Letter to SLC Council encouraging removal of ADU owner occupancy requirements

16 February, 2023

Salt Lake City Council
Councilmember Petro, District 1
Councilmember Puy, District 2
Councilmember Wharton, District 3
Councilmember Valdemoros, District 4
Councilmember Mano, District 5
Councilmember Dugan, District 6
Councilmember Fowler, District 7

Salt Lake City Councilmembers:  

SLC Neighbors for More Neighbors is a network of Salt Lake City residents working for affordable housing for all income levels through policies that are pro-housing and pro-tenant. 

We’re writing to support the proposed Accessory Dwelling Unit (ADU) Code Changes, with particular support for repealing the owner occupancy requirement that the city currently places on ADUs. 

As a critical part of the city’s stated goals of establishing neighborhood scale infill housing and moderate income housing as called for by most master plans in the city, ADUs are an important part of Salt Lake City’s housing future. Code changes permitting increased construction of ADUs therefore number among the many important policies that must be passed for Salt Lake City to meet its urgent housing needs, and eliminating owner-occupancy requirements on ADU construction is especially key to ensuring that ADU development is pursued both equitably and on the scale necessary to have a significant impact on the city’s housing supply.

Owner occupancy requirements are inequitable and run counter to the city’s stated housing goals.

Our primary concern with owner-occupancy requirements is that they are inequitable. According to a recent survey by the Terner Center for Housing Innovation, ADU rents average 58% below market value. Their cost-effective nature enables them to provide affordable options to residents who need housing most. To ignore this reality is to maintain a housing system that is biased toward homeowners and against households that rent. In the midst of a housing affordability crisis driven by a lack of housing supply, the city council should eliminate barriers that prevent upward mobility and equitable access to the opportunities that living in Salt Lake City provides.

As a recent Brookings Institution report on owner occupancy rules explains, the policy has regressive effects on equity city-wide by constraining the affordable housing supply that upward mobility requires. These requirements also act as a barrier to lower income, racially diverse, and non property-owning communities from living in neighborhoods where development is determined by the presence of home owning interest groups.

The report notes that the purpose of zoning, in principle, should be to regulate land use; not users. A zoning code that regulates the conditions under which people from certain communities can live on certain residential lots is a zoning code undergirded by the bias that households that rent possess qualities or characteristics that are undesirable. This is discriminatory and inappropriate to be enshrined in Salt Lake City’s code. 

Owner occupancy requirements reduce the production of ADUs.

It is also worth noting that the commonly raised concern that ADU construction uninhibited by an owner-occupancy requirement would invite investors to develop lots with ADUs en masse is a concern unsubstantiated by available evidence from more developed markets for ADUs. A recent evaluation by researchers at the University of California, Berkeley, of ADU permits issued in California, where owner-occupancy requirements have been repealed, found that only eight percent of homes with ADUs were owned by corporate entities despite 17% of homes in the state being owned by corporate entities or organizations. 

Individual homeowners are overwhelmingly more likely to construct ADUs due to the unique opportunities they present. AARP has found that in cities in the pacific northwest that have repealed owner-occupancy rules, sixty percent of ADUs were used as long-term housing, and only twelve percent as short-term rentals. 

Available evidence shows that owner-occupancy requirements inhibit ADU development, while ADU permitting has surged in instances where such requirements were repealed: research completed by the Oregon Department of Environmental Quality found that ADU permit applications tripled in one year from 25 in 2009 to 75 in 2010, following the ending of the homeowner-occupancy requirement, while a master's thesis on ADU development in Colorado has found that various interviewed parties complained of "off-street parking requirements, homeowner occupancy mandates, fees, homeowner (dis)interest, and the appraisal and finance process”, and that “Real estate professionals (REPs) also found homeowner occupancy requirements to be prohibitive to ADU development because of it effectively prohibiting the involvement of the development community in ADU development, which REPs strongly believed was integral to ADU creation, given their ability to develop ADUs in greater numbers and at lower cost than an individual homeowner... REPs, ADU advocates, and some planners interviewed agreed on homeowner occupancy requirements as also inhibiting ADU development. REPs and ADU advocates believed the greater development of ADUs was linked to the inclusion of investors and developers in the ADU market."

Removing the owner-occupancy requirement is not likely to result in more short-term rentals and more investors buying properties.

There is no evidence that ADUs are more likely to be used for short-term rentals. Conflating the owner occupancy requirement and short-term rentals is detrimental to the council’s stated goal of increasing ADU construction. 

ADUs are seldom used as short-term rentals to begin with; in a survey of 380 ADU owners who rent their ADU in California (where there is no prohibition on short-term rentals), only 8% said that they rent their ADU on a short-term basis. While discouraging short-term rentals may be a legitimate policy goal, the owner occupancy requirement is a poor tool for accomplishing it given its negative effects on households who rent and ADU construction.

Each of the changes to zoning code proposed by Salt Lake City will make ADUs easier to build, but ADUs cannot be expected to impact the city’s ongoing housing crisis significantly unless they are built at a significant scale. This is unlikely to occur unless ADU construction is allowed to proceed unencumbered by an owner-occupancy requirement that disproportionately affects the city’s diverse community of households that rent. 

We support the code changes with the inclusion of the repeal of owner-occupancy requirements on ADU construction as a necessary first step. The council can support its stated goals of incremental density and increased housing in every neighborhood in Salt Lake City. Establishing a vibrant market for ADUs is an important step toward undoing the unconscionable history of exclusion and discrimination that has left our city deeply divided between East and West. 

Thank you,
SLC Neighbors for More Neighbors