Eli Spevak, owner of Orange Splot, a housing development company and general contractor with a mission to pioneer new models of community-oriented, affordable, green housing in Portland, OR. 

• Interview Questions and conversation topics

• What’s happening now in Portland and in Oregon at large with changes in residential zoning standards?

• Who is going to buy this? What needs to happen next legally, or with financial products to allow for there to be a market for middle housing?

• As we consider middle housing, what are some tiered size policy considerations?

• What are some other emerging trends in zoning or financing?

• Roles that a coalition can play in building a housing movement

• Technical assistance for ADU policy

• What’s your mentality for undertaking potentially financial risk?

• ADU condoization

Full text of interview

Kol: [00:01:48] I'm just gonna quickly introduce who Eli is. But not a really formal introduction. I'll let him do that. But Eli and I have been co-conspirators in a number of different initiatives and [00:02:00] activities and educational programs over the last decade. And so he and I worked together in a symbiotic way on a number of different things and not the least of which is we run AccessoryDwellings.org together, which is a volunteer run website.

And Eli and I kind of started that and have been running it since for a long time. So there's a lot of things we could talk about. But first I'll just, have you just maybe briefly introduce yourself Eli to the group.

Eli: [00:02:27] All right. Well, thank you, Kol and thanks for hosting this series. It's a great idea. I am currently sequestered in the common house for our community keeping as far away from my two little kids as I can, who are trying to homeschool. I started doing affordable housing development in Portland, about 25 years ago, originally in the nonprofit sector with Habitat for Humanity and some community-based groups and came to love the small homes that we were building and the market wasn't building small homes at all.

And so for environmental reasons, and for affordability reasons, I got interested in accessory dwellings, which Portland allowed for a long time. But [00:03:00] weren't getting very many of them built. So I will jump forward to today where I am a developer and a general contractor. I built ADUs I worked with AARP to help launch them other parts of the country city and the state level, and done tours, the website. And I just, I geek out on them. I'd done condominiums where you solve them separately. I've tried to fuss around with them any way I can and just trying to get the new, more broadly available then they are today.

Kol: [00:03:24] Great. Thanks, Eli. All right. So we're just going to jump right into the heavy stuff.

Cause that's what I like to do here. So Eli, please,  udpate us on what's happening now in Portland and in Oregon at large, with changes to residential zoning standards.

Eli: [00:03:38] Well, that's a short question. So I started one of the things I had, I also, where as I serve on the planning and sustainability commission of Portland that I chair and I led a group for a while before shifting roles to try and expand housing options in the neighborhoods of Portland.

So Portland is going back over seven years now, we've been trying to update our residential zones so that instead of seeing these huge single family homes, 2,500 square [00:04:00] foot, or larger get built on single family, lots, there'll be other options of what we get built. And the residential infill project is an outcome of that.

And also, pressure from neighbors to build smaller than because they're tired of the large homes getting built. This has been a very politically challenging process. And that means it's taken a long time. But the, the nugget of it is that Portland is now going to not let you build as large a structure on a lot, but there's going to be more flexibility about what happens inside that structure. And that would mean go up to two, three or four units on a lot, even six units. If there's some affordability component to them, it's gone through the planning commission. We monkeyed around with it quite a bit to staff's chagrin.

And now it's at city council. And it was about to be voted on literally. It was on the agenda for city council when city council shut down for COVID-19. So, for a project has gone on this long. It's still not done yet. They're hoping that it gets done by the end of this fiscal year or the end of June.

But in while this has been going through the State of Oregon passed a law, which requires every city in the state over a certain size to allow [00:05:00] duplexes on every lot and a single-family zone. And for largest cities, two three or four units or a cottage cluster allowed on any lot, somewhere in areas of the city.

And that's a groundbreaking state law. I mean, frankly, Oregon is kind of a leader in state land use planning to have a pretty large role of the state in what can be built in, in comprehensive planning and what can be done in parts of the city. But this really, in some ways makes you think again, what single family zoning really means.

It really says that if you're going to have large neighborhoods where historically you could just go to one house on a lot. That's just not going to be true anymore. You can still regulate the scale of the structures to make sure things are compatible, of the right sort of size and height and setbacks.

Those all can be regulated locally. But you're not going to be able to let single family zoning become an exclusive way of keeping smaller households or lower income households out of a neighborhood. And I think that's a great leadership role the state's done. And because of that, actually residential infill project, called RIP, a terrible name for it, in Portland now [00:06:00] has a "RIP 2". Because it's the RIP that thing going through the political process thus far only adjusted the zoning in the closest neighbors of the city that are zoned for relatively high density, residential. You have other parts of the city that was zoned for one house for 10,000 square foot, lot or one house for 20,000 square foot, lot, which under new state law, we're going to have to be updated also to allow additional housing choices.

And that process is just getting queued up starting this summer.

Kol: [00:06:24] All right. So, in summary, for those who want the summary version, Portland is going to be allowing for up to four units on every residential lot. Meanwhile, Oregon at large is also going to be doing the same, at least in all large cities and Metro areas cities.

So that's awesome. That's great. I love it.  But the big question for me is Eli. Like this is incredibly progressive. It's never happened anywhere as far as I know in United States and or maybe it has kind of historically [00:07:00] happened in cities, but in recent years, recent decades, it has not. But the question to me is, is there actually a market for this type of housing, so sure. We're going to allow it. That's great. But is anybody going to build these things? Who's going to buy this stuff? What needs to happen legally or with financial products for there to actually be a market for middle housing?

Eli: [00:07:24] Well, it's a good question. I think that it will get used. I don't think it's going to be a quick change in what gets built in neighborhoods.

We can go back to Portland and other cities before there was zoning. All kinds of residential areas of cities were up for grabs. You could build an apartment building, you'd go up single family house, a fourplex, any of those were options. And mostly people built single family homes. And I expect that even under these rules, mostly people build single family homes, but back in the day before zoning people also built duplexes, triplexes, fourplexes, courtyard plexes, and they mix them in and I think you'll see the same thing today. So, it means that in our [00:08:00] neighborhoods what are the housing types we're going to see? I'm guessing that you'll see people doing cute little cottage clusters.

People like, especially on the West coast, they like single family detached structures. They don't like sharing walls, at least not yet. I grew up in Washington, DC, so I'm used to it in so many other expatriates, but historic Oregonians, like their own four walls. So, you'll see that you'll see townhomes get built.

If you've got one close in lot in Portland, you'll probably see, instead of being one house, maybe you'll see three or four narrow townhomes sold, likely as condominiums. And that'll require a little bit of a climbing of a learning curve for the home builders. But they're already doing it, frankly.

And I think that that will, that will continue. And I think the affordable housing non-profits many of them own scattered sites, single family homes, all over the city. And they've been looking to do something a little bit more with their property, and this will give them an extra bonus density to be able to build smaller, affordable homes in some close, in really fancy neighborhoods.

Kol: [00:08:54] Although I don't think you mentioned this as what you thought a realistic or a common typology would [00:09:00] be, but let's talk about triplexes and fourplexes.

Eli: [00:09:02] I think the way that Portland's rolling out the residential infill project, it really does a great job for corner triplexes or fourplexes, especially because you have lots of street frontage. You can have a 50 by a 100-foot lot. You can have four townhomes all facing a hundred-foot side of it with narrow backyards. It's a great housing type. And we already see some corner duplexes both this way, but under current rules, but this will expand the options. And I think it's, I think it's incredible. that Portland has come this long without having much townhouse development. It's not just good for smaller homes, but attached to homes of energy savings. And frankly, if you're trying to buy a house in Portland you're stuck. You want to buy a new house let's say, you're already priced out of anywhere within biking, distance of downtown by and large.

So, people are going further and further afield. This will allow some of those folks to be able to land closer into the neighborhoods that they really want to be in. And they're sharing a lot with a couple other people, but people will definitely make that compromise. So, I think that there is a market for some attached townhomes for sale in Portland. And also, people will take their existing [00:10:00] houses, maybe then, you know, an 80-year-old house. And they will not only do a detached ADU in the back, but they'll do a basement in ADU as well. And they'll get a little, a supplemental rental income and provide some rental options in the close in neighborhoods too.

Kol: [00:10:14] I think actually one of the sleeper elements of the code that I do see happening in a big way is going to be the provision that it will allow for two ADUs within a single detached accessory structure. I think from a homeowner's point of view that's going to be a really kind of profitable good housing typology to add that doesn't require that they tear down the primary house. And it'll probably add, you know, 50% to 75%, more than a single detached accessory dwelling cost, but you'd be able to effectively double the rent.

Eli: [00:10:47] Yeah, no, I think that having a shared structured wall decreases the skin to volume of a house which decreases the operating costs.

And I think that rentals--- If you're trying to rent out a triplex absentee, [00:11:00] it's kind of hard to manage because you have to deal with all the shared areas and yards, but for owner-occupied rentals, we rent out two units. It works really nicely because the person that lives on site and take care of the grounds without hiring a company to do it, it works pretty well.

Kol: [00:11:14] So you alluded to one way in which this type of housing could be purchased, which is condoized units. And I'm wondering if you could talk a little bit about that more. So, condoization is something that you have experience with for ADUs in the past. And I want you to kind of, if you could articulate what some of the drawbacks of condoization are and what can be done about it in terms of legislation.

Eli: [00:11:40] Yeah. Well, maybe I should describe for a second how condos work for this. Condoization is really common in like a 40 unit building where you have, instead of having one person own the whole building and rent out the units, you divided it up into little volumes of air. So each person owns their own volume of air and they can get separate financing [00:12:00] for that volume of air through a mortgage secured by that condo unit.

That same model works in the single-family setting where you have a single-family house, and then maybe you build a detached ADU and maybe on the lot next to it. You have another house with a detached ADU and you can submit it to the condominium regime-- that's a jargon way of saying, but basically you divided it up.

So, the person who wants the house, owns that volume for the house. So, someone owns that ADU owns that volume. Someone owns the other ADU that volume and the other house, and then the common areas that the ground in between them was all on collectively or is divided into private yard areas. So that's what condominium means.

It makes no difference. The actual built structure is identical, whether it's owned as a house with an ADP behind it rented out, or it's set up as condominium. But the condominium provides the flexibility to finance it differently. It means that if you have a house and an ADU and a two-unit condo, the person who was the ADU can get their own independent financing.

There is mortgage not intertwined at all with the mortgage of the person who has the house. And that means that the [00:13:00] ADU behind it could be sold for a lot less money than any other house in the neighborhood. Cause it's probably a lot smaller than the other homes. I did one project where I had house and ADU. The ADU sold for a $120,000 and the house sold for about $360,000. This is 10 years ago. Now they resell for twice that, but in a neighborhood with $600,000 homes that ADU in the back is a third, the cost of a single-family home in that neighborhood. So, it provides a homeownership way of creating relative affordability and but it also gets some people antsy because what happens is someone buys a lot, scrapes the house off of it and builds four townhomes or three townhomes and sells them all as condos? People are going to be concerned about the house that got taken out to make that happen. And maybe condominium ownership increases the value too much.

My sense is that there are some places where that could be a concern. And I think that Vancouver, BC is a, is a city where they've already clamped down on condominium conversions because of that in the Bay area that's happened already. You can't just do a condominium association by, right. [00:14:00] There's a lottery process to make sure there's some rental housing preserved in the city. Most places aren't like that. So, I'm, I'm kind of a supportive of cities allowing. Condominium ownership in ADUs is not very common. I did it the first time in Portland, 10 years ago.

It's happened a few times since then. And actually, recently I saw 23 of them were being sold right now. And we're in the past six months. I know in Austin; Texas will be a market for that. Or a developer's been building houses and ADUs and selling them separately is still a pretty tiny piece of the market.

And I think it provides some flexibility to provide some first-time home buyer opportunities. I know that Habitat affiliates have looked at this for example, as one way to get more homes up than they otherwise would, but there's challenges. And this is where the home builders they're really squeamish about condominiums because when you do a condominium, you take on a 10-year liability period.

Whereas this is true in Oregon at least, it's not true everywhere this way. We could get sued by the homeowner association for construction defect. And if you build the exactly the same product, but sell it as a single-family home with the ADU rented in the back, then you've got one [00:15:00] year of warranty period.

So that liability exposure is something that really does get builders, antsy. Their subcontractors get worried about it because no one wants to get a phone call nine years after building a product that they've basically forgotten about that based on they have to write a big check to deal with an issue that arose later on.

So, there's some initiative in, in Oregon and in California to try and change those condo statutes. Because if you're ever going to see small condos get built in any scale there's going to need to make it a little bit closer to the way single family homes handled for liability reasons.

 

Kol: [00:15:32] And as a side note, I believe people in the chat box can correct me if I'm wrong, but in California, that condoizations not going to be allowed for ADUs at all, whereas it is allowed in Oregon.

Eli: [00:15:45] Yeah. I think that, I wish that California had given that latitude to the local jurisdiction rather than doing a state. And I think the state mandate does have an exception for affordable housing and some limited situations. But I kind of wished they'd left that as a local option.

Kol: [00:15:58] Yeah. And I’ve [00:16:00] expressed to you in the past, I have mixed feelings about condoization with ADUs, but in general, I think all the points that you've made are, are correct. And in the big picture, it's probably a good thing in terms of providing more affordable housing stock.

Eli: [00:16:13] And for anyone out there worried about condos happening, it only happens in very expensive housing markets. So, if you're in a housing market where you're not seeing condos at all. It's not going to happen with ADUs. It's something that only in expensive neighborhoods.

Kol: [00:16:24] So as we start to consider middle housing, what are some middle housing, meaning triplexes, fourplexes, primarily what are some tiered sizing policy considerations? So Just to frame this context, this whole middle housing phenomena is kind of starting now and we're seeing, you know, we're seeing this happen now in Portland and Oregon. And there's a lot of conversations about this in California. Nothing's really kind of passed into law there. And similar conversations are occurring in Washington and Vancouver, BC. And we'll be talking about those more this week in [00:17:00] Portland the city that's been working on this kind of initiative for quite a while now, few years, Portland has decided that the tradeoff is that as you build more additional units, your collective habitable square footage is ratcheted down. And I'll maybe let you clarify that a little bit Eli, so people understand what Portland has done, but also, I wanted to see whether it should apply in other jurisdictions that are considering middle housing.

Eli: [00:17:27] Well, Portland, this is part of the big deal Portland made. And the strategy Portland took is that if you have a 5,000 square foot, lot 50 by a 100, which is pretty typical here, then you can build a house that is 2,500 square feet. That's like a floor area, ratio of 0.5. That's geeking out, but that's basically regulated how much floor area you can have in that house.

If you go to a duplex or house, plus an ADU, you can get 3000 square feet to play with. So maybe it's two 1500 square foot units and a duplex or a house plus an ADU. If you go to three units, then [00:18:00] that pops up the threshold once again to 3,500 square feet. If you go to four units, you're still at 3,500 square feet, because at some point we decided you just can't go too big in the city on the, on a 5,000 square foot loft. And the exception is if you do affordable housing, then you get a density bonus above 3,500 square feet. So that's the way we're playing it out here. And the reason is because from a policy perspective, we want more people housed in these great neighborhoods and we wanted to incentivize putting more than one house on the lot.

If we just had the same size cap regardless of home size, then you probably would end up seeing just single-family homes, massing out the footprint. We wanted to give some incentive for someone to go build an ADU or duplex or triplex. In terms of the market, I think that four is going to be a sweet spot because financing from Fannie Mae, Freddie Mac, FHA, really is uniquely wonderful when you go one, two, three or four units, each one of those is considered a house. So, you've got this development model that you see probably more often on the East coast than out here where someone builds up a threeplex or a fourplex and moves into it. [00:19:00] Rents out the other units till it's stabilized. Then they go do it again, you know, to stay there for two years. And, and it works well for owner-occupied financing, great terms. Once you get the five units or more there's financing for apartments, but 5-20 units is kind of a weak spot. So, I think you'll see the existing financing works pretty well for fourplexes.

And I think that'll be a natural housing type. And if the city implements the policy well, they'll make sure that that fourplex fits in, they'll make sure that it's not, not gargantuan compared to every other house on the street. And I think Portland's done a pretty good job of that.

Kol: [00:19:31] Do you think other cities should consider a tiered size strategy when considering middle housing?

Eli: [00:19:40] I think that's ideal. The pushback that the cities will get is that plan reviewers aren't used to looking at floor area ratio for single family zones. So even though I think that's the best way to do it, that that relies on a pretty sophisticated building review department in your city and if you don't have that, then the other approach is just to say, well, whatever size you can build a [00:20:00] single family house, you can build the same. You can build two, three or four units in the same envelope, meaning the height, the setbacks, the yard setback and not try and measure the square footage.

But I think the ideal thing is to measure the square footage of the home, both for incentivizing small plexes and also down the road, tiering system development charges or impact fees based on how big the house is. So, there's some other reasons to measure house size.

 

Kol: [00:20:25] What other emerging trends in zoning or financing are intriguing you these days?

 

Eli: [00:20:31] Good question. You know, I'm excited seeing all the jurisdictions experimenting with loan products for ADUs. And I’m sure you're gonna talk about that with other folks who've been tracking it as well. But especially community nonprofits in CDFIs, which are community development, financial institutions, or like non-profit lenders are really getting creative to try and make the financing more available to owner builders.

 Let's see, zoning trends, you know, what's interesting to me is seeing the we started off Kol, both of us really operating at the city level of Portland just looking at our zoning [00:21:00] reforms and then Metro our regional government with 18 jurisdictions or something like that. They got interested and through some advocacy we did, we gave technical assistance, to all these other jurisdictions. And suddenly you start seeing ADU codes pop up in other parts of the region. And now this whole State of Oregon, it's not statewide and state mandates are coming out, not just Oregon, but Washington and California, Vermont already had one. There's a few other States that are doing at the state level. And so, I'm seeing more action right now with a regional level. So, I've been out to Chicago, that region does a lot of activity there, the Denver region we're doing some work right now in Des Moines. We were in Nebraska last year. This is some of this with AARP, which has taken a big interest because it's perfect housing for their members.

And the Massachusetts around Boston, there's a cluster there. Magic CC. These regional, a lot of regions have planning associations. Their whole job is to help the local municipalities update their codes with smart best practices. And increasingly they're getting interested in expanding housing options to neighborhoods.

And so, you're seeing a lot of technical assistance percolate out [00:22:00] all over the country so that's a neat trend for me to see is how a zoning reform that pops up in a few little places in the country can start spreading all over.

Kol: [00:22:08] Indeed. So, since you mentioned the AARP work, let's talk about that for a second. So, tell us about the AARP technical assistance team and how people potentially on this call who are interested in bringing technical assistance from you or from me, or from a colleague Elizabeth can potentially apply for that subsidize technical assistance.

Eli: [00:22:29] Yeah. So, AARP is a, it's a massive organization. Many of the parts don't speak to each other that well. But within it, there's a group called the livable communities initiative led by Danielle Arigoni and they are really entrepreneurial and they've got, I think over 500 local chapters at this point, each focus on making their community more livable for people who were getting to be older in life.

And they really taken on ADUs with gusto. I mean, they worked with me to write [00:23:00] the ABCs of ADU, which is a free flyer. Anyone can get that for free. Just go to the AARP website. It's 15 pages, it's short readable and one page of it has a code guide in it, basically. They've also put out some other publications to support this.

And it's about to be in a national bulletin which of the big publication they do. And the other thing they had done is provide free technical assistance to communities around the country who apply to get help with things, to made their community more livable. So Better Block has worked on this Locus, Opticos, some of the national consultants that worked with this, but also one of the groups is Orange Splot, my company teaming up with Kol and Elizabeth. And so, we've provided assistance in Vermont, Nebraska, Chicago. We're working with Florida this year and cities through the AARP chapter can apply to the national group happens once a year and they can get an 8- or 24-hour assistance package, which means getting someone into a site visit or remote assistance to help them get over whatever hump they have to try and make this housing option more available.

And it's fun for us. We get to see what's happening around the country and we can share our [00:24:00] experience and help launch ADUs in places where we don't live. So, it's a great program and you can go to your local state office. They'll know about it.

Kol: [00:24:08] Thanks. So, you also touched on something that you and I have been heavily involved with for almost a decade now, which was the space efficient housing work group initially, which was hosted by Oregon DEQ, and then later that transitioned to something called the Build Small Coalition, the BSC for short, and that's hosted by Metro, which is the regional governmental body in Oregon that works with the 28 jurisdictions around the Portland Metro area. So, can you just kind of talk about this coalition for the benefit of attendees on this webinar, because I have, I now kind of classify a coalition of that sort as a best practice for jurisdictions who are trying to do work on increasing housing supply specifically with ADUs.

Can you just talk about the, the role that that group has played over the decade and what your thoughts are about that?

[00:25:00] Eli: [00:24:59] Yeah, I think you're absolutely right. It's the best practice. And it takes a hosting capacity. It started off really, I in my living room, tiny house society, informal working group out of green building folks who were frustrated by the LEED McMansions being built.

And we knew that is better environmentally built, small. But importantly, our Department of Environmental Quality picked up the facilitation, Jordan Palmeri and stewarded it for, I don't know, over five years, probably longer than longer than that. And it was really an informal collective of volunteers, who cared a lot about changing housing practices.

We're pretty connected designers, architects, planners we're involved, entrepreneurs. And so many of the changes are local to be made. So, either changing city level zoning rules or state level energy rules. And some things, not regulatory at all, like creating events, like it Built Small Live Large Summit that we've been throwing every couple of years came out of that group.

Also, guidelines for heating system selection for your ADUs, lots of little, just nuts and bolts thing, financing options, that are all quite local. And I can see this as [00:26:00] having a role in a lot of different parts of the country. Chicago has got a great group of folks who were already really doing this kind of work informally.

The convening organization can shift. In our case, DEQ started now our Metro regional government convenes it. In other jurisdictions, it might be something totally different. It could be a, a ULI chapter or a CNU chapter, or it could be a local government affordable housing working group. There's lots of ways it can be convened, but there's volunteers we find, I know, I'm sure you find this too Kol, everywhere you go. There's early adopters. There's people who are enthusiastic, who are willing to put in, you know, they figured out how to build an ADU on their property, or they're trying to do the homework and they're willing to volunteer some time to help make it easier for the next person. And those are the folks who you want to tap both to help plan and also to show up and testify when you do need to make the changes to the code to make it work better.

Kol: [00:26:44] Awesome. So, I'm going to transition to one final question for you before we move into kind of the questions from the audience. So, I think you are particularly prone towards investing or putting your money where your mouth is on projects that are [00:27:00] risky by conventional standards, meaning projects that aren't proven models.

And I, you know, it's very inspirational for a lot of people who are trying to do innovative housing developments, whether it's cottage clusters, or tiny house on wheels or other stuff. So, what's your mentality about undertaking these potentially financially risky property developments that you do?

Eli: [00:27:22] Well, I am a risk taker, I guess, I didn't expect I would be. I think it probably helps that I worked in the nonprofit sector for over 10 years first. So, I got used to a regular paycheck that wasn't very large. So now that's sort of my benchmark. So, although I did make a fine living as a developer, other developers with some of our skillsets could make a lot more than I do.

So, I don't have, I'm not I guess I have enough. And, and I'm okay going that way. Cause I like to do stuff I care about. And I found that as a developer, you really can you have to have some appetite for risk, but you also have to realize that if you just make not quite as much as somebody else on the same property, you can have much broader latitude to do something that expresses your values.

And [00:28:00] so I love doing co-housing communities, cottage, clusters, I like to experiment. And, and if I just knocked down my profit expectations, I can do that. And so, I think a lot of people would like to do that as well. It takes learning the skillset and I've got plenty of hard knocks this year from that.

I won't try and do that on this call. But I I'm a big supporter of getting small developers to try it out, start small. Don't be as insane as the way I do it, where every project is a different model. I somewhat like a developer with ADD, if I do it once and it works well and I'm happy for others to copy it, but I might not never do it again.

That's not really a smart business model. And then also being involved, at least it gives them a little more time to do the policy side. Cause I'm trying to figure out what kind of impact that you have. And part of it is doing nice projects that people say, Oh yeah, I'd like to see one of those in my neighborhood.

And the other part is changing the rules for everybody. And that's important too. So, I'm glad people are interested in changing the rules. Put your, put your time in for that too, because as much as I've done development, I built like 75 homes or something like that. That's a, no, some builders build that many in one year.

A lot of the impact we can have a change in the rules that everyone works by.

[00:29:00] Kol: [00:29:01] Good message. And so, what people should take away from that is if you don't care about making money, just do, what do what Eli does, it’s awesome. Now, but seriously.

 

You have to be willing to risk a lot of money,

Yeah exactly. Yeah. Not only do you get to spend a lot of money and potentially not make a lot. But it's also really risky, so what's there to lose?

Kelcy King: [00:29:51] What are your thoughts regarding the use of federal funds, such as the community development block grants to help homeowners finance construction of an ADU?

[00:30:00] Eli: [00:30:00] Okay, well, I'll try not to delve back to my affordable housing days too much, but there are federal programs. CDBG is community development block grant, and they're also home funds that are available throughout the country by local jurisdictions to support affordable housing goals in their communities. And those affordable housing money tends to go either towards multifamily projects, like 40 plus units, cash rate and stuff like that.

That's not the kind of products that are going to work for these infill types. However, most communities have some project down payment assistance or community land trusts, or other ways to subsidize first time home buyers to get into a house that they can afford. And those subsidy programs, including home and CDBG, and there's some others as well who work really well with some of these infill housing models.

So, they could let someone who maybe be couldn't afford to buy. Maybe you're building a four-plex on a lot. That would have been a single-family house. Each one of those homes, maybe you need $50,000 to cover the gap from the market value is what a low-income school teacher say could afford to purchase that $50,000 [00:31:00] might be able to come from home funds or CDBG to make that home affordable to someone, not just for the first buyer, but if it's with a land trust in perpetuity,

Kelcy: [00:31:08] How do you see this being possible in the federal funds being used in exchange to homeowners in exchange for affordable rent? 

Eli: [00:31:16] There are definitely programs that help reduce people's rent. Let's see, boy, this, the city, this country so varied on this. If, if your single-family scale projects, whether it's one, two or three units, don't oftentimes work for long-term rental properties that the management costs can be high compared to having a property manager operate it. So except for pretty small communities usually rental housing funds go towards larger multi-family developments. There can be niche situations where you have single family rentals with public subsidy. But they're kind of going out it's less common than it was in the past.

So more often it's single-family home ownership, single family affordability is going to be home ownership style rather than the rental style.

Kelcy: [00:31:56] And then two into condoization. Isha asked, [00:32:00] "What do you need to think about for a condo conversion? Is that something that you initiate before the building process after it's built? When can that happen?"

Eli: [00:32:08] You can do it at any time. Really. And some people I know in Portland had built a house and have an ADU as a rental associated with the house. And they know that when they eventually want to sell the property, they're not sure whether they'll sell it as just the house or the Navy as a rental or the condominiumize it or as itself, sell it separately.

That's a decision you can do down the road. If some people would go into a project knowing specifically that they are going to sell them separately. And then you can do the condominium process in parallel with the construction process, because while you're building the buildings, once it's framed up and you can actually see it there and survey it, then you do a survey.

You literally make a map of the property and define a three-dimensional volume of air.  This can be the condominium unit, then there's some, there's some work involved there. You have to work with an attorney, a surveyor --in Portland it used to be 20,000 bucks was sort of like the rough number to go through that process so that you could sell them separately.

So, it takes getting some local experts who've done it, [00:33:00] but it really can happen while you're physically building the structure so that when it's completed, you're all ready to sell them separately.

Kelcy: [00:33:08] Thank you. And can you speak a little bit to the shared space? Like the yard and the,

Eli: [00:33:16] Yeah. And for those interested in condos, I did a post a little while ago on AccessoryDwellings.org, which goes into pretty good detail on how to, how to think about condos as an ownership style.

But it's a really flexible style of ownership. In terms of common areas, you can say you've got a lot with two different structures on it. You can make it so that all the grass, all the landscaped area between the homes is all common areas, or you can make it so that you've got a fence between the two homes. And on one side of the fence, all the land goes with one home. The other side of the fence on land goes with the other home. So, there's no common space really at all, except for that shared fence. Or anything in between. I think the more common idea is to have a small, shared small private yard --maybe some common area for a Grove of trees or, or some common shared space, but it's really mutable.

It can [00:34:00] be designed as, as someone wants, whatever makes sense.  One really quick item related to associations. That Kol didn't pin me on, but homeowner associations are common in new development areas and a lot of times they have rules saying you can't do accessory dwelling units in the HOA.

I'm not a big issue in the city, but in suburban areas, almost every home is within a HOA. And I should say Oregon and California have both said HOAs can’t do that, going forward-- is one way to allow these middle housing types to grow. So that wasn't a question I asked, but I wanted to toss it in there.

Kol: [00:34:31]. Eli, you had talked about the construction defect legislation.  Is there any updates you could share that you know about that particular piece of legislation?

Eli: [00:34:41] I think that it was proposed for this past session and when our legislature got shut down, because one party left the building that got dropped on the floor.

So, I don't know whether it was likely to pass anyway, but there's for several legislative sessions, there've been attempts to try and decrease the liability period from 10 years down to something shorter. [00:35:00] And it hasn't succeeded yet.

 Kelcy: [00:35:01] This question is from Christopher Seymour with condoization, how does it relate to the deed ownership? So, if one owner wants to sell, does the entire property convey at the same address or do you sale as two separate buildings?

Eli: [00:35:14] It's all separately. So, the separate deed for each property. Yep.  I mean, there's an association, you have to maintain with some common expenses, but people can sell independently from one another.  At the initiation of the condominium there is a time where you have to sell one home and then pay down whatever mortgage is on the property and with a partial lease and then sell the other home and pay off the rest of the mortgage.

So there is a little bit of a dance to do at the initial sale. So, I'm not going to get into that though on a little podcast.

 Kelcy: [00:35:38] This question is from Brooks Gibbs and he is in Utah and ADUs are becoming a new building alternative there. So, he wants to know what suggestions do you have to build awareness in communities at the homeowner level?

 

Eli: [00:35:50] Well, I'll start with this, but Kol will definitely piggyback on.  A lot of this is not regulation. It's not a regulatory thing we can do.  I met Kol when I led a tiny house, [00:36:00] a tour of tiny homes in ADUs, and he jumped on it with a hundred people on their bicycles, just seeing them in Portland.

They're discreet by nature. So, people, if they don't see them, they don't know they exist and don't get inspired to make their own. So, doing a tour is great, whether they're legal or not, who cares, we just get people into them, gets people's gears turning. Also getting media stories about them. Not media stories about NIMBYs versus YIMBYs. Media stories about this is why I built the ADU and it works for my family and my mother-in-law can stay there and telling the story behind them is critical.

That's one of the reasons we started this website, AccessoryDwellings.org is to share the stories behind real built ADUs. And then part of it is communicating with real estate agents. They're the ones at the point of sale for homes, as people are trying to dream about what they might do with their property once they own it.

So, they're the ones who always need continuing education credits so they can get that done at the same time that they're learning about ADUs, and providing their clients with information about, "Hey, if you get this house in lot, you could actually build a granny flat behind your house. Pretty cool."

And if you're selling a house, [00:37:00] sell it as bragging rights. So, you could actually a separate unit if you want to. And then lastly, something I'll just hand it over to Kol is that having a local expert who makes a little cottage industry about coaching people through the process is, is incredibly important. Because ADU's are built as Kol pointed out many times by amateurs, but probably the only housing type in the United States built mostly by amateurs, who need people to help them along the way there's enthusiasm. But they need some coaching and being able to have short one-on-one sessions or weekend trainings gets people high up enough the learning curve so that they can take the rest of the project themselves.

Get that architect involved, get the contractor involved and actually make it happen. You want to piggyback on that, Kol? 

Kol: [00:37:38] Yeah. You forgot the biggest, most important tip of all you, I would just buy this book.    So, I'd say of all the things you just rattled off Eli, the one I think that is most applicable and most broadly useful, and I see the need for this everywhere really is what you said regarding local media stories that are just first-person narratives in [00:38:00] local outlets, whether it's radio, TV, or newspaper that cover the life-changing story of somebody having built near an ADU and how, why they did it. And those stories are really powerful. And you can read those kinds of stories on AccessoryDwellings.org. But if you want to get that message infiltrated into the broader market, that is the way that you start to turn ADUs into something that's threatening into something that, "Oh my God, I want one of those" because I also have a mom that's aging, or I also want to have retirement income that doesn't come solely from my job that I may or may not have right now. So, I think, I think those first-person narratives are really important and they also help kind of dispel that the myth that people have around ADUs being some kind of boogeyman developer housing type. That's going to increase parking problems in my neighborhood and cause the downfall of my pristine single family, residential zone setting.  I'm not talking [00:39:00] New York times and talking like your local Tribune newspaper.

Get a reporter on the line and say, "Hey, I know somebody just built an ADU. Would you be interested in covering a story about it? They just build it from their parents." And if you can somehow tie it into a bigger story, that's great. From a reporter's point of view, but that, that kind of normalization  is a really powerful mechanism to first-person help raise awareness and, and help kind of create a cool factor or a factor that would help inspire other people to build them. If they're not gonna actually get access to seeing an ADU itself, because there isn't enough ADUs to see, to merit an ADU tour.

Eli: [00:39:37] Yeah. And don't forget about TV. I'm not, I don't even have a TV, but whenever I've been on TV talking about ADU, I find out everyone I know who's seen that show.

You've already got the advantage. HGTV, tiny homes. People are already saturated with tiny home enthusiasm on TV. But if they see it happening in their local community, that'll be important. And the last thing I'll say on that is get the history. I mean, almost every city in this country has some [00:40:00] history of ADU.

They just call it by different names. So, coach housing in Chicago, casitas in some Southern cities bungalows, granny flats, you know, there's different names for them everywhere. And if you've got a history in your community of these already been there, just say, you're re legalizing, you know, you're bringing back something that's been there. you know, going back 80 years. That seems to get traction too.

Kol: [00:40:21] Kelsey let's take one more question. And then we'll wrap up today's show

Kelcy: [00:40:28] What innovations are you seeing in the market to lower costs to build ADUs as affordable housing solutions?

Eli: [00:40:35] Well, there's some great initiatives going on around the country to try and bring down the cost of ADUs, because one of the challenges is that right now, they're almost always built with cash or home equity lines of credit, which means you have to be pretty affluent to be able to build one.

And there's a lot of groups trying to bring that cost down.  There's a few companies that are doing modular versions of ADUs.  Wolf Industries is one, Dweller is another one. And, frankly, none of them have done that many of them. I think we're at a dozen or [00:41:00] less, I think for any group. So, people are working hard to get modular housing into the ADU world and it hasn't really launched too much yet probably because mostly the people who can afford to do them.

If you can write a check for a hundred thousand bucks for somebody to be in your backyard, you might have some pretty strong opinions about what that's going to look like. And people start tiptoeing towards more and more customization. Once they realize what it's going to cost. I think though that there's great opportunities there.

And especially as affordable housing nonprofits get into building ADUs, they'll start coming up some very simple designs. The person, the contractor in Portland has been more ADUs than anybody else build some pretty simple, absolutely decent good-looking designs of ADUs. And I think that you'll see that’s the future I see, I think they still might be stick-built, but they won't be like the, the fancy violins of ADUs that, that    show up on the tours.