Detached Accessory Dwelling Units – Who benefits and who pays?

Abstract

Cities across North America are facing unprecedented challenges related to housing affordability, climate resilience and economic sustainability. In many cities, infill housing policies are being adopted in response to these issues. This research focuses on one particular type of infill housing - Detached Accessory Dwelling Units (DADUs). DADUs, also known as laneway homes, garden suites, or carriage houses, are independent rental units typically built in the backyards of single-detached homes. DADUs create opportunities for downsizing and age in community, multigenerational living, additional rental income, and flexible housing that adapts to people’s needs across their lifespan. DADUs add incremental density to existing neighbourhoods and are often put forward as a form of affordable housing. This research examines DADUs from an affordability lens, addressing both affordability for renters and whether or not DADUs are affordable to build. A policy comparison of nine municipalities in Canada and the United States is used to determine DADU best practices and what characteristics are shared by municipalities that have had high DADU uptake. In addition, a secondary analysis of Edmonton DADU permitting data is used to analyze the spatial distribution of DADUs as it pertains to affordability. Finally, a survey of DADU owners and residents interested in building in Edmonton is used to examine barriers to develop. Tenants of DADUs were not surveyed. Findings from the policy comparison suggest that municipalities looking to spur DADU development should focus on reducing onerous regulations to allow for flexibility in DADU size, height, and orientation. Eliminating parking minimums, owner occupancy requirements, location restrictions, and contextual regulations that require DADU height and size to be subsidiary to the principle dwelling will help create the conditions in which a successful DADU market can take root. That being said, the success of DADUs in any particular city is in large part dependent on local housing markets, as cities facing extreme housing pressure were more likely to see high rates of DADUs, likely as a means of offsetting the high cost of homeownership and offering relatively affordable rental alternatives. Findings from the survey and secondary data analysis suggest that DADUs are being built by residents who have high household incomes and access to considerable personal savings, in higher income neighbourhoods. From a rental perspective, voluntary affordability was observed in Edmonton whereby rental rates for family and friends of the owner tend to be ultra-low based purely on relationship, however, DADUs rented to unrelated tenants tend to be rented at slightly above market rate. Findings also show that cost and financing remain a primary barrier to DADU development, and that financial products and knowledge of DADUs is lacking from lenders. As such, it is recommended that financial institutions develop more sophisticated DADU products to better serve this growing market.