High costs, regulations get in the way of adding accessory dwelling units in Olympia

By Brandon Block

The Olympian

Kelsey Hulse hit refresh on her computer.

It was 2017, and Hulse — a political wonk, nonprofit fundraiser, and former candidate for Thurston County Commissioner — was searching for a place to live in Olympia. She opened up Craigslist and local property management websites and sorted for one-bedroom units under $1,000 per month.

Very few came up.

After making a flurry of phone calls, she found a one-bedroom in Lacey for $1,170. Even with a job as a lobbyist for Puget Sound Energy, minimal student debt, and few other financial commitments, it was more than she wanted to pay or could sustainably afford. Hulse stayed out her six-month lease there, and then got a lucky call: a friend told her they had a spot opening up in a unit built above their garage for $850 per month, utilities included.

The unit was essentially one open space, just over 1,000 square feet, with a bathroom, tiny appliances and no oven. Although technically permitted as a “bonus room” — a room created by remodeling or an addition that does not meet building code definitions for traditional rooms — it functioned a lot like an Accessory Dwelling Unit (ADU), which are also sometimes known as backyard cottages, mother-in-law units, or granny flats.

ADUs can be remodeled basements or attics, attached additions, or above-garage units like Hulse’s, but most commonly they look like a small detached cottage house in a backyard.

While $850 isn’t exactly cheap, and definitely isn’t affordable for low-income people, for Hulse it was a better option than what else was out there. She lived there for just over a year, and in that time was able to save up some money. Earlier this year, she bought her own house in west Olympia.

While ADUs aren’t affordable by definition, they do tend to be built by individual homeowners who are motivated to make a long-term investment, and they’re often rented at below-market rates to family members or friends.

Or as Janae Huber puts it, they’re “lower case affordable.” Huber is founder of Olympians for People Oriented Places, a group that advocates for progressive zoning reform. She means that while $850 is not going to be accessible to someone on public support, it’s more affordable than what’s generally available in Olympia. It might be something that someone working a retail job could afford.

“Affordable” as defined by the federal Department of Housing and Urban Development means paying no more than 30% of your income towards rent. For those making less than half of the area median income (AMI) in Thurston County, or about $35,000, an “affordable” rent is under $900, according to a recent housing report by the Thurston Regional Planning Council. (At 30% of AMI, about $21,000, $500 rent per month would be “affordable.”) At those prices, there are few units, and they’re almost exclusively ones created by federal programs such as low-income housing tax credits or subsidized by Section 8 vouchers — with the latter program only serving about 25% of the people who qualify.

“There’s just not enough subsidies available from government sources to meet the needs that we have for this kind of housing,” Huber said. “Right now, the way that housing comes into our community is by and large through the efforts of private developers. And so until that changes, until the entire system changes, that is what we need, and ADUs are a realistic way that individual families can add housing to our housing stock.”

While putting cottages in backyards won’t solve the housing crisis, Hulse and Huber think that having more options in the lower-middle price range would take some of the pressure off Olympia’s housing market, especially for young, single people and older adults who want to downsize.

Olympia’s regulations on ADUs

Data provided by the Planning Department show that there are approximately 100 permitted ADUs in Olympia. The city officially allowed ADUs as a housing type in 1995, but most ADU permits were issued in the past decade.

There are also a significant number of ADUs that are unpermitted, according to conversations with builders, housing advocates, renters, and homeowners familiar with Olympia’s housing market. Some were built prior to 1995. In other cases, the owner chose not to go through the city’s permitting process.

City officials have expressed support for ADUs, but the city’s own policies present major obstacles to developing more of them. Those interested in building an ADU in Olympia face regulations that can quickly torpedo the project.

First, there’s the requirement that all ADUs be owner-occupied, meaning the owner must live on site, either in the ADU itself or the primary house that it’s attached to.

That rule makes it impossible for anyone other than an individual homeowner to create an ADU, including an organization such as Homes First, a nonprofit affordable housing provider.

Homes First CEO Trudy Soucoup says they have five sites in Olympia where they’d like to develop ADUs, as they’ve done already in Lacey. By using volunteer labor from the YouthBuild program, they were able to bring ADUs online in Lacey for about $45,000 — half the cost of what an individual homeowner would pay in the private market.

Olympia’s owner-occupancy requirement could change soon. Olympia’s Planning Commission has approved eliminating the requirement as part of the Housing Options Code Amendments, which will be considered by the City Council in December.

Another regulation that would be addressed by the code amendments would be the requirement that ADUs provide one off-street parking space — a significant deterrent on small city lots in older neighborhoods.

Mandated parking policies were introduced in the city’s 1961 zoning code, which required one off-street parking space for each single-family house, as well minimum parking requirements for businesses, schools, and medical offices. Subsequent zoning ordinances upped that requirement to two parking spaces per single-family house, four for duplexes, and more for multifamily structures and businesses. ADUs were included when the city legalized them in 1995.

High costs of building

Where zoning allows for ADUs, prospective builders often find the costs quickly exceeding their budget.

Building an ADU in Olympia means paying between $3,500-$4,000 in development impact fees, depending upon whether you’re building downtown or not.

Impact fees are a one-time fee meant to offset the costs of expanding government services to accommodate new development. Especially in suburban areas, they’re meant to address the costs of adding infrastructure such as new roads, transit, schools, and utilities.

But perhaps the most expensive requirement for a prospective ADU builder in Olympia is the automatic fire sprinkler system, which the city began requiring in all new residential structures in 2014.

The hidden cost driver is that much of Olympia’s older water infrastructure is not sufficient to carry the volume of water necessary for a sprinkler system, meaning a prospective ADU builder would need to lay new pipes, connect another water meter, and pay a city hookup fee. That can add $8,000-$10,000 to a project, according to builder John Erwin.

Olympia is one of just eight cities in Washington that require fire sprinklers in new homes. Fire codes are largely determined at the city and county level, with each jurisdiction deciding what provisions of the International Building Code to adopt.

Last week, the city’s Land Use and Environment committee approved a proposal to exempt ADUs from the fire sprinkler requirement if the primary house is not required to have them. This would mean any ADU built on a lot with a house built prior to 2014 would be exempted.

Olympia’s proposal, brought by Fire Marshal Kevin Bossard, is based on legislation passed by the state of California in 2016. (California also has a carve out for impact fees: In 2019 the state passed a bill that prohibits municipalities from charging impact fees for ADUs under 750 square feet.)

It may sound odd to campaign against fire safety codes, but you have to look at the outcome rather than the intention, Erwin said.

“We can be smart about it, we can be diligent, but you can’t regulate complete safety into our lives,” Erwin said. “Through over-regulation you increase the price of housing and you put people out on the streets. So now what’s safer: living in that 1950s house that’s poorly insulated and doesn’t have fire sprinklers, but you can afford to rent it, and you can shower and bathe and cook and sleep, or living on the streets?”

Olympia vs. Lacey: different regulatory approaches

Fundamentally the question is whether a one-room cottage should be regulated the same way as a 2,000-square-foot single family house.

Other cities take a different approach. The city of Lacey does not charge development impact fees for ADUs, and doesn’t require fire sprinklers in any new housing. Lacey also waived utility hookup fees for ADUs.

Earlier this year, Lacey made available free, pre-approved designs for ADUs, created by local architectural firm the Artisans Group, in an attempt to make the permitting process easier. Design work can account for as much as 10 percent of project cost, says Associate Planner Jessica Brandt, so the designs will make ADUs cheaper, too.

The program hasn’t seen any takers yet, though that may have more to do with it launching during a pandemic. In total the city has permitted at least 40 ADUs since 1999, according to Brandt. She has been working with Olympia and Tumwater and hopes to eventually share Lacey’s architectural designs across jurisdictions.

Faces of a housing crisis

Hulse is not exactly who legislators have in mind when talking about the housing crisis.

She’s a young professional, gainfully employed, in good health and with few common barriers like debt or disability that could make housing elusive. She also is well-connected with a circle of friends and neighbors with available rental housing. (Her friend who rented her the ADU? That was Ryder, the mayor of Lacey.)

“There really were very few barriers for me,” Hulse said. “I have a good job that pays me a good wage. I don’t have any kids, it was just me by myself, I don’t have any pets, I don’t have any physical limitations where I’d have to seek a certain type of property.”

Nonetheless, her experience struggling to find affordable housing points to the extent of the challenge posed by Olympia’s tight, increasingly expensive housing market.

“Given my experience looking for housing as a fairly well-resourced person with not a lot of barriers, it seems clear we just need more.”