Non-traditional ADU development idea for discussion

[Marshall Daly]

Hi there,

I have an outside-the-box ADU concept and I’m trying to understand if it would conform with local ADU zoning. I would love any advice this group has!

Here’s my situation:

I have a friend that lives in a single-family home in one of DC’s “R” zones, with a yard that is compatible with the city's ADU zoning restrictions. They would like an income-generating accessory dwelling unit but they do not have the $ resources to finance an ADU build at this time. 

In parallel, I would love to live locally in a backyard ADU and I do have the financial resources to construct something in the $250k range. But I do not own property on which to build, and I can't afford to buy in the DC market w/ interest rates + home prices where there are right now.

Thinking about these two challenges together, I'm wondering if, by blending my friend’s land ownership with my capital, an ADU + a ground lease could be a potential solution to both my friend and my own housing challenges?

Here’s the idea, using a ground-lease model of development: 

1. The owner of the ADU-compatible lot would lease to me a portion of their backyard land via a formal ground lease agreement (similar to examples I’ve seen from Community Land Trusts across the country).

2. I would build an ADU on the leased backyard land, including responsibility for design/permitting/construction/maintenance of the ADU structure.

3. Once complete, I’d own the physical ADU building while the lot owner retains ownership of the land the ADU sits on (again, seems common to what I’ve seen with ground-leases for commercial and land trust properties).

4. We’d both live full time on the property, I in the ADU and the lot owner in the principal dwelling unit, for the duration of the ground lease. (I believe this would satisfy DC’s owner-occupancy restriction.)

I’d love feedback on the feasibility of this “model” of ADU ground-lease development. 

To be clear -- I know this is not a standard setup, but I’ve read DC’s zoning code extensively and I can’t find anything prohibiting this concept. The setup plays well to our situations and would be interesting as another option for property owners that want an income-generating ADU but can’t afford the construction costs themselves.

Thank you for your help!

Marshall Daly

marsha...@gmail.com

[cheryl cort]

I think this is great! The owner occupancy rule is fulfilled by your friend residing at the property. There could be a question about what would happen if our friend moved away.

Groundleases have been tried for ADUs - here's an example from a company called Dweller in Oregon. https://www.dweller.com/groundlease

It's telling to think that $250k is a reasonable amount you would be able to spend to build an ADU for yourself. It's a lot for an individual -- but quiet small compared to the market. For $250 you can probably build a 2 story building, though the 450 SF (for detached) remains a very small footprint. 

--
You received this message because you are subscribed to the Google Groups "DC Accessory Apartments Forum" group.
To unsubscribe from this group and stop receiving emails from it, send an email to adudc+un...@googlegroups.com.
To view this discussion on the web visit https://groups.google.com/d/msgid/adudc/2e108b41-a3d3-48d2-b90e-42c5430929ddn%40googlegroups.com.

[Ileana Schinder]

Hi Marshall, 

How are you? I'm going to throw my two cents when it comes to co-living with an ADU in the backyard. The main barrier you will face is the co-ownership of the same plot of land. Here is where the deed (and the mortgage holder) will not allow a secondary owner of the same land. this is what you CAN do.

• "Pretend" your project is a co-op
• Set up co-ownership of the WHOLE property and subdivide right of usage of each area.
• This is IDENTICAL to a condo/co-op situation where each property owner has a portion of a whole property.
• Condo/Co-op rules indicates who has access to what, who pays for what and what happens if one of the members fails to contribute.

So, simply put... in order to make it work, you have to create an association with the current homeowner and each other's fiscal responsibilities.

Let me know if you want to talk about it and I'm happy to schedule a call soon,

ileana

On Fri, Apr 28, 2023 at 6:15 PM Marshall Daly <marsha...@gmail.com> wrote:

--
You received this message because you are subscribed to the Google Groups "DC Accessory Apartments Forum" group.
To unsubscribe from this group and stop receiving emails from it, send an email to adudc+un...@googlegroups.com.
To view this discussion on the web visit https://groups.google.com/d/msgid/adudc/2e108b41-a3d3-48d2-b90e-42c5430929ddn%40googlegroups.com.

--

PS: Wait, don't go... My book "Housing for Humans" is available!

ileana schinder, Architect

AIA, LEED AP BD+C

i...@ileanaschinder.com
o: 202-381-7463 / c: 202-431-6760

http://www.ileanaschinder.com

[Marshall Daly]

Cheryl -- thank you! much appreciated. 

Two followup questions I'm hoping you could help with:

1. You make a good point about the conditions of the ground lease -- doing some more research about ground leases, there seem to be a ton of contingencies to address, including what happens at the end of the lease term. Do you know of any resources or professionals locally that might have insight on the necessary particulars of a ground lease such as the one I'm imagining? 

2. Also a great point about the 450 sq ft limit. When the code says "Height: 22’ and 2 stories, footprint: 450 SF or 30% of required rear yard" is the correct reading that a 2-story ADU would need to have those 450 sq ft split across the two levels? (that is a somewhat ridiculous floor plan for DC to be incentivizing) I was also understanding that, for rear yards larger than 1,500 sq ft you could build larger than 450' (i.e. a 2,000 sq ft rear yard would allow for 30% building footprint = 600 sq ft ADU). Am I understanding the code correctly here? 

[Ileana Schinder]

Marshall,

Quick answer to your second question

1. it's 450sf per level. so you can have 900 total. 
2. it's 22' high max, resulting in 2 stories.
3. in order to make it larger than 450 sq ft, the lot must be GIGANTIC (in fact, like 60'-0" frontage or something like that)

All being said, you can ALWAYS file for an exception and it's likely to pass. I've done more than a few and they all got the ok from BZA. It is a bit time consuming but if you can prove you won't ruin your neighbors' life... BZA will give you the ok.

Again, when discussing land lease, the biggest issue is WHO will own which portion of the value if the deal sours. You can co-own 100% of the property and subdivide the value based on % of built value. Say the ADU is 20% of the area of the house, then you would "own" 20% of the total value of the assessment of the property. You will not be a lessee but a co-owner.

I'm happy to explain this over the phone because it is simpler than it sounds.

Cheers

ile

To view this discussion on the web visit https://groups.google.com/d/msgid/adudc/fb6611a9-1602-4c77-96fa-721225fd2aden%40googlegroups.com.

[Marshall Daly]

Hi Ileana-  

Thanks for your response! Like you, I definitely see co-ownership of the land to be a huge barrier. My understanding of the ground lease method is that there is no actual co-ownership but rather the property owner is leasing the land to the building owner on a long-term basis. I'm hoping that gets around the issues with co-ownership of land 🤞.

I was considering the condo route, but it seems like DC (and most local governments) impose hefty condo conversion fees & review processes that would turn a [relatively] small project like an ADU into an [even larger] headache. Do you have experience with this route? I'd love to learn more, as I hope I'm wrong!

Best,

Marshall

[Tom Hall]

Hi Marshall,

You can build a two story unit that is a total of 900 square footage, 450 on each floor, assuming it doesn't exceed tthe 30% occupancy.

Attached is a PDRM (Preliminary Design Review Meeting) Letter I got from DCRA for an ADU I was considering for my backyard.   I hired an architect to get DCRA to sign a letter that says more or less, "if you design it as outlined in this letter, I will approve it."  I ultimately tabled the ADU plans, but I thought it was money well spent to make sure that the plans that I had were going to comply before I started detailed design.  Note that this was 2019 so at the time the height limit was 20 ft but as you note it is now 22 ft.  The letter may be useful in interpreting some of the language in the code.

 

Best regards,

Tom Hall

To view this discussion on the web visit https://groups.google.com/d/msgid/adudc/fb6611a9-1602-4c77-96fa-721225fd2aden%40googlegroups.com.

[Marshall Daly]

Tom-

Thanks for sharing that letter. Excellent idea. 

One question from Bullet 14 -- "the property is... required to have 1 parking space. The site does not currently have a parking space... a parking credit applies and a new parking space is not required." Could you explain the parking credit concept, if possible?

Best,

Marshall 

[Tom Hall]

I honestly can't explain what the "parking credit" gets me, but very likely someone else on this forum can.  

Mostly I read that section simply as "OK I don't have to "replace" existing parking, since I am not removing any," so the parking issue is not going to be a problem for my project to move forward. 

To view this discussion on the web visit https://groups.google.com/d/msgid/adudc/f6bce855-8685-4672-8265-7ca860c10b97n%40googlegroups.com.

[Ileana Schinder]

when it comes to the parking requirement, it's VERY easy to comply. In fact, if you have any property line adjacent to an alley, as long as you have an 8'-0" opening and an area clear of buildings of 10'x20' it is considered an area that can receive a car. 

In fact, including an area like that is a very good idea if you plan to have an electric car so as not to have to pull an extension cord in the public way. 

Most of the parking pads can be used for entertainment or other outdoor uses.

I hope this helps!

ile

To view this discussion on the web visit https://groups.google.com/d/msgid/adudc/CAFXYo9cvKH7wKOGRyMm08m6Ag0jXRHOmw6UVphQYjTNah8WJSQ%40mail.gmail.com.

[Cheryl Cort]

1. Ground leases- community land trusts do this a lot so look for resources from Grounded Solutions Network

 

Ground leases can be any term up to 99 yrs, I believe. 

2. See our ADU manual. You get 900’ on a 450 SF footprint. It seems that few lots in DC are large enough to make the 450 SF limit smaller.  

https://smartergrowth.net/resources/adu-d-c-homeowners-manual/

To view this discussion on the web visit https://groups.google.com/d/msgid/adudc/fb6611a9-1602-4c77-96fa-721225fd2aden%40googlegroups.com.

--

_____________________________ Cheryl Cort (she/her) Policy Director Coalition for Smarter Growth Mobile: 202-251-7516 (e) che...@smartergrowth.net | www.smartergrowth.net  Twitter @betterDCregion | @cherylcort

[Adriana Navarro]

Hi, 

I researched this some years ago as I too find it an  interesting mechanism to create more affordability and unlock potentially equity that is sitting there yet dormant.  Though in theory residential ground leases could be used, it is my understanding that lenders and real estate professionals are not really open to residential ground leases. 

Baltimore actually has a history of residential ground leases: https://www.peoples-law.org/understanding-ground-rent-maryland

Nevertheless, the city has taken steps to limit the use of ground leases for residential properties and these “ground rent" structures have been criticized for several reasons : 

-They can make it difficult for homeowners to access financing, as lenders are often hesitant to provide mortgages for properties with ground leases. This can lead to lower property values and reduced demand for homes with ground leases.

- Ground leases often include clauses that allow the ground leaseholder to increase the rent or other fees associated with the land over time, leading to escalating costs for homeowners. This can make it difficult for homeowners to afford the property over the long term…

-They can also make it difficult for homeowners to make improvements or renovations to their properties, as the ground leaseholder may have veto power over any changes that are made.

In any case, just wanted to share some of these findings…. 

However, super interesting to pursue and I would be curious to hear how things advance. Good luck! 

Adriana

To view this discussion on the web visit https://groups.google.com/d/msgid/adudc/CACM%2B%2Bj2Z1cqkKswTuzkHebxdwwmTHCzB%3DSBcAmX6P4%2BONBgsoQ%40mail.gmail.com.

[Ileana Schinder]

On a side note. Land-leases are extremely common in large commercial deals but extremely rare in small residential projects. 

As in, single family homes deals are ruled and organized around shorter "real life" terms (10-20 years) that make land leases harder to document for banks and mortgage holders. 

That's why, when it comes to single family homes plus ADUs I always suggest a private agreement between parties (co-op, condo, shared ownership, etc) that facilitate financing and short/long term financial planning.

Commercial and residential land leases are different animals and the conditions of one rarely work on another.

Anyways, I'm happy to chat about this and the routes my clients have followed to finance ADUs within their properties.

Cheers!

ile

To view this discussion on the web visit https://groups.google.com/d/msgid/adudc/55A473DD-C8D6-4622-820F-00DC9BB589FD%40gmail.com.

[Cheryl Cort]

I think Baltimore might have a different & more complicated history of ground leases than DC. So might be worth checking DC practice. DC has one main Community Land Trust - Douglass CLT. DC govt. often does ground leases for mixed use developments that are essentially private, but have a lot of affordable housing.

_____________________________ Cheryl Cort (she/her) Policy Director Coalition for Smarter Growth Mobile: 202-251-7516 (e) che...@smartergrowth.net | www.smartergrowth.net  Twitter @betterDCregion | @cherylcort

On Tue, May 2, 2023 at 8:46 PM Adriana Navarro <adriana.nav...@gmail.com> wrote:

[Marshall Daly]

Adriana - that is quite the history in Baltimore!  Hopefully I can stay far away from the colonial-style ground rent mess in Baltimore. To Cheryl's point, the style of ground lease pioneered by CLTs do give me hope! 

One followup: Adriana, you mentioned how ground leases can make it difficult for homeowners to access financing -- this would of course be a huge barrier to greater adoption, and I was wondering if you have any resources I could check out regarding financing of ground lease purchases?