bedroom, or 3 Bedroom or larger) for each survey region, as well as displays the American Community Survey (2 008 2012 ) median rent for all rental housing types for the major metropolitan city within each region: Berkeley, California and Portland, Oregon respectively. Figure 4 .8 helps to distinguish if rents charged by ADU homeowners are below, at, or above the metropolitan median rent as a proxy for the affordability, vis vis the rental market at large. Figure 4 .8: Rents Charged by ADU Type, East Bay, California and Three Cities in Oregon $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 Studio 1 BD 2 BD 3+ BD Rent Charged by ADU Type East Bay, California & Three Cities in Oregon Average Rent (East Bay) Average Rent (A/E/P) Berkeley, CA Median Rent (ACS 2008 2012) A/E/P Median Rent (Average of 3) (ACS 2008 2012)

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59 Figure 4 .8 shows the monetary difference between reported rent s by ADU Type and the metropolitan mean rent Studio and 1 BD ADUs (which represent 67% of all units reported in the East Bay survey) are approximately $200 lower than the ACS metropolitan median rent in the East Bay region. Studios (which represent 27% of all units reported) in the survey charge approximately $150 below the ACS median rent for its associated metropolitan region; all other ADU types c harged at or above the ACS median. The East Bay region homeowners charge lower rents, ov erall, for ADUs than homeowners in the region. This suggests that newer ADU markets offers less affordability. An established ADU inventory, therefore, may offer some level of affordability, as the cost to develop the ADU is amortized over the years. This is important for ADU advocates and p lanners in Colorado to consider, especially when conveying the benefits of ADUs. Size, market lifecycle and amortization of existing ADU housing stock matter s for affordability. If a jurisdiction is seeking to achieve affordability in the near term thr ough ADUs, this data shows there would also be a need to offer technical and financial support (such as specialized loan funds ). Tenant Demographics Figure 4 .9 shows the breakdown of the tenant demographics from the survey. F emales are the predominant gender of ADU tenants, though tenants aged 25 34, female and male, represents the two largest proportions. Additionally, each survey found the same proportion of ADU tenants were households with children : 8% of respondents in the East Bay survey and 7.8% of responses in the three survey (Wegmann and Chapple, 2012, p. 13 & Horn, Elliott, and Johnson, 2013, p. 13). This data is important for its ability to speak to common resident resistance to ADUs based on concerns f or the quality and characteristics of ADU tenants, as interviewees in Colorado testified to receiving during their public processes for creating ADU zoning codes and regulations (discussed in Chapter V Interviews of Planners, Real Estate Professionals, an d ADU advocate s).

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60 Figure 4 .9: ADU T enants by G ender and Ag e, Three Cities in Oregon Homeowner and Tenant Relationship Some have suggested that the affordability that ADUs offer is largely through the discounted rent given to ADU tenants that are fami ly members, friends, or acquaintances. Both surveys gathered information on the homeowner ADU tenant relationship, and the results show that it is more common for the homeowner and ADU tenant to have no prior relationship. The data also show that there a re more familiar relationships between homeowners and ADU tenants in the East Bay survey than in the survey. 0 10 20 30 40 50 60 70 80 90 Female Male Total Nmber ADU Tenants by Gender and Age Ashland, Eugene, and Portland, Oregon Tenants, 18-24 Tenants, 25 34 Tenants, 35 55 Tenants, 55+ Tenants, Unknown Age

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61 Figure 4 .10: Relationship between the H omeowner and ADU T enant, East Bay, California and Three Cities in Oregon Rents Charged Based On Homeowner Tenant Relationship and Homeowner on Site The data from the survey allows for comparison of the rents charged by relationship to the homeowner, without considering for ADU configuration, size, or type. While conducting this analysis, it was found that whether or not the homeowner was on site (i.e.: occupied either the primary residence or the ADU), influenced the rent charged for the ADU. The homeowner on site discount is corroborated by findings in the East Bay survey (which targeted only homeowners who lived on site) which found a 9% reduction in rent charged compared to Craigslist rental ads for rentals with similar characteristics to ADUs (Wegmann and Chapple, 2012, p. 28). The survey data found an average 9.9% reduction in rents charged by relationship between homeowner and tenant, when the Family Acquaintance was not included (which represented a 10% premium). 0 5 10 15 20 25 30 35 40 45 50 % Respondents Relationship Between the Homeowner and the ADU Tenant East Bay, California & Three Cities in Oregon East Bay Region, CA Ashland, Eugene, and Portland, CA

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62 Thus, Figure 4 .11 reflects these three variables: rent charged to an ADU tenant the impact on rent the homeowner ADU tenant rel ationship has, and the impact a homeowner on site has on rent charged. The data clearly shows that rents charged to tenants with no prior relationship to the homeowner are charged more in rent than those wit h some prior relationship. The one deviation from this are those identified as friend of family. It is possible that the interpretation of this term is loosely used by respondents and the actual relationship may be more akin to the Unknown to the Househo ld classification. Figure 4 .11: ADU R ent C harged by T enant R elationship t o the H omeowner, Three Cities in Oregon For half of the relationships, having a homeowner on site produces a slight discount in rent compared to the rent charged by homeowners who are not on site. Counterintuitive as it may be, homeowners on site charge more in rent to family members and family acquaintances than homeowners who are not on site, which may indicate that this small sample size with limited answers is not sufficient to show all the variations and reasons for rent charged. $0 $250 $500 $750 $1,000 $1,250 $1,500 $1,750 Rent Charged by Tenant Relationship to Homeowner (HO) HO Occupied vs. Not HO Occupied Ashland, Eugene, and Portland, Oregon Q3 Box Q2 Box Average Family Member Friend of Family Homeowner Acquaintance Unknown by Homeowner

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63 Rents Charged Based On Homeowner Tenant Relationship & Homeowner on Site To continue the analysis of the impact a homeowner on site has on the rent charged, I also looked at the ADU configuration to see if whether the ADU was attached, detached, a basement unit etc. might help to explain the rent charged The data show that for all but Garage Conversions, a homeowner on site provides a discount in rent compared to a non homeowner on site. What the data presented in Figures 4 .11 and 4 .12 reflect is what might be understood but in need of articulation: a homeowner on site will offer a discounted rent perhaps as bait to entice the best or largest pool of renters. A homeowner who is not on site i s likely operating the ADU as an investor and seeks the highest rent possible to maximize their profits, rather than a tenant that meets additional non monetary criteria the homeowner on site may desire because of the close living situation. This finding i s important for promoting ADUs as affordable housing. In many communities, a homeowner on site (a.k.a. homeowner occupancy) is required by zoning code, often in response to resident demands. R esidents demand this stipulation as a means of preserving thei (or possibly as a form of exclusionary zoning and NIMBY ism) For the Colorado planner and ADU advocate concerned with affordable, and relatively affordable, housing, however, this stipulation may aid in the achievement of their goals since the on site homeowner tends to charge anywhere from 9 10% less than homeowners not on site. Fo r instance, as shown in Figure 4 .12, rents in the Oregon cities for homeowner on site ADUs average $ 795 to $912 with a range of $ 190 to $1,525 (sho wn by the whiskers), but median rents in those same cities are $ 885.

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64 Figure 4 .12: Rents C harged by ADU C onfiguration, Three Cities in Oregon Summary In summary, the East Bay, California and Oregon homeowner surveys provide many insights into how homeowners acquire an ADU, who is creating ADUs, why they do so, h ow they do so (both construction and finance ), how much it costs to do so, to whom they rent the ADU, and how a homeowner on site impacts the rents charged. The findings include: The East Bay, California region has a more mature ADU market consisting of an established inventory of ADUs $0 $250 $500 $750 $1,000 $1,250 $1,500 $1,750 Rent Charged by ADU Type Ashland, Eugene, and Portland, Oregon Homeowner Occupied (HO) vs. Not Homeowner Occupied (Not HO) Q3 Box Q2 Box Average Converted Interior Space Attached Addition Garage Conversion Addition to Garage Stand Alone Unit

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65 In both survey regions, ADUs are construc ted using a paid contractor, homeowner labor or some combination of the two. Colorado planners should consider leveraging t he common practice of homeowner as ADU developer by allowing for homeowners to test for competency in construction and remodeling, as Denver does This turn, increas es its affordability The East Bay, California survey received responses from homeowners without ADUs and found that approximately 35% of homeowners did not want an ADU; roughly half had either not considered building an ADU prior to the su rvey or might wa nt to, represent ing potential target populations for ADU promotional programs If generalizable, this provides a rough estimate for the proportion of potential homeowners willing to develop an ADU, which offers a place from which Colorado planners and ADU advocates can begin. earn at least one third more than their respective metropolitan median household income Roughly half of homeowners in the region in Oregon repo rt creating an ADU for the rental income it provides This data is useful for Colorado jurisdictions which seek to broaden the discussion of ADUs and affordable, and relatively affordable, housing by substantiating ADUs as offering housing that is afford able to both the homeowner and the ADU tenant The top challenges to developing ADUs, as reported by homeowners in both regions are the cost, zoning requirements, and design challenges Planners in Colorado need to be cognizant of the technical and financ ial gaps with which homeowners grapple in developing an ADU and seek ways of bridging them Homeowners in the three cities Oregon survey utilized cash and home equity more than any other means of financing the construction of an ADU which

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66 suggests that en abling ADUs in Colorado may require financial assistance, as conventional financing for ADUs appears to be lacking in the data. Median costs to construct ADUs in the survey in Oregon region ranged from $50,000 to just over $100,000, depending on the ADU configuration (converted interior space, attached addition, garage conversion, addition to a garage, or a stand alone unit) Jurisdictions which have development patterns of single family residences with attics, basements, and garages could be targeted through outreach and design and technical assistance to leverage these lower cost to convert to ADU spaces. Data show that cost of construction increases as the square footage of the ADU increases for all sizes except ADUs between 200 and 400 squ are feet. Median rents reported held a similar upwards linear trend, except units between 600 700 sqft Both surveys reported ADU rents at or below the American Community Survey median rent for the ir respective metropolitan area for four out of five of the ADU configurations (East Bay California attached additions reported rents higher than the ACS median). This aligns with the E ast B ay, California researchers findings that compared ADU rents to mor e local city rents using Craigs list When rents charged by the ADU type (studio, 1 bedroom, 2 bedroom, or 3 + bedroom) were compared to the ACS median rent for the respective metropolitan area, East Bay, California rents were found to be approximately $200 lower than the median for studio and 1 BD units (representing almost two thirds of all units reported) and roughly $200 higher than the median for 2BD and 3+BD units (representing slightly more than one third of all units reported) ; three cities in Oregon rents were $150 lower than the ACS median for studio ADUs (representing approximately one quarter of all units reported) priced roughly at the median for 1 BD and 2 BD units (representing almost three quarters of all

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67 units reported) and approximately $200 higher than the median for 3+ BD (representi ng 1% of all units reported) Thus, Colorado planners promising affordable housing through ADUs may need to heed this cautionary data maturity may aid in an ADU s affordability. T herefore, financial supports are likely necessary to create affordable ADUs in the near t erm ; this would require Colorado planners to develop policy that is not currently in place. Both surveys found ADU tenants were more likely to have no prior relationship to the homeowner Females represent the largest segment of ADU tenants, bu t ADU tenants that are between 25 and 34 years old represent the greatest proportion For Colorado jurisdictions who receive resident resistance to ADU development based on the social construction of its tenants, this data can be used to defuse these re a c tions. Homeowners on site offer a 9% 10% discount in rent in both regions Therefore, homeowner occupancy requirements may aid a planner in achieving some affordability through ADU. In summary, ADUs offer potential for affordable, and relatively afforda ble housing through homeowner occupancy (where the homeowner lives on site) discounts of 9% 10%, resulting in rents at or mature markets offering mor e affordability for greater types [studio, one bedroom, two bedroom, etc.]). Homeowners are primarily motivated to develop an ADU by the rental income it provides. ADU h omeowners in both surveys reported median household incomes at least one third greate r than the metropolitan average and those in the Oregon survey reported primarily using personal capital and home T he data suggests that the potenti al for ADUs to offer affordable, and relatively affordable, housing exists but may require additional policy and technical assistance to achieve greater affordability. Planners need to conduct greater outreach to and data collection on households earning at or below the median income

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68 and racial and ethnic minorities to better understand their adoption of and interest in ADUs; design assistance through pre approved architectural plans appropriate to the local residential contexts; dedicated planning capacit y to ADU development through homeowner technical assistance; and financial support to defray the costs to develop ADUs such as grants, low or no interest loans, tax breaks, or loan backing

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69 CHAPT E R V INTERVIEWS OF PLANNERS, REAL ESTATE PROFESSIONALS AND ADU ADVOCATES Introduction 49 interviews were conducted with professionals and activists involved in the planning, promotion, and/or development of ADU s Each interviewee was asked questions regarding demand for ADUs, including current and projected h ousehold demographics and their housing preferences; ADU policy and affordable, and relatively affordable, housing definitions and needs; the potential of ADUs as affordable, and relatively affordable, housing; perceived barriers to ADU creation; and appra isal and finance of ADUs and their influence on ADU creation. The analysis of the interviews is presented below by group: p lanners, r eal e state p rofessionals, and ADU a dvocates. Pl anners I nterviews with 35 planners identified contrasting views across th e five themes identified in the introduction (above) Detailed b elow is a summary and quantification of t he se difference s, with analysis of the potential reasons for variations in their perceptions or experiences related to each theme Demand Planners representing each region interviewed spoke to current and projected demographic changes impacting their community, though four planners acknowledged that the ir department was not currently planning for this change, and three planners doubted the baby boome r housing downsize projections as accurate or impactful to their community.

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70 Half of all planners interviewed spoke about the amount of ADU development in their community. and 10% expe cted increased development in the future, with four planners pointing to the housing downturn (as a result of the Great Recession) as the hindrance to ADU development. One in four planners spoke to homeowner attitudes or interest in ADUs as an aspect of AD U implementation rates. Residents were characterized by some planners as leery of ADUs, largely for the assumed tenant characteristics, such as the age, household size, race, and/or ethnicity of potential ADU tenants. Additionally, affluent homeowners we re thought to be least likely to develop and rent an ADU. Conversely, communities with ADUs in their fabric were cited by planners as increasing demand for ADUs in their communities. One third of planners interviewed stated rental income was the primary driver for homeowner demand for ADUs R ural resort planners went further and tied the demand for rental income from the ADU there) because they cr for guests, family members, and household use was also acknowledged as drivers for ADU demand. Affordability & Policy The planners interviewed provided no consistenc y in thought on ADUs as affordable housing. Some saw the creation of ADU zoning codes and issuance of permits for their construction as inherently inclusive of affordable housing goals (Personal Interviews, 2013, #43594, #23024, #51270, #89251). Some den ied the solve the housing problem with ADUs (Personal Interviews, 2013, #87893, #34758, #15288, #63854). Inherent in these responses is the concepti on of affordable housing, itself. As the literature suggests, contemporary attitudes towards affordable housing are tainted with perceptions of failed government atively affordable), the frame of affordability must be redefined:

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71 #16129). Planners from communi ties with acknowledged affordable housing crises, including rural resort communities, university towns, and urban jurisdictions, testified to greater public favorability to affordable housing generally, and ADUs specifically corroborating the findings i n the literature that found greater acceptance of affordable housing by those living closer to it (Hart, 2005) The most common impetus for ADU code development or revision was from the planning department, council, or elected officials. The two most co mmon reasons for undertaking the process were Though 24 pla nners interviewed had participated in crafting ADU codes ADU specific documents, and associated programs, ten planners stated they (and their department) were not promoting ADUs (though not all communities responded to this question). When asked why not, the reply another identified the challenge public planning offices face when promoting one housing form over another (Personal In terviews, 2013, #34670 and #50444). A lthough a jurisdiction has a n ADU code, the intent is not to promote the ADU Barriers to ADU Development The planners interviewed spoke to the commonly cited barriers to ADU development found in the literature and homeowner surveys : off street parking requirements, homeowner occupancy mandates, fees, homeowner (dis)interest, and the appraisal and finance process. All but one community interviewed mandated off street parking for ADUs. Some planners street

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72 street parking street parking as bad or two people and so likely street parking and it (on street ADU parking) (Personal Interviews, 2013, #23024, #43594, and #46440). One planner noted the ability to meet off street requirements may n used for ADU off off street parking varied by jurisdiction type (metropolitan/ suburban front range, rural resort mountain community, or west slope jurisdictions), with mountain communities citing snow and road clearing needs metropolitan and suburban communities in the front range and west slope citing the existence of an off stree t parking culture, and all jurisdictions referencing the political touchstone on street parking is perceived to be for residents and elected officials. Planning interviewees provided mixed responses to homeowner occupancy requirements. One planner asked: #16129). Some communities did not require homeowner occupancy due to the perceived onerous nature of onal Interview, 2013, #75241). For those who required homeowner occupancy, it was necessary to the passage of the ADU zoning code: why there was v ariance amongst planners towards homeowner occupancy mandates, given the discrete nature of the interviews and the assumption that these comments reflect planning ideology of the planners and/or their jurisdiction. However, planners who had undertaken par ticipatory planning processes in the development of their ADU codes were more likely to identify homeowner occupancy as a demand from their residents in exchange for support of the ADU code and policy. This suggests that homeowner occupancy is politically expedient in many communities, and perhaps more so in jurisdictions with a n actively engaged homeowner constituency. Though homeowner occupancy is hotly contested, it may aid ADUs in offering affordable, and relatively affordable, housing, from homeowner ADU tenant relationships offering

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73 discounted rent and from the amateur nature of homeowner as landlord pricing ADU rents below market, discussed previously in Chapter II : Review of the Literature and again in Chapter IV: Homeowner Attitudes ADUs as Affordable Housing Planning interviewees acknowledged non #75241). Two planners tied the prese nce of non permitted ADUS to specific regions of their community: of illegal ADUs (emanating) from the older areas and (dissipating) in the new dev Intervi ews, 2013, #15288 and #12723). The ubiquitou s nature of non permitted ADUs and the ir association with older housing stock was ins inuated by planners as a source of housing affordability. In Chapter IV: Homeowner Attitudes, A DU rents charged in the East Bay region of California (a more mature ADU market) offered rents approximately 20% less than the respective American Community Survey metropolitan median rent for 63% of all units reported, lending some credence to this conflation of older housing stock and ADU affordability.. Appraisal and Finance of ADUs The planners interviewed spoke little to none about the costs to develop ADUs or for the appraisal and finance practices for ADU development. That is, there was not mu ch discussion or demonstration of knowledge of the cost and financing realities homeowners would have to bear to develop this housing form. Summary of Planners T he majority of planners interviewed were familiar with the ADU housing form and were readily identified one (or more) o f its perceived benefits: affordable housing, age in place, efficient use of existing infrastructure, infill development, multi generational housing, rental housing, rental income generation, and smaller housing

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74 All but one ju risdiction interviewed responded to these benefits by revising existing or creating new zoning codes to enable ADU development Many planners viewed the zoning code s as the extent of their capacity to enable, but not necessarily promote ADU s in their com munity. A few communities were exceptions to this (Arvada, Crested Butte, Durango, Glenwood Springs, and Grand Junction) and actually took more actions beyond zoning enabling legislation Though planners in four of these five towns ( Arvada was the except ion ) denied the political or staff capacity to promote ADUs, their actions showed the contrary. E xtra measures in the development and d issemination of their ADU codes included: extensive public participation in zoning code creation, the subsidizing of w a ter and sewer tap fees for newly constructed ADUs and the creation of clear and concise ADU specific documents such as brochures and applications. Arvada utilized all of these extra measures and also analyzed the effectiveness ( using permits issued as a proxy ) and crafted additional education and outreach efforts, this time aimed at contractors and financiers (the first line of contact for homeowners considering home improvements). Each of the five exceptions had different triggers f or the more active ADU discussion and promotion ; including housing pressures from colleges, second homeowners, retirees, and a rapidly expanding oil and gas industry. For Glenwood Springs, it was an attempt to leverage existing infrastructure and promote infill development to create more attainable housing for rent or for purchase in its town For Arvada, it was an opportunity to revitalize an ageing community and its housing stock as well as to prepare to leverage a planned mass transit rail stop to be b uilt with in its borders. It appears, then, that all planners more or less acknowledge the benefits of ADUs but few have led their communities in an effort to promote them beyond crafting a zoning code for them. Those that have taken additional efforts, from modest to major, have done so out of planner and planning department initiative to manifest one or many of the recognized ADU goals for their specific community needs and capacities whether extreme housing demand (Durango, Crested Butte, and Grand Ju nction) or sustainability goals (Glenwood Springs and Arvada) I n higher housing cost communities planners expressed greater awareness of and planning for affo rdable and/or workforce housing. These communities were also more likely to doubt that ADUs could

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75 solve the affordable and/or workforce housing problems of their community. One reason, as one would expect, is that few local residents are able to purchase single family residences without deed restrictions (the latter of which prohibits the development of ADUs). Deed restrictions cap the sales price and/or the appreciation value of the home as a means of ensuring and maintaining affordable housing in the community. Deed restrictions on single family housing are considered necessary in these communities because of the severe disconnect between median household income and median single family home prices families and working professionals would otherwise not be able to remain in these communities Therefore, many households in these comm unities are unable to purchase a single family home without some form of cap on the (via a deed restriction) The housing costs are so high because of the exogenous impact of wealthy second homeowners buying and building homes that both decre ase the available land and housing stock for affordable, and relatively affordable, housing development, and inflate the value of both. These second homeowners were said by planners interviewed to have regulatory permission, and development capacity to develop an ADU, but no financial need or willingness to do so. This is interesting, because market ren communities examined here found this to not be true, Aspen provides an example below. This suggests that there is some homeowner interest income threshold, no t identified by Nordvik, beyond which homeowners cannot be incentivized to produce and rent an ADU, though they have the regulatory permission and development capacity to do so. Aspen is considered a pioneer in affordable an d workforce housing policy for r ural r esort communities, for which ADUs have always been a part. Aspen has long been a wealthy, international enclave 71,284 (US Census, 2010) and an average home list price of $4. 1 million ( ). Several r evisions to the affordable and workforce housing programs were made over the years aimed at motivating homeowners constructing or remodeling single family residences to develop A DUs by instituting and increasing affordable housing mitigation fees equal to the cost to construct an affordable, workforce

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76 housing unit. These efforts made development of an ADU the cost effective mitigation strategy for the homeowner, b ut the policy di d not mandate the subsequent rental of the ADU. As a result Aspen succeeded in getting ADUs built through the affordable and workforce housing mitigation program, but less than 30% have been determined to be used for rental housing T he Aspen planning d epartment has interpreted the ADU mitigation program as failing to meet its intended goals and has recommended to their council to eliminate ADUs from the affordable and workforce housing offset programs. I believe that this lack of implementation by Aspe n homeowners reflects what some planners interviewed stated and Norvik did not identify: high income households do not have the financial need and lack the willingness to develop an ADU, regardless of their regulatory permission and development capacity. Therefore, it is reasonable for planners in these higher housing cost communities to believe that ADU development would be minimal because, homeowners of deed restricted single family residences, with financial need, willingness to be an ADU landlord, and some development capacity, are excluded from doing so by a lack of regulatory permission. Planners agreed on the commonly perceived barriers to ADU developmen t including off street parking requirements, homeowner occupancy manda tes, fees, homeowner (dis)interest, and the appraisal and finance process. Off street parking is mandate d by all but one community interviewed with planners speaking to the perceived political and the pragmatic necessities for these policies There were mixed response s to homeowner occupancy requirements, with one planner stating the three planner s cited the political expedience the homeowner occupancy requirement to ADU zoning code approval. The disparity of perceptions of interest and disinterest among homeowners in their community for ADUs demonstrates either planners know their specific homeowners and tha t the household demographics and corresponding attitudes toward ADUs vary significantly across jurisdictions or that

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77 planners have not analyzed the need, potential, or capacity of their homeowners for ADU development and they are assuming generic preferen ces for all homeowners, which may not be accurate if there are difference s by context or within similar demographic groups Given the range of motivations for constructing and renting an ADU and the diversity of household finances even within seemingly si milar household types, the latter appears to be more accurate. Arvada, Denver, Durango, Golden, Lakewood, Lafayette, and Salida all utilized participatory planning efforts in the development of their ADU codes, and the public comments derived from these e fforts influenced the ADU zoning code and policies for their respective jurisdictions. For the remaining 24 jurisdictions, there was no extensive su rvey of household attitudes towards or development capacity for ADUs which suggests most planners do not have confirmation of their perceptions of their residents The planners interviewed spoke little to none about the costs to develop ADUs or for the appraisal and finance practices for ADU develop ment. That is, the p d at the code when it comes to ADUs. A common critique of planners is that they do not understand the costs of development or the real estate market, and ADU policy seems to reflect this through the lack of awareness of the appraisal and finance practices associated with ADU development, and their jurisdictional homeowner capacity and need for ADU development. Many see their job as regulating land use to protect the health, safety, and welfare of citizens, not to stimulate the market specifically at the household level It is likely that this aversion to household level market influence by planners is reflected in the variance in attitudes regarding homeowner occupancy mandates: those who contest the requirement may be seeking ways to enable the real e state community to develop ADUs which seems to ignore the development capacity of the individual homeowner The lack of appraisal and finance practices for ADU development however, may be forcing these planning departments to rely strictly on the develo pment community, with their financial capacity to develop ADUs. Additionally, w elfare is defined differently in different communities. Some consider welfare to include affordable housing and therefore necessitate programs to make housing more affordable, e.g. through subsidies of water and sewer tap fees for ADUS, for example, while others use a more conventional attitude towards the health, safety, and welfare dictates of their job and focus strictly on building and design facets of ADUs.

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78 Real Estate P rofessionals Demand The six design and construction Real Estate Professionals (REPs) recognized similar roots of demand for ADUs as the planners interviewed (rental income, extra space, and multi generational housing), though one, an architect, testified t o demand for their ADU plans as being driven by the desire for smaller housing forms, in general, and not ADUs, specifically (Personal Interviews, 2013, #50250). Perceived Barriers to ADU Creation Two REPs spoke in contradiction to each other in regards to perceptions of homeowner interest or lack thereof, in ADU development One thought young and first time homebuyers lacked the interest and financial capacity to create and rent an ADU. Another provided anecdotal evidence of a young family utilizing the ADU to afford the primary residence. O n e REP cited to lot line development as a barrier to ADU development due to the elimination of parcel space to develop a detached unit, which, in some communities, is the only ADU configuration allowed. REPs also fo und homeowner occupancy requirements to be prohibitive to ADU development because of it effectively prohibiting the involvement of the development community in ADU development which R EPs strongly believed was integral to ADU creation, given their ability to develop ADUs in greater numbers and at lower cost than an individual homeowner. ADUs as Affordable Housing The REPs interviewed were less consistent towards ADUs as affordable housing than the planners interviewed. Some spoke to the cost of constructio as reason ADUs cannot be affordable housing, while others supported the theory by speaking fro m a return on investment frame: s about $300 to $350 per month (extra) in mortgage payments. If the ADU rents for $600 $1,000 a month, the (Personal Interview, 2013, #50250 and #73871).

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79 Two REPs interviewed addressed the cost to develop ADUs, all questioning the af fordability to do (you) These comments reinforce the notion discussed previously in Chapter IV: Homeowner Attitudes, that ADUs as affordable housing in the short term may require technical and//or financial assistance ( such as specialized loan funds ) to realize this goal. These comments also reflect a lack of ac knowledgment of ADUs as relatively affordable housing suggested by Infranca (20 13 ). Appraisal and Finance of ADUs The REPs provided the most practical knowledge of the appraisal practices and financing options for ADU development. One appraiser stated that attached units add little value in the appraisal whereas configuration, size, or type (Personal Interviews, 2013, #84243). Several REP interview examples of this differential with comparable sales data (comps) ). The lack of impacts ADU demand because those with interest m because conventional appraising and underwriting practices necessitate estimation of the value of a recently exchanged property with similar characteristics though alternative practices exist and are acceptable through conventional mortgage processes and programs (Brown and Watkins, 2012)

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80 o r fiscally prudent imagine primary residences purchased only by those able to pay the entire purchase price to one REP interviewed (Personal Interviews, 2013, # 50250). Though another REP cautioned that, in the Interviews, 2013, #80392). Summary of Real Estate Professionals Real Estate Professionals (REPs) interviewed were chosen for their association with ADUs and so it is no surpr ise that all were in general agreement about the utility and benefits of them. There was divergence in opinion on the ability for ADUs to provide affordable housing due to the c osts to develop them and likely due to a lack of acknowledgment of their capacity for providing relatively affordable housing H omeowner occupancy requirements and to lot line developments (squeezing out space for ADUs on the parcel) were also cited as inhibitors to ADU development The a ppraisal valuation and financial lending practices garnered valuable knowledge and opinion, with both cited as barriers to ADU development, in general. The lack of comparable sales of primary residences with ADUs, and the conventional method for appraising properties with ADUs, leads to lower valuations for all properties with ADUs and ultimately impacts the financial underwriting for their purchase or construction. REPs interviewed called for new financial products to correct this but offered little hope the financial industry would do so in the wake of the Great Recession. ADU Advocates Demand The eight ADU a dvocates spoke to one or all of the understood benefits of ADUs. Demand for them was succinctly stated by one financial a dvocate believed non l (non

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81 2013, #42126 and #83007). All ADU a dvocates interviewed spoke to demographics as a means of identifying the appropriate target population to 2013, #17305 and #64400). Two advocates spoke to the cultural use of space, one speaking to the minority generational housing (Personal Interviews, 2013, #17305 and #52592) Perceived Barriers to ADU Creation Off street park ing requirements are the bane to ADU development in ADU followed closely by homeowner occupancy mandates. One ADU a dvocate questioned the reasoning f o r heir house, why would s, 2013, #42126). Another ADU a an ADU opponent) I asked (them) if h omeowner occupancy (was required) would (you) support it? (They) Two ADU a dvocates spoke to illegal, or non permitted, ADUs as a barrier to ADU development: a dvocate felt that talking about non permitted ADU owners w as a means of defusing this fear but that this tactic is often unavailable because of the illegal status of the unit ADUs, in general, and the ir tenants, specifically, may be through greater understanding (and sharing of stories) of these non permitted units. Chapter IV: Homeowner Attitudes offers information on ADU tenant dynamics, providing data for planners to defuse public p erception of AD Us and their tenants.

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82 ADUs as Affordable Housing One ADU a increasing hous ing costs and decreasing incomes (both projected to continue for the next ten to twenty years), as proof that the issue is necessary for all communities to address (Personal Interviews, 2013, #62009). Only two ADU a dvocates, though, claimed ADUs were affor dable due to their size with one saying: e vidence to back up the affordability claims (Personal Interviews, 2013, #83007) ADUs were acknowledged as affordable via affordable housing mitigation (such as deed restrictions and/or rent controls) which are sometimes traded for regulatory permission to develop the ADU (Personal Inter views, 2013, #17305). One ADU a dvocate scoffed at the use of ADUs by planners to address their housing crises (affordability among (Personal Interviews, 2013, #83007). The result is, as one ADU a theory, (they were non permitted and) used less than building code standards homeowner (Personal Interviews, 2013, #42126 and #83007). Appraisal an d Finance of ADUs One ADU a 2013, #83007). Two ADU a dvocates offered anecdotal reports of the market valuing properties with ADUs higher than similar properties wi thout an ADU (Personal Interviews, 2013, #42126 and #83007). Data substantiating these reports would improve the financing of ADU construction, according to one ADU a the value (ADUs)

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83 comparable sales to appraise a property with an ADU. This is a difficult process because of the inherent variations of configuration, size, and type of ADUs. Also, non permitted ADUs are not included in appraisals due to their non conforming status. This produces a scarcity of properties with ADUs that are actively bought and sold. One ADU a dvocate challenged this conventional approac h to appraising properties with ADUs by property. . (a) far more accurate indicator of the real value for the property (with an ADU) is the income g enerating capacity approach Personal Interviews, 2013, #83007). Summary of Advocates ADU ad vocates, as their group title attests, are knowledgeable of and actively promoting the com monly perceived benefits of ADUs They critique z oning codes and regulations, such as off street parking and homeowner occupancy requirements as prohibiting ADU development ADU ad vocates identify younger and professional households as appropriate target populations for ADU creation They acknowledge the cost of co nstruct ion current appraisal practices, and lack of financial products as prohibitory to ADU development Interviews Summary Demand All interviewees were familiar with the ADU housing form and identified one (or more) of its commonly identified benefits : affordable housing, age in place, efficient use of existing infrastructure, infill development, multi generational housing, rental housing, rental income generation, and smaller housing. Affordability & Policy Planners in higher housing cost communit ies expressed a greater awareness of and planning for affordable and/or workforce housing. These communities were also more likely to doubt that ADUs could solve the affordable and/or workforce housing problems of their community. This was likely due to the ir

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84 high er housing costs which precludes those who have financial need some development capacity, and are willing to develop and rent an ADU, from doing so due to a lack of regulatory permission included in the deed restrictions associated with the onl y single family residence s affordable to this target population Real estate professionals added to the argument of whether ADUs are affordable housing in a mixed fashion, with discord stemming from the costs to develop them and influenced by a lack of ac knowledgment of ADUs as relatively affordable housing. An interesting finding was that rural resort second homeowners were found to have household incomes out of the range of sensitivity to market rents identified by Nordvik (2000). This means that there is a point where homeowners cannot be incentivized to produce and rent an ADU, though they have the financial capacity to do so. Aspen provides potential evidence to support this theory. Most planners, and several ADU advocates, responded to the percei ved benefits of ADUs by revising existing or creating new zoning codes to enable ADU development. ` ADU a ADU development. Planners recognized this population as one of many target populations, in theory. The disparity of perceptions of interest and disinterest among homeowners in their community for ADUs, drawn from a limited group of planning interviewees, demonstrates either that communities vary significantly or planners have not analyzed the need, development capacity for or interest of their homeowners for ADU development. Therefore, the zoning codes in these communities may not be granting the regulatory permission for ADU development that their presence s uggests Perceived Barriers to ADU Creation ADU a dvocates, and some Real estate professionals (REPs) were actively engaging with existing data to promote ADUs: the former critique zoning codes and regulations, such as off street parking and homeowner occ upancy requirements, and the latter agree and also point to the lack of appraisal techniques and financial lending products for ADU properties as being prohibitive to their development.

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85 Planners and ADU a dvocates agreed that off street parking was also prohibitive to ADU development. Still, off street parking is mandatory in all but one community interviewed and planners that spoke to the reasoning for this mandate identified both the perceived political and the pragmatic demand for the policy by residents and elected officials R EPs ADU a dvocates, and some p lanners interviewed agreed on homeowner occupancy requirements as also inhibiting ADU development. REPs and ADU a dvocates believed the greater dev elopment of ADUs was linked to the inclusion of investors and developers in the ADU market. The reason, however, that some communities require homeowner occupancy was due to resident pressure. Appraisal and Finance of ADUs ADU a dvocates and REPs pointed to conventional appraisal practices and a lack of financial products for ADUs as being prohibitory towards ADU development. Planners spoke little to this issue, zoning code wh en it comes to ADUs. The lack of comparable sales of primary residences with ADUs, and the conventional method for appraising properties with ADUs, leads to lower valuations for all properties with ADUs and ultimately impacts the financial underwriting for their purchase or construction. REPs interviewed called for new financial products to correct this but offered little hope the financial industry would do so in the wake of the Great Recession. Best Practices A few communities were exceptional in their p lanning practices and promotion for ADUs, including Arvada, Crested Butte, Durango, Glenwood Springs, and Grand Junction. Though planners in every one, except Arvada, denied the political or staff capacity to promote ADUs, each took extra measures to enab le and/or promote ADU development.

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86 Conclusion I nterviewees represented coherence in thought on theoretical aspects of ADUs (such as their perceived benefits and appropriate target populations), but differ on facets of the ADU zoning code, which was written to enable their development. It appears that all planners more or less acknowledge the benefits of ADUs but few communities have undertaken efforts, beyond crafting a zoning code, for them. Those that have taken additional efforts, from modest to major, have done so out of planner and planning department initiative to manifest one or many of the recognized ADU goals for their specific community needs and capacities, and from the presence of certain triggers that drive them to look to ADUs as a potential solution. Striking is the reliance by planners on zoning codes to achieve development and the goals of ADUs. This is especially so given that REPs and ADU a dvocates are quite aware of the limitations common zoning code regulations and current appraisal and finance practices apply to ADU development.

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87 CHAPTER V I ANALYSIS OF ZONING CODES FOR ADUS IN 31 JURISDICTIONS IN COLORADO I reviewed zoning codes of 31 jurisdiction in Colorado. These jurisdictions were chosen based on recommendations provided to me by Alex Schafran, who had previously researched ADUs in Colorado for The politics of accessory dwel ling units in the United States (2012). Additional communities were added to this list via snowballing of interviewees, internet searches, and research. ADU Specific Documents The first way I reviewed the 31 jurisdictions was according to the information they provided or processes they created to regulate ADUs. The purpose of this exercise was to get an overall sense of the Of the 31 jurisdictions in the study, nine had crafted ADU specific documents. A few ha d created ADU specific planning documents to succinctly explain the ADU policy and regulations, and to expedite the ADU application and approval process ( Table 6 .1) Only two communities (Golden and Glenwood Springs ) stated the benefits of ADUs in the documents Golden focused on the flexibility that ADUs offer to the life cycle of the primary residence household, citing special needs accommodation, the ability to age in place, adult children returning to live at home, and extra space for the primary residence household. Glenwood Springs cites the ADUs capacity to offer affordable housing and its efficient use of existing municipal infrastructure (roads, water lines, sewer facilities, etc.). The documents of the remaining communities used simple language and graphics to define an ADU, demonstrate acceptable application s in their respective community, and presented the development

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88 procedures The presence of ADU spec ific document, however, did not necessarily mean more enabling treatment of ADUs in the underlying zoning code. Table 6 .1: ADU Specific Documents from Community Zoning Code Reviews in Colorado Jurisdiction Region in CO Population (US Census 2012 estimate) ADU Guide (N=5 of 31) ADU Application (N=5 of 31) Arvada Front Range 109,745 X Boulder Front Range 101,808 X Colorado Springs Front Range 431,834 X Denver Front Range 634,625 X Golden Front Range 19,186 X Glenwood Springs Rural Resort 9,677 X X Lakewood Front Range 145,516 X Mesa County West Slope 147,554 X X Steamboat Springs Rural Resort 12,029 X These nine cities and counties represent geographically, economically, and politically diverse communities in Colorado, including metropolitan areas, inner ring suburbs tourist destinations, university town s, retirement communities, and a locus for oil and gas extraction. These communities exist in the Front Range the rural resort mountains, and the W est S lope. With the exceptions of Lakewood and Arvada, these communities all have housing pressures H ousing pressures, alone, do not instigate streamlined ADU processes as most communities in the study, including those with housing pressures, had not developed ADU specifi c documents It is possible that planning capacity dedicated to their development is also key to their creation. ADU Planning Review Process The least onerous process possible for ADU development is Use By Right, meaning that owners of single family res idences have the right to develop an ADU when constructed in compliance with the zoning code. Use By Right reduces the administrative and time requirements of receiving building permits for development of an ADU. Psychologically, Use By Right conveys a l ess intrusive governmental process to the homeowner while concurrently empowering them to maximize the use of their primary residence. In the reviewed zoning codes, jurisdictions used the terms, Administrative Review, Design Review, and Minor Site

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89 Review to connote Use by Right. These types of reviews are standard for all development in cities, and allow the jurisdiction to comment on design and to check the plans for compliance with the zoning code, community context, and adequate facilities or utilities Sixteen community zoning codes utilized an Administrative Review process for ADU development ( Table 6 .2). There is nothing notably consistent among the communities that chose the particular mix of ADU specific document creation and planning review process. Therefore, the mixture of ADU specific documents and choice of planning review processes is worth noting to illustrate the range of community processes for ADU permitting, but it is difficult to interpret why there is a range w ithout further inquiry into other development policies, attitudes of their residents toward development, infrastructure capacity for infill and ADUS, and goals in the comprehensive plan. Table 6 .2: ADU Planning Review Process from Community Zon ing Code Reviews in Colorado ADU Planning Review Process Jurisdiction Use By Right N=3: Arvada, Lafayette, Ouray County Administrative Review N=1 6: Aspen, Boulder, Buena Vista 6 Chaffee County, Colorado Springs, Denver, Estes Park, Garfield County, Glenwood Springs, Golden, La Plata County, Lafayette, Mesa County, Salida, San Miguel County, Steamboat Springs, Summit County Conditional Use N=1: Crested Butte Design Review N=1: Greeley Limited Use Review N=3: Durango, Eagle County, Lakewood Minor Site Review N=1: Grand Junction Public Hearing N=2: Silverthorne, Buena Vista 1 (Unknown) N=4: Ouray County, Pagosa Springs, Telluride 6 The planning review process for Buena Vista depends on the zone and zone di strict. Therefore, the homeowner may be able to build an ADU t hrough administrative review or, if in another type of zoning district, the owner may need to present at a public hearing.

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90 Permitted Zones a nd Types of ADUS 11 of the community zoning codes reviewed allow for ADUs to be built in all residential zones For the remaining 20 zoning codes reviewed, the allowance of ADUs is restricted at the zone district level. Residential zoning is a broader designation for land use and zone districts define the types of residential development allowe d in discrete locations; for example, R usually denotes zoning for residential land uses, and R 1 usually denotes a zone district where only single family residences are allowed. The zone district and associated regulations are typically defined by the bu ilt form of , for a neighborhood. Denver offers an example of this phenomenon. (Suburban, Urban Edge, Urban, General Urban, Urban Cent er, and Master Planned) but not all zone districts within the residential zones allow ADUs. For example, though the Urban zone (or neighborhood context in Denver zoning parlance) allows for ADUs, the U SU B zoning district (Urban, single unit, 4,500 sqft lot) does not permit ADUs. Therefore, the zone district is more prohibitive towards ADUs than the zoning code initially portrays. While ADUs in Denver are considered a residential use, they are not allowed in all types of residential zoning, of which there are many in Denver. In some cases, ADUs are enabled in all of the residential zones and zone districts but there are restrictions on the types of ADUs allowed. For example, in seven of the reviewed zoning codes, only detached ADUs were allowed meaning the creation of an ADU in basements, attics, or extra space internal to the primary residence (the least costly method of creating an ADU) is prohibited. The communities that prohibit Attached (internal) ADUs usually allow a n attached, internal second dwelling unit by considering the two units (primary residence and second dwelling unit ), combined, as a duplex However, t he duplex may incur different calcula te the lot coverage, density, or parking requirements of the parcel differently. The building code may require separate utility meters where it would have allowed sharing if the attached, interior conversion were considered may appraise and tax the property differently as a duplex than as an ADU.

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91 The jurisdictions that allow only detached ADUs had these types historically in the ir residential zones, though often non permitted. Z oning codes were developed to permit ADUs in these communities but limited the residential zones to those with the historic detached ADU form already in place (Denver, Lafayette, Colorado Springs and Crested Butte ). Thus, the detached ADU requirement is more a way of enabling additional development of an existing (and likely acceptable) ADU type in very specific locations than enabling ADUs overall. These additional zoning requirements nested within the residential use zone district make more prohibitive the conversion or construction of an ADU They are more prohibitive because of the added time and cost burden s from complying with multiple agencies, construction costs additional utility fees, and higher property taxes. These may be perceived as prohibitive to homeowners and so inhibiting ADU production On the other hand, the duplexing of a unit might be similar in cost to a detached unity. By only permitting a detached or duplex unit, the towns with these pr ovisions are not making ADUs an affordable method of creating more housing. R eviewed community zoning codes from 11 communities allowed ADUs in all residential zones and also allowed al l types of ADUs to be developed which represents the most enabling in regards to where and what ADUs may be developed ( Table 6 .3) Interesting to note is that only three communities which created ADU specific documents, considered a sign of greater enabling of ADU development, permitted all types of ADUs in all residential zones (Arvada, Golden, and Steamboat Springs).

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92 Table 6 .3: Permitted Zones and Types of ADUs from Community Zoning Code Reviews in Colorado Zones Allowing ADUs ADU Types Allowed Jurisdiction All R Zones Attached/Detached N=11: Arvada, Chaffee County, Garfield County, Golden, Grand Junction, La Plata County, Salida, San Miguel County, Steamboat Springs, Summit County, Telluride Limited R Zones Attached/Detached N=10: Boulder 3 Durango, Eagle County, Glenwood Springs, Greeley, Lakewood, Mesa County, Ouray County, Pagosa Springs, Silverthorne Limited R Zones Attached (internal) N=2: Boulder 3 Estes Park Limited R Zones Detached N=7: Aspen, Boulder 7 Buena Vista, Colorado Springs, Crested Butte, Denver, Fort Collins, Lafayette Prohibitive Zoning Codes Other zoning code requirements that have been recognized as being prohibitive to ADU development (Wegmann, Nemi r ow, and Chapple, 2012 & Personal Interviews, 2013) are minimum lot sizes, parking requirements, homeowner occupancy mandates, and the proh ibition of the sale of the ADU (separate from the primary residence). Minimum Lot Sizes T he act of setting a minimum lot size has the ability to be either enabling, through inclusion of all or the majority of residential lot sizes in the community, or pr ohibitive, by excluding the majority of residential lot sizes in the community. When the minimum lot size is large, the target population for ADU creation is the higher value homeowner, who may not have a financial need or tolerance for developing and 7 Boulder acknowledges three different types of Accessory Dwelling Uni ts, labeling them Accessory permitted for one of these three types of ADUs depending on when the original building was built and what type of building is on t he parcel where the ADU is being developed. This represents the most nuanced created ADUs, and the (likely) reversion of multi family housing to single famil y residential with ADUs. This last is important in Boulder, a university town, which has had many primary residences developed into multi family apartment housing.

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93 ren ting an ADU. Politically, setting a high lot size may be a form of exclusionary zoning, by reducing the parcels with capacity for an ADU. If the minimum lot size is low and/or represents all or the majority of single family residential parcels in the community then the target population expands and the pool of eligible (for ADU development) parcels broadens ; development is assumed to follow Thus, a scan of required minimum lot sizes in a community approximation of the intention toward and enablement of ADU production ( Table 6 .4) Urban jurisdictions (Denver and Grand Junction) and historic mining towns (Pagosa Springs and Telluride) were more likely to allow for 3,000 sqft lots, due to historic lot sizes and increased housing demand in these places Counties (La Plata and Mesa) tend to require larger minimum lot sizes than the average of the jurisdictions reviewed for preservation of their rural form and from health and water mandates for septic systems and well water I f minimum lot size requirements are indeed barometers for jurisdictional promotion, it appears that two communities (Lakewood and Fort Collins) are actively dissuading ADU development by requiring a minimum lot size from 29% to 100% greater than the a verage lot size for their jurisdiction s In the follo w ing table, I compare the minimum lot size required to the average lot size of the more accept ance of ADUs and a broader set of eligible lots. Table 6 .4: Minimum Lot Size Requirements from Community Zoning Code Reviews in Colorado Jurisdiction Min imum Lot Size Required (sqft, unless otherwise stated) Average Lot Size for the Jurisdiction (sqft, unless otherwise stated) At or Below Average Lot Size for the Jurisdiction (Y/N) Boulder (a) 6,000 7,000 Y Boulder (.c) 6,000 7,000 Y Colorado Springs 6,000 to 7,000 7,000 Y Denver 3,000 to 10,000 7,000 Y & N Durango 5,000 to 7,000 7,000 Y Eagle County 2 acres to 35 acres 2 Because of the rural nature, the average is skewed by large parcel sizes Y

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94 Jurisdiction Min imum Lot Size Required (sqft, unless otherwise stated) Average Lot Size for the Jurisdiction (sqft, unless otherwise stated) At or Below Average Lot Size for the Jurisdiction (Y/N) Estes Park 1.33 times the zone district minimum N Fort Collins 10,000 to 12,000 6,000 N Garfield County 2 acres or 2 times the lot minimum 2 N Glenwood Springs 5,000 to 6,000 5,000 Y & N Grand Junction 3,000 6,000 Y La Plata County 70 acres 35 acres N Lakewood 9,000 6,000 N Mesa County 6,500 6,500 Y Ouray County 3 acres Because of the rural nature, the average is skewed by large parcel sizes Y Pagosa Springs 3,000 6,000 Y Telluride 2,500 6,000 Y Off Street Parking Requirements Parking is infamous for its perceived prohibitory effects on ADU development. Typically, homeowners who develop an ADU are required to provide one off street parking space to accommodate the vehicle of the ADU tenant. Mountain communities tended to require two or more off street parking spaces to accommodate the perceived two car ADU tenant households and the challenges on street parking poses for snow removal during winter months Homeowners must be able to allocate parcel space to the provision of the required ADU parking space in order to develop an ADU The inconvenience, through loss of yard space, and cost, through construction of the parking space (po ssibly including a garage), are thought to be onerous enough to dissuade a homeowner away from developing an ADU. It is possible that driveway space in front of an existing garage the parking requirement. Where this form is not common, the provision of the ADU may not be possible given the lot size, configuration of the primary residence on th e lot, and other confounding zoning requirements (such as setbacks and yard space require ments).

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95 Yet, only one community zoning code reviewed does not require off street parki ng provisions for ADUs: Denver. Of those that do require off street parking, 24 require one off street space per ADU, one requires two off street parking spaces per ADU, and two require two or more off street parking spaces for ADUs one bedroom and larger ADUs. No zoning code required parking to be covered or concealed. Homeo wner O ccupancy Requirements Some community zoning codes require the primary residence homeowner to live in either the primary residence or the ADU ( also known as the homeowner occupancy requirements). This requirement is likely due to perception that homeowners on site ameliorate the perceived negative externalities of rental housing and their tenants However, by instituting homeowner o ccupancy requirements, the development of ADUs is limited to homeowners to the exclusion of investors. If this is true, the homeo wner o ccupancy requirement s may dampen the creation of ADUs by eliminating those with both the financial means and the capacity to develop them be they developers or individual investors Homeowner occupancy was required in 11 of the zonin g codes reviewed ( Table 6 .5) Table 6 .5: Owner Occupancy Requirements from Community Zoning Code Reviews in Colorado Jurisdiction Owner Occupancy Required (Y/N) N=11: Arvada, Boulder, Denver, Durango, Garfield County, Glenwood Springs, Golden, Grand Junction, Mesa County, Pagosa Springs, Silverthorne Y N=13: Aspen, Chaffee County, Colorado Springs, Crested Butte, Eagle County, Fort Collins, Greeley, La Plata County, Lafayette, Lakewood, Salida, Steamboat Springs, Summit County N N=5: Buena Vista, Estes Park, Ouray County, San Miguel County, Telluride Not Stated Selling the ADU Table 6 6 shows the number of communities that allow for the separation (from the primary residence) and sale of an ADU. This may under represent the number of communities that would allow the

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96 severance and sale of an ADU as many communities do not explicitly forb id this practice in their ADU zoning codes. It is likely, however, that the costs of conforming to the greater zoning and building regulations associated with single family developments (versus that for an ADU) makes the separation and sale of an ADU hig hly unlikely and fiscally infeasible. The ability to sell the ADU however, was cited by Real Estate Professional interviewees as being capable of incentivizing more investors in the real estate market to develop ADUs, and to do so in greater numbers. Tab le 6 6 : Permitted Sales of ADUs from Community Zoning Code Reviews in Colorado Jurisdiction Can Sell ADU A s pen Yes La Plata County Yes Mesa County Yes Ouray County Yes San Miguel County Yes Silverthorne Yes Steamboat Springs Yes Summary Z oning codes may inhibit, or outright prohibit, the development of ADUs through onerous administrative requirements and/or other requirements that i ncrease the cost to develop such as only permitting duplexes or detached ADUs Zoning codes that appear on the su rface to enable ADU development may have n ested within the zoning code restriction s that may impede ADU development. These restrictions may be in the form of l imitations on the zones and zone districts that allow ADUs; l imitations on the types of ADUs (de tached, attached, interior or exterior) that can be developed; m inimum lot size requirements above the average for the jurisdiction; off street parking requirements; homeowner occupancy requirements ; and l imitations on the ability to separate and sell the ADU from the primary residence Additionally, the chosen permitting mechanism for ADU approval may also impede development, if the process is lengthy and bureaucratic e.g. a public hearing versus an administrative review T he majority of jurisdictional zoning codes reviewed utilized some form of administrative r eview permitting, considered to be the least onerous method of p lanning review In an administrative review, a planner reviews the plans to ensure they meet the

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97 zoning and subdivision requiremen ts, building codes, and other codes, but does not look for design, and it does not involve the public, a commission, or the legislative or governing body of the community. Some communities developed ADU specific documents, including applications and guides as a means of simplifying and clarifying the ADU, and its development process, to their community. The presence o f these documents, however, does not necessarily reflect an enabling planning department or a jurisdiction that is actively promoting them. Of the nine jurisdictions that had developed ADU specific documents ( guide and/or application ), all utilized some form of administrative review processes, only three communities (Arvada, Golden, and Steamboat Springs) permitted all types of ADUs in all re sidential zones, 1 (Lakewood) set minimum lot sizes above their average residential lot size, all required off street parking, 3 (Colorado Springs, Lakewood, and Steamboat Springs) did not require homeowner occupancy, and two (Mesa County and Steamboat S prings) allowed for the ADU to be separated from the primary residence and sold. There are several arguments for and against the zoning code r equirements highlighted in this chapter ( administrative review permitting, permitted zones and zone districts, A DU types allowed, minimum lot size requirements, off street parking mandates, homeowner occupancy requirements, and the ability to separate and sell the ADU from the primary residence). Planners interviewed sometimes spoke to the pragmatic necessity of th ese code regulations. More often, though, the regulations were due to real or perceived political pressure from residents, elected officials, and the development community. Additionally, planners stated peer community ADU zoning codes were reviewed and a ltered for their local requirements. This suggests that status quo practices set the tone also. In the absence of clearly agreed upon enabling zoning codes, it is difficult to rate or rank the jurisdiction zoning codes reviewed for their level of enabling Additionally, there is a lack of empirical studies of the inhibiting potential these particular zoning codes have on ADU development. Therefore, a summation of the jurisdictions by each facet explored in this chapter is presented here for review ( Table 6 .7).

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98 Table 6 7 : Zoning Code s Summary of Potentially Prohibiting Regulations, Colorado Jurisdiction Administrativ e Review Permitting All ADU Types Allowed All Residential Zones Minimum Lot Size At or Above Jurisdictional Average Off Street Parking Not Required Owner Occupancy Required Able to Sell the ADU Arvada X X X X Aspen X X Breckenridge Boulder X X X Buena Vista X Chaffee County X X X Colorado Springs X Crested Butte Denver X X X Durango X X X Eagle County X X Englewood Estes Park X X Fort Collins X Garfield County X X X X X Glenwood Springs X X X Golden X X X X Grand Junction X X X X Greeley X X La Plata County X X X X X Lafayette X Lakewood X X X Mesa County X X X X Ouray County X X X

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99 Jurisdiction Administrativ e Review Permitting All ADU Types Allowed All Residential Zones Minimum Lot Size At or Above Jurisdictional Average Off Street Parking Not Required Owner Occupancy Required Able to Sell the ADU Pagosa Springs X X Salida X X X San Miguel County X X X X Silverthorne X X X Steamboat Springs X X X X Summit County X X X Telluride X X

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100 CHAPTER VII ANALYSIS OF FINDINGS I undertook this thesis as a means of understanding the circumstances which may inhibit the creation of ADUs as affordable, and relatively affordable, housing, as discussed in Chapter I: Introduction. The l iterature as discussed in Chapter II: Review o f the Literature, suggest s that ADUs should be in demand, due to rising housing costs, increasing transportation costs, declining wages, and shrinking municipal budgets ; and proposes ADU s as able to benefit the homeowner and the community by offering solut ions to these fiscal dilemmas : for homeowners, through rental income, age in place, and flexibility to meet household lifecycle needs; and for communities, through provision of affordable, and relatively affordable, housing, efficient use of existing infr astructure, and infill development As discussed in Chapter III : Methodology, t hree methods were used to explore the research question,: homeowner survey data from California and Oregon interviews with planners, ADU advocates, and real estate professi onals working in Colorado and elsewhere; and analysis of zoning codes from Colorado jurisdictions. Through this research, I tested the hypothesis that a combination of four homeowner characteristics ( regulatory permission, financial need, willingness to be an ADU landlord and development capacity) would make a household an optimal target for ADU development policy. I then focused on whether it is one, several, or a combination of all four of these barriers that is inhibiting ADU development in Colorado. I used f ive themes to guide th is analysis : demand (for ADUs); perceptions of affordab le housing in policy and practice ; barriers to ADU creation (experienced and perceived) ; ADUs as affordable housing (in thought and practice); and appraisal and finance of ADUs (either construction or conversion). I present the findings of this analysis here Demand R ental income, along with social support are considered primary motivators for ADU development by interviewees and ADU homeowner survey data from Oregon supports this with 51% of respondents

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101 citing rental income as the primary motivation for their ADU development and 24% identifying social support, via use for a family member or helper Though e vidence demonstrates middle and lower income, and minority homeowner s need this rental income due to stagnant wages, disparity in net wealth, increasing transportation costs, increasing housing costs, and a loss of equity due to the Great Recession these groups are under represented in the homeowner survey data from California and Oregon: in both survey regions, median household income (ACS, 2008 2012) ; and while the Oregon surveys did no t collect data on race or ethnicity, the California survey instrument was offered in English and Spanish, with only English language responses received, noted by the authors as disproportional for their region Thus, these surveys do not allow full explor ation of the willingness or need among these groups. Still, these homeowner groups need to be studied in Colorado: t office projects Hispanic, Black Asian, and other m inority populations will grow from less than 30% of Colo greater than 40 % in 2040 (DeGroen, 2012); the Denver Aurora MSA ranked ninth out of 95 MSAs nationally for the t op rates of poverty rate change from 2000 to 2008 in the primary city and associated suburbs (Kneebone and Garr, 2010) Another issue of interest to Colorado is interest in reducing transportation costs, and car sharing is on the rise in the Denver metropolitan region, with five companies in operation (eGo CarShare, Occasional Car, Car2Go, Hertz 24/7, and Enterprise CarShare ) Thus, the demographic changes by race, ethnicity, and income, and the growing interest in living in in town locations where car ownership is optional if households have access to transit and a shared car suggest a growing share of households in Colorado would or should be interested in creating ADUs in proportions greater than interviewees report Affordability and Policy Some jurisdictions in Colorado sought to increase ADU implementation as a means of achieving affordable housing, among other stated benefits (efficient use of existing infrastructure, and infill development). Affordable housing was a driver for the ADU code development in communities experiencing housing crise s such as a lack of rental housing, i n town housing, and/or affordable and relatively affordable,

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102 housing T he s e crise s served to trigger political will in elected officials and/or planners for the ADU form which then drove planning department zoning code development Despite this many p lanners denied they could do more than enable ADUs in their community due to political constraints Thus, absent unique circumstances that create political will for ADUs, most planners feel they are working within a general political climate that is less accepting of ADUs as affordable housing. Regulations or sent iments that prohibit p lanners from fully engaging with ADU policy can be a reason for the lack of ADU development. D ata points to the role the planner has on policy success and finds it is crucia l, primarily via staffing capacity and resources dedicated to plan creation and implementation (Laurian, Day, Backhust, Berke, Ericksen, et al, 2004). Indeed, t he lack of lower and moderate income, and racial and ethnic minority ADU homeowners in the lite rature and homeowner survey data may reflect a lack of appropriate outreach and ADUs policies suited to these communities by their planners. Given the lack of state level guidance for ADU policies in Colorado jurisdictions that seek to enable ADUs must use their limited planning resources to do so, which leads to a reliance on peer jurisdiction zoning codes It also leaves the planner susceptible to local resident resistance and other political pressures with out support from the state Few planners in Colorado reported utilizing extensive planning processes when crafting their ADU zoning codes, suggesting a reliance on status quo codes No planner interviewed had homeowner and/or p arcel capacity for ADUs and so could not understand the influence their proposed codes and policies would have on both Barriers to ADU Creation Z oning requirements were cited by the literature, homeowner surveys, and interview ee s to inhibit ADU develop ment through limitations on the permitted residential zones and ADU types; setting minimum lot sizes greater than the typical parcel size; requiring off street parking which may exclude some parcels that would otherwise be eligible for ADU development ; ho meowner occupancy requirements, which limits the development of ADUs by investors who may have greater financial and physical development capacity;

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103 and prohibiting the ability to sell the ADU, which limits their market potential by prohibiting their commod itization. Review of 31 Colorado jurisdiction zoning codes found each had some, many, or all of these potential barriers. Therefore, despite the presence of ordinances that allow for ADUs, specific regulations are not supportive of, and may even be comp letely prohibitive to hom eowners who may be most willing to develop them ; i.e.: zoning code barriers may outweigh homeowner demand and willingness to develop an ADU by diminishing the ir development capacity, and/or denying them permission. Research found a statistical correlation between the percent of Mexican immigrants and the level of restriction of ADUs across jurisdictions (Brinig and Garnett, 2013) and a disproportionate lack of African American ADU homeowners (Rudel, 1984) and Spanish speakin g ADU homeowner s (Wegmann and Chapple, 2012) meaning the absence of racially and ethnically diverse ADU homeowners in survey data may be due to barriers found in the Colorado jurisdiction zoning codes reviewed here such as limited residential zones and m inimum lot size requirements These homeowner populations may be more susceptible to restrictive ADU regulations because they may be more likely to have lower net wealth ( State 2013 ) and to live in residential zones that do not pe rmit ADUs, per zoning code Conventional appraisal and finance practices were also identified as potential barriers to ADU development, and are discussed in a separate section below. ADUs as Affordable Housing The East Bay, California homeowner survey dat a found that studio and 1 bedroom ADUs which were 63% of all ADU types reported rent s for approximately $200 less than the American Community Survey (ACS) median rent for its metropolitan region (Berkeley, California). S tudios in the Oregon cities, which were 27% of all ADU types reported rent ed for less than the ACS median rent for each of their respective regions (Portland, Oregon). This suggests that a mature ADU market may offer a greater level of affordability: 77% of al l East Bay ADU homeowners reported the ADU being in place prior to their purchase

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104 of the primary residence, demonstrating an established ADU inventory The lower rents are likely due to a greater amortization period : the homeowner has paid off all or a p ortion of the construction costs from the ADU and can charge a lower rent since no portion of the rent is going to the debt on its construction. It is also possible, given my findings on the limitations of conventional appraisal practices for ADU evaluati on that a homeowner in a mature ADU market purchased a primary residence with an existing ADU at a price that does not fully value the presence of the ADU and thus has less ADU mortgage to cover through charging a higher rent. Therefore, jurisdictions se eking to develop affordable housing may need to adopt long range expectations before newly constructed ADUs will achieve affordability through market development especially if zoning codes, planning technical and financial assistance programs and/or appr aising and financing practices do not evolve to enable more households to affordably develop ADUs. However, the literature and interviews stated relative affordable housing strategies may still be achieved in the near term because of the convenient locati ons and smaller sizes of ADUs Appraisal and Finance of ADUs L imited appraisal techniques and lending products were cited by the literature and interviewed real estate professionals as another barrier to ADU development. Conversely, the planners interviewed did not express awareness that the appraisal and finance environment homeowners must operate in to develop an ADU was even an issue or constraint A common critique of planners is that they do not understand the costs of development or the real estate market, and Colorado ADU policy and planning attitude seems to confirm this. Conventional appraisal and finan ce practices, which rely on homeowner capital and/or home equity, could outweigh and willingness to develop and rent the ADU, and may explain the minimal ADU developmen t reported by planners. Given this, planners need to offer technical and financial assistance to homeowners, which could reduce their financial risk and construction costs, and enable more homeowners to develop ADUs. Cities and the state might also work with the banking system or other types of lenders, such as Community Development Financial Institutions, credit unions, or state housing finance authorities that might provide alternative sources of financing for ADUs built as affordable rentals.

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105 Target Po pulations The homeowner surveys and interviews were used to further explore the hypothesis that some combination of regulatory permission, financial need, willingness to be an ADU landlord, and development capacity made optimal target populations for ADU development. Evidence supported some of these factors, though not all. Financial Need R oughly half of the homeowners in the region report ed creating an ADU for the rental income it provides which could suggest a need by the household for this income stream. However, ADU h omeowners in both regions earned one third or more than their respective household median income suggesting need may not be the appropriate term. I t is possible that even above median income homeowners may need additional income due to the local context : m edian housing prices in the East Bay are well over $585,000 in some cities, whereas the median income in these cities ranges from $ 51,683 to $73,728 (ACS, 2008 2010). Therefore, m edian income, as reported in the East Bay survey, may not be enough to afford the median home price in its region, when using the rule of thumb that the home price should and therefore need is the appropriate term These contexts are also present in Colorado: r eal estate professionals working in Colorado provided anecdotes of savvy homeowners using ADU rental income to afford their primary residence, and planners in rural resort mountain towns stated households need the additiona l rental income to afford the higher housing costs. Additionally, many savvy investors seek un earned incomes sources, such as real estate investments. Nordvik (2000) supports this through an econometric analysis of homeowners in Norway which found high er income households had so me sensitivity to market rents and would be induced to develop and rent an ADU Interviews in with planners in Colorado, though, suggested that need by even high income homeowners has some undefined br eak point after which market rents may no longer incentivize ADU development, regardless of household income This phenomenon was not identified by Nordvik (2000) but supported by with promoting ADUs through their affordable hous ing

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106 mitigation program. Aspen created an affordable housing mitigation program which financially incentivized ADUs (through fees equivalent to market rate construction rates) to be built as an affordable housing mitigation for new construction and/or reno vations, but saw only 30% of the constructed ADUs being rented. As result, the planning department has requested its council remove ADUs as an affordable housing mitigation option. It is not clear why they do not m andate that the units be rented, but it is clear the homeowner had little willingness to be an ADU landlord. Thus, financial need appears to be linked to willingness to a point. Willingness to Develop and Be an ADU Landlord Non ADU homeowner survey responses from the East Bay acknowledged the presence of at least one ADU on their block, representing many homeowners willing to be ADU landlords. Additionally, only one third of non ADU homeowners reported being firmly opposed to developing an ADU and one half reported some potential interest. A dditionally, both surveys found 68% to 77% of the surveyed ADUs were as opposed to using the ADU as flexible space for the primary household Interviewees in Colorado that stated their communities had several unpermitted ADUs also show demand and willingness to be an ADU landlord, but quantification of the number of non permitted units is not available. Development Capacity Development c apacity, meaning physical and financial capacity to develop an ADU was explored through interviews and homeowner survey data. Approximately 20% of h omeowner s in both survey regions reported contributing some personal effort to the construction of their ADU signifying a h physical capacity to develop an ADU Understanding this supports the development of programs, such as one offered by the City and County of Denver, that allows individuals to test for competency in home construction to avoid mandates for the us e of licensed contractors, which translates into construction cost savings and, potentially, ADU rent reduction

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107 The homeowners in three cities in Oregon that reported the financing mechanism for their ADU construction used cash more than any other means (189 responses out of 369 surveys), followed by home equity (92 responses); though these numbers are not proportional, as homeowners could select multiple financing practices. Given the median costs of construction reported by these homeowners of constru ction reported for ADUs ( ranging from $50,000 to just over $100,000 ) financial development capacity may be the greatest limiting factor to widespread ADU development due to conventional appraisal and finance practices. Regulatory Permission The homeowner surveys showed the se three homeowner characteristics were not enough of an explanation for why ADU development is or is not occurring, and a third characteristic was important -that of regulatory permission. Onerous zoning requirements, such as off stree t parking, homeowner occupancy, and minimum lot sizes, are found to have the potential to deny an otherwise optimal homeowner from developing an ADU. Findings for Colorado To explore the concept of permission 31 zoning codes of selected Colorado jurisdictions were reviewed to identify several potential barriers or enablers to ADU development : existence of applications and guidebooks, the permitting process, and zoning treatment and provision, e.g. if zoning perm itted ADUs, which types, and how ( minimum lot sizes, off street parking requirements, home owner occupancy requirements, and the ability to sell the ADU) I nterviews were also conducted and coded to see if there was an understanding or belief among policy makers that appraisal and finance practices were enabling or inhibiting ADU development, if planning policy needed to target the most likely group of homeowners for ADU implementation and if planning staff should be dedicated to ADU development and how These two research efforts did not find consensus in the enactment of ADU zoning code s and ADU policies in Colorado nor in the belief that ADU policies need to be targeted at certain households by

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108 interviewees In regards to zoning codes, the review fou nd general cohesion on some facets, such as administrative permitting (considered to be the least onerous method of p lanning review ) and off street parking requirements (considered to be pragmatically necessary, though blamed as being one of the biggest deterrents to ADU development). Homeo wner occupancy is considered by some interviewees and the literature to also be a deterrent to ADU development, yet one third of the reviewed Colorado jurisdictions incorporated this requirement into their ADU codes. A minimum lot size requirement for ADU development that is above the median lot size of its jurisdiction is considered here to be an exclusionary zoning practice, and five surveyed jurisdictions in Colorado incorporated this into their A DU zoning codes. Conversely, allowing ADUs in all residential zones and allowing all types of ADUs (interior, exterior, attached, and detached) is considered to be enabling of ADU development, and one third of t he reviewed Colorado j urisdictions allowed f or both A DUs in all residential districts and all types of ADUs. I n the absence of clearly agreed upon enabling zoning codes, it is difficult to definitively rate or rank the Colorado jurisdiction zoning codes reviewed for their level of enabling Howev er, i t was possible to summarize each jurisdiction zoning code by how many barriers they had despite their provision to allow ADUs Yet there is a lack of empirical studies to verify the inhibiting potential these particular zoning codes have on ADU d evelopment. Therefore, the zoning codes provide anecdotal, and not deterministic, evidence for the potential for ADUs to be developed. Further study that looks at the zo n ing code regulation s, the homeowner characteristics, and the presence or desire to c onstruct an ADU is required to understand which package of zoning codes, policies, contexts and homeowner characteristics produces the greatest proportion of ADU development or vise versa Interviews and the literature identified a lack of appraisal pr actices that accurately captured the value of ADUs, which implies underwriting practices for ADU finance are equally limited. S urvey responses from the three cities in Oregon for means of financing ADU development may offer support for these claims Interviews with planners in Colorado support ed this finding by stating that only those with money are this may seem logical, if not fiscally prudent, i magine primary residences being only available to those able

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109 to pay the entire purchase p rice without any loan pr oduct. This thought experiment leads to a hypothesis that the optimal target populations may be hindered in ADU development by the lack of app raisal and financing practices. As Schafran (2012) and interviews recognized, ADU policy is unique within housing developmen t (both affordable and market r ate) in its reliance on the individual homeowner, w ho may be motivated but unaware of the financial obstacles to develop one and therefore would require additional support (technical and financial) to do so. Interviews with planners in Colorado made it clear that they find themselves restrained in developing new or progressive zoning codes and constrai ned in promoting ADUs for both political and pragmatic reasons which they developed their regulations, which suggests status quo also sets the tone in planning departments. Without the capacity or support either political or staff, communities will not be willing or able to undertake the effort to understand their homeowner base to determine who has financial need and development capacity (both physical and financial ) to de codes and ADU policy provide those homeowners with regulatory permission to develop an ADU Without this analysis, i t is possible that Colorado jurisdiction s have adopt ed zoning codes that do not fit wit h their homeowner s result ing in the less than potential (and possibly expected) ADU development. Outliers Some communities however, did undertake efforts capacity to provide regulatory permission by adopting enabling ADU zoning codes and/or to develop technical and financial assistance programs. These outliers include Arvada, Crested Butte, Glenwood Springs, and Salida It appears that these communities undertook extra efforts due to a local tr iggering effect which forced them to be more proactive about the ir ADU policy Arvada dedicated staff time to conducting a public outreach effort for ADUs, which informed the zoning code. This extensive process achieved unanimous support by elected off icials. enabled all types of ADUs in all residential zones, with no minimum lot size requirements, but it also required

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110 off street parking and homeowner occupancy. The last two requirements were a result of public demand which may r eflect not in my backyard ( NIMBY ) sentiment and inclusion of negative social construction of ADUs and their tenants. Once the code was adopted, however, the planning department monitored ADU implementation and found it to be less than expected. In respon se additional outreach was conducted with contractors, developers, and financiers to educate this first line of contact with homeowners considering remodeling or development, to further promote the ADU housing type. Arvada undertook this effort to respon d to its ageing households and housing stock, and to better leverage a new commuter rail station scheduled for development within its borders. Crested Butte developed a plan to promote ADU development through water and sewer tap fee subsidies equaling $12 ,000 per ADU. Crested Butte is a rural resort mountain town that has been experiencing tremendous housing inflation. As a result, residents of Crested Butte rank affordable housing as critically important. The town also has an historic presence of ADUs These factors combined to elevate the ADU as one means of achieving additional affordable housing units. The water and sewer tap fee subsidy is provided in exchange for a deed restriction on the ADU which requires that it be rented to those earning 60% or less of the Crested Butte AMI (which in 2010 was $60,000). This practice of incentivizing ADUs as affordable and workforce housing is not unique to Crested Butte : Aspen and Telluride offer two additional example s in Colorado Crested Butte topogra phy severely constrains the potential for housing development, which means developments that do occur are not at a scale which allows for developers to produce affordable housing without subsidies of approximately $100,000 per unit. Crested Butte recogniz es that partnering with individual homeowners is another form of public private partnership that can produce affordable housing through homeowner development of ADU s at lower costs to the town Glenwood Springs is a rural resort mountain community and se rves as a hub of affordable housing for its region. Non permitted ADUs had previously existed in the town, many of which were sub standard in quality and posed health and safety hazards The town was and is experiencing a demand for in town housing from young professionals and retiring baby boomers causing inflation of housing costs In response, Glenwood Spring planning department to develop an ADU zoning code as a method

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111 for increasing the affordable housing stock T he Glenwood Springs ADU zoning code stands out for its stated goals of cost effectively addressing household growth, increasing housing without government subsidies, and integrating attainable housing into the community. In addition to these goals, t he ci ty later crafted a clear and concise homeowner guide for ADU development and provided a 25% reduction in water and sewer tap fees to increase the affordability of the ADU development. Salida is a rural tourism community in central Colorado. Salida updated its zoning code in 2005 to allow detached ADUs in all residential zones with no homeowner occupancy requirements ( though off street parking is required ) Salida had an active public participation process, with residents and developers providing input into the zoning code language. Salida is notable for two things: (1) a very active developer community which eliminated the homeowner occupancy requirement and earned a lesser permitting review standard than proposed by the city ; and (2) the impetus for the code development : though a rural town of roughly 5,000, Salida was uilt out and experiencing a lack of rental housing, for which ADUs were seen as a solution. Salida demonstrates that ADUs fit in rural communities also, and that the commoditization of ADUs may support their development in certain contexts.

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112 CHAPTER VIII CONCLUSION AND RECOMMENDATIONS More than one of the outlier communities identifi ed here tied ADU development to affordable housing, either through stated goals or enacted policy. Several interviews and the literature supported this: analysis found ADUs to have some measure of affordability due to ho meowner as landlord, each of which results in below market rent While these may be true, it is also likely that ADU homeowners have non financial factors as Ruud and Nordvik (1999) suggest, that influence the ADU tenant chosen and the rent charged to them; i .e.: i t is conceivable that a n ADU homeowner may offer discount ed rent to attract the The lower ranges reported for cost of construction for conversions of interior space (attics, basements, and extra interior space), and existing garages could be important to professional planners, real estate professionals, and ADU advocates. These ranges may help to identify communities appropriate for ADU development by their built for m. They may also help focus ADUs as affordable, or relatively affordable, housing programs to neighborhoods and housing styles that enable low cost development. Further, developing technical assistance, via how to convert bulletins, pre approved design p lans, and/or contractor trainings, may more effectively equip homeowners to undertake low cost ADU conversions, which could lead to low(er) cost rental housing. T he findings from the two homeowner surveys suggest that : certain homeowners may be more likely to develop and rent ADU s but there are limitations to this interpretation due to a lack of data on low and moderate income and minority households ; zoning codes continue to contain onerous requirements which inhibit or make more difficult ADU development; conventional appraisal and finance practices undervalue ADUs and thus limit ADU development to those homeowners with personal capital or home equity to do so independent of financial lending; and that most cities ha ve not enabled ADUs enough through herefore it is likely that

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113 the little ADU construction commonly reported by many jurisdictions in Colorado is due to a combination of one or more of these inhibitors. However, some jurisdictions have approached ADUs in interesting ways to implement infill, in town, affordable rental housing These efforts have had different impetuses, including inflated housing costs, elected official dic tates for affordable housing, an engaged developer community, and mass transit expansion Highlights of findings from this analysis are shown in Table 8.1, below. Table 8.1: Methodology Matrix with R esearch Findings Using the Hypothesis Homeowner Surve ys Interviews Zoning Codes Regulatory Permission 7% of homeowners in the East Bay region of California survey tried but failed to develop an ADU, most commonly due to off street parking requirements Planners understood that regulations within their zoning codes could limit ADU development but cited resident NIMBY ism, political pressure, and pragmatism as the reasons for their adoption One reviewed jurisdiction forbids ADUs; Many jurisdiction zoning codes include regulations which may deny a homeowner the ability to develop an ADU Financial Need 51% of homeowners in the three cities in Oregon survey reported rental income as primary driver for ADU development Planners in high housing cost communities acknowledge resident homeowners need the ADU rental income to afford their housing costs Some codes create additional costs, running directly counter to the financial need argument Willingness 62% of homeowners without ADUs in the East Bay region of California survey reported at least one ADU on their bloc k; 68% of homeowners in the East Bay region of California and 77% of homeowners in the three cities in Oregon studies, reported their ADU is in residence Non permitted (also known as illegal or bandit) ADUs exist in every communit y interviewed Yet, several communities, including communities which undertook exceptional planning efforts to enable and/or promote ADUs, testify to less than expected development rates 21 of the reviewed zoning codes utilized some form of administrative r eview, representing the lowest administrative hurdle for ADU permit review and approval

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114 Homeowner Surve ys Interviews Zoning Codes Development Capacity Cash and Home Equity were the primary means of financing ADU development in the three cities in Oregon survey Those between 20 and 60 have the greatest physical capacity to develop ADUs; Only those with money are developing ADUs; Planners may not have analyzed their zoning physical capacity of parcels for ADU development nor analyzed development capacities One community allowed for homeowners to test for home construction and/or repair minimum qualifications, which increases the development and financial capacity (the latter through cost savings) Future Research Additional research is needed to determine what homeowners participate in ADU development, of a community may be developed. If appraisal and finance practices for ADU development do not evolve, of technical and financial assistance to inspire ADU development among a broader income range of households. Financial assistance could take the form of grants, low or no interest loans, tax breaks, or loan backing. Each of these recommendations stem from practices from communities around the country, documented in the literature, as well as tools that have been used to support for other forms of affordable housing L ack ing from the literature and homeowner surveys is information on low and middle income and racial and ethnic minority ADU homeowners particularly what proportions they represent within the total of all ADU homeowners This lack of data is partly due to it not being systematically tracked in the housing stock those with low and mod erate incomes tend ing not to respond to surveys, and man y having informal or non permitted ADUs and thus self selecting out of such studie s Because they have need, willingness, and even capacity, they could be optimal targets for permitted affordable ADUs.

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115 Recommendations: Additional homeowner surveys are needed to collect data on all types of existing ADU homeowners, particularly low and moderate income and minority homeowners using more direct survey approaches Further s tudies to determine the impact of potentially prohibiting ADU zoning codes upon ADU construction, given different contexts o The outlier communities highlighted here may of fer initial learning to determine which have seen higher proportions of development by whom, in what configuration and type, and at what level of affordability Non permitted ADUs need to be studied to determine the extent of their presence, who develops t hem, how they afford to do so, why they develop them how they are used, what income is earned, and what level of affordability they offer Development of technical and financial assistance tools and techniques o Technical assistance tools could take the form of ADU guides, educational campaigns, pre approved architectural designs and drawings for the predominant housing styles of a community, and technical assistance programs for managing rental properties o Financial assistance could take the form of grants, low or no interest loans, tax breaks, or loan backing Greater dissemination of research findings to broaden a jurisdiction s perspective on what works, where, and how so that ADU zoning codes may b ecome m ore contextual and effective

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116 REFERENCES Antoninetti, M. (2008). The Difficult History of Ancillary Units: The Obstacles and Potential Opportunities to Increase the Heterogeneity of Neighborhoods and the Flexibility of Households in the United States. Journal of Housing For the Elderly, 22 (4), 348 375. Aspen Real Estate Overview. (2014) Retrieved from http://www.trulia.com/real_estate/Aspen Colorado/ Bogardus, R. (2013). Constructing homeownership policy: social constructions and the design of th e low income homeownership policy objective. Housing Studies, 28(4), 616 631. Brown, M. J., & Watkins, T. (2012) Understanding and appraising properties with accessory dwelling units. The Appraisal Journal, Fall 2012, 297 309. Chapple, K., Wegmann, J., Nemirow, A., & Dentel Post, C. (2011) Yes in my backyard: mobilizing the market for secondary units (Working Paper 2011 07). Berkeley, CA: Berkeley Institute of Urban and Regional Development. The City and County of Denver. (2013) Neighborhood stab ilization program (Performance Report). Denver, CO: Denver Office of Economic Development. Cityofarvada. (November 5, 2008). Acce s sory Dwelling Units [video]. United State of America: YouTube. Cobb, R. L. & Dvorak, S. (2000) Accessory Dwelling Un its: Model State Act and Local Ordinance. Washington, D.C.: Public Policy Institute, American Planning Association. Colorado Constitution, Article XX, §6, clause h. Colorado Division of Housing. (2007) Affordable housing: a guide for local official s. Denver, CO: Kathi Williams. DeG r oen, C. (2012). Population Forecasts [ PowerPoint slides]. Retrieved from http://www.colorado.gov/cs/Satellite?blobcol=urldata&blobheadername1=Content Disposition&blobheadername2=Content Type& blobheadervalue1=inline;+filename%3D%22Population+Projections.pdf%22&blobheadervalue2=a pplication/pdf&blobkey=id&blobtable=MungoBlobs&blobwhere=1251833653289&ssbinary=true Duff, S. (2012). The possibilities in neighborhoods Utilizing accessory apartment s in existing homes to address social, environmental, and economic issues. Urban Design International, 17(1), 33 44. Fannie Mae Foundation. (2005) Identifying successful tactics: a summary of findings from a survey of four affordable housing case stu dies (Research Paper). Washington, D.C.: Peter D. Hart Research Associates. Farris, J. T. (2001). The barriers to using urban infill development to achieve smart growth Housing Policy Debate, 12(1), 1 30. F ederal Reserve Board. (2010). The effect o f gasoline prices on household locations (Finance and Economic Discussion Series, Research Paper). Washington, D.C.: Raven Molloy and Hui Shan. Retrieved from: http://www .federalreserve.gov/pubs/feds/2010/201036/201036pap.pdf Fishman, R. (2006) Variety and choice: another interpretation of the Mount Laurel decisions. Journal of Planning History, 5(2), 162 166.

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117 Florida Department of Community Affairs. (2007) Accessor y dwelling units: report to the Florida legislature. Tallahassee, FL: Thomas G. Pelham. Gellen, M. (1985). Accessory apartments in single family housing. New Jersey: Center for Urban Policy Research Gratton, M. C. (2011). an analysis of secondary suites as a policy instrument in the city of Edmonton http://hdl.handle.net/1993/4891 Grzeskowiak, S., Sirgy, M. J., Dong Jin, L., & Claiborne, C. B. (2006) Housing well being: developing and validating a measure. Social Indicators Research, 79, 503 541. Haas, P., Makarewicz, C. et. al. "Estimating Transportation Costs for Households by the Characteristics of the Neighborhood and Household." Tran sportation Research Record of the Transportation Research Board ( 2008). Homes for Working Families. (2006) views of home affordability (Research Paper). New York, NY: Peter D. Hart Research Associates, Inc. Horn, T Elliott, D., and Johnso n, A. (2013) Accessory Dwelling Unit Survey for Portland, Eugene, and Ashland, Oregon: Final Methodology and Data Report (Survey Report). Portland, OR: Survey Research Lab, Portland State University. Housing California Communications Campaign. (200 8) A winning story for housing policy (Framing Memo). Minneapolis, MN: Action Media. Housing Costs % Income. (2014). Retrieved April 29, 2014, from http://www.apastyle.org/learn/faqs/web page no author.aspx Housing + Transportation Costs % Income. (2014). Retrieved April 29, 2014, from http://www.apastyle.org/learn/faqs/web page no author.aspx Howe, D. A. (1990). The flexible house designing for changing needs. Journal of the American Planning Association, 56(1), 69 77. Infranca, J. (2013). Housing changing households: regulatory challenges for micro units and accessory dwelling units (Legal Studies Research Paper Series, Research Paper 13 35). Boston, MA: Suffolk University Law School. Joint Centers for Housing Studies of Harvard University. (2013). Cambridge, MA: Joint Centers for Housing Studies of Harvard University. Kneebone, E., & Garr, E. (2010). The Suburbanization of Poverty: Trends in Metropolitan America 2000 to 2008. Washington, D.C: Brookings. Kochera, A., Straight, A., & Guterbock, T. (2005). Beyond 50.05: A Report to the Nation On Livable Communities. Washington D.C.: AARP Public Policy Institute. Lang, R. E., Anacker, K. B., & Hornburg, S. (200 8) The new politics of affordable housing. Housing Policy Debate, 19(2), 231 248.

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118 Laurian, L., Day, M., Backhurst, M., Berke, P., Ericksen, N., Crawford, J., Dixon, J., and Chapman, S. (2004) What drives plan implementation? Plans, planning agencie s and developers, Journal of Environmental Planning and Management, 47:4, 555 577. Lipman, B. J. (2006). A Heavy Load: The Combined Housing and Transportation Burdens of Working Families. Washington, DC: Center for Housing Policy. Molinaro, J. & Morris H. (2013). National Community Preference Survey October 2013 [ PowerPoint slides]. Retrieved from National Association of Realtors website: http://www.realtor.org/sites/default/files/reports/2013/2013 community preference analysis slides.pdf National Low Income Housing Coalition. (2012) guide to housing & community development policy. Washington, D.C.: Amy Clark. Nation (Research Brief). Washington, D.C.: Megan Bolton. Retrieved from: http://nlihc .org/article/housing spotlight volume 3 issue 1 Nelson, A. C. (2013). Reshaping Metropolitan America: Development Trends and Opportunities to 2030. Washington, DC: Island Press. Nemiro w A. & Chapple, K. (2012). Yes, but will they let us build? The fea sibility of secondary units in the East Bay (Working Paper 2012 02). Berkeley, CA: Berkeley Institute of Urban and Regional Development. Nordvik, V. (2000) Utilisation of the stock of owner occupied single family houses: an econometric analysis. Urba n Studies, 37(7), 1171 1183. On Livable Communities. Washington D.C.: AARP Public Policy Institute. Krass C. (2013) Factors http://hdl.handle.net/1773/23649 Park, S. H., & Oh, E. H. (2012). Development of a program of financial support on enhancing apartment houses maintenance in Korea Focused on the U.S. and Japanese financial programs for housing maintenance in Korea. Renewable and Sustainable Energy Reviews, 16(2012), 648 659. Personal Interviews. (2013). Population by Age and Gender Results. (2014) Retrieved April 29, 2014, from https://dola.colorado.gov/demog_webapps/pagParameters.jsf Population Projections 2010 to 2040. (2014) Retrieved April 29, 2014, from https://dola.colorado.gov/demog_webapps/dashboard.jsf Retsinas, J. & Retsinas, N. P. (1991) Accessory apartment conversion programs. Journal of Aging & Social Policy, 3(1/2), 73 89. Ruud, M. E., & Nordvi k, V. (2010). From the kitchen floor to the basement sharing arrangements in two centuries. Housing, Theory and Society, 16(4), 192 200. Rudel, T. K. (1984) Household change, accessory apartments, and low income housing in suburbs. Professional Geog rapher, 36(2), 174 181.

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119 Sabatier, P. & Mazmanian, D. (1980) The implementation of public policy: a framework of analysis. Policy Studies Journal, 8(4), 538 560. Salamon, L. M. (2000) The new governance and the tools of public action: an introducti on. Fordham Urban Law Journal, 28(5), 1611 1675. Schafran, A. (2012) The politics of accessory dwelling units in the United States. France: Alex Schafran. Schneider, A. & Sidney, Mara. (2009). what is next for policy design and social construction theory? The Policy Studies Journal, 37(1), 103 119. Stege, E. H. (2004). What next for accessory dwellings? Getting from bylaws to buildings. Retrieved from: http://dspace.mit.edu/handle/1721.1 /50124 U.S. Censu s Bureau: American Community Survey. (2008 2012). American FactFinder : Aspen City, Colorado Retrieved from http://factfinder2.census.gov/faces/tableservices/jsf/pages/productview.xhtml?src=bkmk University of Notre Dame, The Law Scho ol. (2013). and local parochialism (Notre Dame Law School Legal Studies, Research Paper No. 1327). Notre Dame, IN: Margaret F. Brinig and Nicole Stelle Garnett. Urban Land Institute. (2007) Lack of affordable housing near jobs: a problem for employers and employees new survey from ULI looks at impact of commuting [Press Release]. Retrieved from: http://www.prnewswire.com/news releases/lack of affordable housing near jobs a problem for employers and employees ---new survey from uli looks at impact of commuting 57793397.html Wegmann, J., Nemirow, A, & Chapple, K. (2012) Scaling up secondary unit production in the East Bay: impacts and policy implications (Working Paper 2012 05). Berkeley, CA: Berkeley Institute of Urban and Regional Development. Wegmann, J., & Chapple, K. (2012). Understanding the Market for Secondary Units in the East Bay (Working Paper 2012 03). Berkeley, CA: Berkeley Institute of Urban and Regional Development. Wegmann, J. & Nemirow, A. (2011). Secondary Units and Urban Infill: A Literature Review (Working Paper 2011 02). Berkeley, CA: Berkeley Institute of Urban and Regional Development.

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120 APPENDIX A Definitions Accessory Dwelling Units: dwelling units on the same lot as, and subsidiary in design and sometimes si ze to, a primary residence. ADU Configuration: where an ADU is built or converted on the lot, e.g.: within an attic, basement, garage (attached or detached), or attachment to the primary residence, an attached garage, a detached garage, or as a stand alo ne unit. ADU Size: the square footage of the ADU ADU Type: whether the ADU is a studio, one bedroom, two bedrooms, or three (plus) bedrooms Affordable Housing: Housing and Urban Development (HUD) defined measure for determining a afford a housing unit. A housing unit is affordable if a household spends no more than 30% of their income on housing (rent or mortgage) and utility costs. Context: the use of context is a spatial, political, and temporal construct; it refers to the lot or site, and neighborhood in which the ADU is developed, the politics, goals, demographics, and economics of the jurisdiction that regulates ADUs in the community, and the particular period in history Homeowner: In this study, the homeowner refers to the person(s) who construct and rent out the ADU on their property where they are the primary resident. In this vein, they act as the ADU landlord. Non permitted ADU: An ADU that was built without receiving planning approval or one that does not conform to z

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1 21 Owner Occupancy: when regulations require the primary residence homeowner to live in either the primary residence or the ADU; this requirement is sometimes attached to a deed or ot her official filing with the planning department. Relatively Affordable Housing: housing affordable to all including income levels who may not qualify for subsidies or fall within HUD defined low income categories ); it place s an emphasis on total afforda bility vis a vis housing location, transportation accessibility, and amenities include within the rent charged (such as utilities, washer/dryer, etc.), versus strictly square footage valuation or rents