Easing ADU limits will boost long-term rental stock

John Farquhar, left, and Jackson Tierney
John Farquhar, left, and Jackson Tierney

BY JOHN FARQUHAR AND JACKSON TIERNEY 

In recent years, demand for rental housing in Asheville has outstripped supply, and it seems pretty likely that waves of renters will continue to arrive, most of them hoping to live within the city limits. After several years of severe shortages, however, the latest data suggest that our rental market is reverting to a healthy norm, with a 4 percent to 6 percent vacancy rate.

Asheville should seize this period of calm as an opportunity to try out a regulatory environment designed to promote long-term housing solutions.

The experience of Portland, Ore., offers real promise for Asheville.

Portland’s strategy

Like Asheville and other cities that have been “rediscovered” by millennials and baby boomers, Portland is experiencing skyrocketing housing demand, especially in areas near the city’s core. In 2014, despite a ban on short-term, whole-house rentals, Airbnb listed thousands of them in Portland. The city decided to manage this reality by legalizing short-term rentals of up to two bedrooms in a private home, provided that the owner is also living there. Renting more than two bedrooms would require a conditional use permit. Short-term rentals of multifamily apartment and condo buildings remained illegal, as did rentals of entire homes which the owner doesn’t occupy at least nine months of the year.

You might have expected Portland to also clamp down on rentals of accessory dwelling units (attached or detached granny flats, garage apartments or backyard tiny houses on owner-occupied property). Instead, the City Council voted to eliminate the limits on short-term ADU rentals, treating them as homestays — and even added financial sweeteners to encourage people to build more of them. ADU construction boomed, with nearly 700 units added in just two years. As Kurt Creager, Portland’s housing director, now proudly reports, that works out to almost “an ADU built every day.” According to consultant Martin John Brown, who’s now a researcher for Oregon’s Department of Environmental Quality, more homeowners will build ADUs if they have the option of renting them short term.

But then a curious thing happened: Within one year of licensing, nearly half of Portland’s ADUs stopped being short-term rentals, reported Brown.

This might seem counterintuitive, but on reflection, it’s less surprising: Operating short-term rentals can be time-consuming, disruptive and require menial labor, and the revenues may not be much more than you’d get from a less labor-intensive long-term rental. Values change; life situations change. For many reasons, substantial numbers of ADUs will return to the long-term rental pool every year. This reversion, it turns out, is a global phenomenon found in cities worldwide.

Applying the Portland model to Asheville

Portland’s experience belies the NIMBY-driven scare stories and fear of change that have clouded the short-term-rental conversation here. Despite differences in population and economic base, Asheville and Portland are quite similar in terms of culture, attractiveness and values. Portland’s experience suggests that allowing short-term rentals to encourage ADU construction will boost Asheville’s housing supply — which is exactly what our City Council hoped for when it loosened zoning restrictions on ADUs in 2015.

To test the Portland solution’s viability for Asheville, we propose a pilot program, as follows:

  • Continue and aggressively enforce the strict ban on whole-home, short-term rentals.
  • Allow up to 150 ADUs as short-term homestays, issuing permits that must be renewed annually on a first-come, first-served basis.
  • Within the 150-unit limit, permit new ADUs on the same basis.
  • Require all units to:
  1. Maintain liability insurance.
  2. Collect occupancy taxes.
  3. Comply with all applicable building codes.
  • Revoke permits after three verified violations.
  • Require ADU homestay operators to live on the property full time and be in residence during the entire term of the homestay.
  • Collect detailed information about host and guest behavior and neighborhood impacts.
  • Establish clear milestones for regulatory review and revision.
  • Require Airbnb to display the city’s permit on rental listings and report the addresses of those who fail to provide a permit.

Both New Orleans and Santa Fe, N.M., have recently negotiated the latter requirement, and other providers such as VRBO will surely follow: Airbnb is the industry’s 800-pound gorilla.

Don’t let short-term issues cloud strategic goals

The extra cash an ADU can provide can help people stay in their homes despite retirement, rising taxes and other expenses. Still, experience shows that ADU owners place considerable value on flexibility, and as they age, they may opt for the more relaxed lifestyle that long-term rentals allow. But ADUs can also support multigenerational housing options, and elderly owners may move into the ADU and rent the primary dwelling long term.

The benefits of increasing the city’s ADU stock will span generations. Some argue that banning short-term rentals of ADUs would immediately increase the supply of long-term rentals. This is questionable, however: ADU owners concerned about flexibility might simply choose not to rent them at all. And as Creager, Portland’s housing director, concluded, “ADUs add to the housing stock, and they will be around for 75-80 years, so a sometimes-use as homestay is inconsequential in the long term.”

It may be tempting to add a tweak here or there, such as limiting the physical distance between ADUs or the number of days per year they can be rented. But care should be taken, as every restriction affects the owner’s cost/benefit/risk equation. Both Portland’s experience and research in other communities suggest that maximizing flexibility is the key to encouraging ADU construction.

The real winner: our unique community

Building ADUs to rent to tourists will ultimately increase the city’s long-term housing stock at no cost to taxpayers. Hospitality profits will be recycled directly into the local economy, rather than being remanded to hotel coffers and big investors. Some data suggest that homestay growth will direct more tourist spending to neighborhood merchants and eateries. Like homestays, short-term ADU rentals pose no problems with noise, appearance or parking. Far from “hollowing out” our precious neighborhoods, helping current residents keep their homes as they age will bolster neighborhood resilience.

John Farquhar is a retired management consultant and ADU owner living in Norwood Park. Jackson Tierney is an environmental consultant and ADU owner in Montford.

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36 thoughts on “Easing ADU limits will boost long-term rental stock

  1. boatrocker

    Uhhh, the elephant in the room-

    Asheville’s excessive need for rental vs owning houses is due to the wage disparity, as in Buncombe County (out of all 100 NC’s counties) having the highest rents and deliberately keeping local wages below what normal humans call a living wage. This figure about rental prices is sourced from,
    yep, the Mtn X.

    Nice try to gloss it over though .

    And sorry, Chamber of Commerce for pointing this out, in case any tourists with an actual conscience ever consider visiting here.

    • NeverTrue

      You have a solution? Or just complaints about peoples life choices and the results it gives them.

      • boatrocker

        Yes, as a matter of fact. Howz about don’t treat shelter like a business? Especially when you have to live next to a STR who loves blasting Widespread Panic? Never ok.

  2. NFB

    “John Farquhar is a retired management consultant and ADU owner living in Norwood Park. Jackson Tierney is an environmental consultant and ADU owner in Montford.”

    Ah, that explains a lot.

  3. The Real World

    Hallelujah, again! (twice in the first week of 2017; it’s shaping up to be a good year as reasonable voices hold sway over the extremist types.)

    Here are two rational and experienced people using solid data and real world results to support their argument. In what universe did that ever become a bizarre way to consider something? What they report doesn’t surprise me in the slightest — yes, people respond to positive incentives and — yes, plenty will switch using their rental for long-term use rather than lots of 2 night stays, etc. The latter is plenty of work and not worth the extra energy for many.

    Very well articulated John and Jackson. Your efforts are appreciated.

    • boatrocker

      Here’s a challenge, oh real world named after MTV’s 1992 groundbreaking TV faux reality show:
      What do you say to the guy who occupies a house right next to you (literally your new neighbor 20 feet away) who tells you something like say, (theoretically)

      “Ohhhh, hey man, yea, I’m living here for the next 2 weeks, just long enough to score some weed, catch the Christmas Jam, try some craaaaafht brews and let my un-supervised toddler pull your dog’s tail in your own yard. Aren’t ADUs sweeeet? It’s all good, man, Asheville rocks- huh huh, I’m an accountant by trade and live in Charlotte but man, when I visit Asheville, dude, it’s like a hippy version of Westworld!- The locals don’t matter as I’ll never see them again, so party on! Oh yeah, and I have yet to tip anyone at a restaurant! Sweeeet!”

      My point being it is ‘sweeeeeeeet’ when you’re collecting $ for them occupying a house but the neighbors grind their teeth over your greedy jerky business practices.

      But $ trumps anyone else’s needs, wants or sanity, right?

      • boatrocker

        Addendum- when the new 2 week neighbor says
        “I made some friends with a jam band, and they’re gonna set up in the kitchen tonight, they should be done playing by liiiike 2 or so”

      • We aren’t advocating whole house short terms. An ADU is defined as a sub-unit of a permanent residence. The resident would be responsible for behavior, and if the privilege to rent short term were abused we could pull the permit.

    • luther blissett

      Portland’s not Asheville. Sometimes it feels like Asheville is a kind of demo version of Portland with all the beards and tats and brews and so on, but if you look for more than a few seconds, the differences are obvious. Talking about similar culture and values is fine enough, but you have to compare housing stock and housing density and the lay of the land and the constraints of the city limits.

      Portland’s bigger and flatter and denser and rounder. There are sidewalks. You can walk more than a few blocks. You can take a bus or ride a bike or jump on a tram. If you’re visiting, you don’t even think about renting a car unless you’re heading way out of the metro area. It doesn’t abut onto “The County” but onto burbs like Beaverton and Hillsboro where they’re rapidly building up mid-rise apartment blocks for transit commuters. There is no Multnomah County equivalent to Leicester or Candler or Fairview, and definitely not to Biltmore Forest and that 7000 acre private estate that occupies the southwest quadrant of where the city might have been.

      Most importantly, the PDX metro housing market is heavily driven by long-term rentals, with a broader range of rental housing than Asheville typically has to offer: plenty of single-family homes, duplexes, etc. It’s not all apartments, and because it’s a bigger city, both in terms of population and area, there are more options for infill development, whether it’s converting brownfield sites to apartment blocks or building ADUs as garage conversions or basement apartments.

      All the reporting from Portland suggests that enforcement of the prohibition against full-unit rentals is far from “aggressive” and even AirBnB’s local manager is flouting the rules:

      http://www.wweek.com/news/2016/08/24/portlands-short-term-rental-rules-are-such-a-joke-that-an-airbnb-employee-ignores-them/

      “[T]wo years after the rules were adopted, less than a quarter of Airbnb clients have bothered to get the required $178 permit and safety inspection.”

      Perhaps the Bothwell approach is the only feasible one — i.e. “screw it, everyone wanting a piece of the pie is going to break the rules and we can’t enforce them properly, so try to take a cut and spend it on something else.” But the idea that Portland has an orderly and controlled approach to the rise of short-term rentals is hooey.

      • Lulz

        LOL, I know a secret. I know a secret. An AirBNB operates in my neighborhood lulz. Has it reduced home values? Nope. Does it contribute to traffic? Not really considering that UNCA students with their individual cars take up much more space. Do the guest act out in any way that annoys others? No, not like UNCA students that throw parties well into the morning sometimes. Do they create large amounts of landfiill waste at moveout time? Not like the mountains of couches, dressers, tables and chairs that I see kids toss away as they move on.

        Problem with your baloney is that Portland has like real jobs in the area. Asheville doesn’t. It has elitist crap like you that come here and assume you’ll live like a king and spew your crap about the working poor while ignoring the fundamental flaws of the local economy. But you’re not as risk of having your home stolen by the government. They are. What’s it gonna take loon? A bunch of people losing their homes and setting the tax office on fire for people to wake up?

  4. Not exactly my view, but close. My observation is that no government has ever had success regulating a black market. Alcohol prohibition anyone? The war on drugs? So if the goal is to create some measure of regulation, then legalize, license, inspect. Require advertising to include a license number. Impose a three strikes rule, or some such, so that landlords who don’t monitor their rentals are pushed out.

    As for spending license fees on something else? No. Currently we are spending a couple hundred thousand of your tax dollars on enforcement. We could offset that with license fees, and presumably reduce enforcement costs in some measure.

    • Lulz

      LOL, of course the vulture shows up crowing about his share. Considering you are in an operation that can’t even plow the roads because your friends in the RAD are sucking all the money down the drain and I’m paying for it, you’re not entitled to a dime thief.

      • Lulz

        Oh and let’s push licenses so we can go to city hall and have to deal with 10 people and their made up phony jobs.

      • You are wildly misinformed about City spending. The RAD project has nothing to do with our storm response. And, yeah, Asheville is kind of slow with the plowing …. but we don’t get much snow here. How much money do you think we should put into plows and crews for occasional big snows? Don’t be stupid.

  5. Gordon Smit

    http://www.wweek.com/news/2016/08/24/portlands-short-term-rental-rules-are-such-a-joke-that-an-airbnb-employee-ignores-them/

    “It just makes it look like those rules were only ever for show,” says Margot Black, an organizer with Portland Tenants United. “Even an Airbnb manager is blatantly flouting them. The fact that it’s in the midst of a housing crisis makes it all the more obscene.”
    […]
    “An analysis commissioned by WW shows that if illegal short-term rentals were removed from the Airbnb website, as many as 1,718 homes could be made available to Portland residents instead of tourists.”
    […]
    “”If you take thousands of units off the market, it’s going to have an impact,” says Commissioner Nick Fish. “People now have the option of making more money renting to short-term rather than long-term tenants. We have, in effect, created an incentive.”
    […]
    “Airbnb spokeswoman Alison Schumer defends the company’s record in working with Portland, blaming the city’s “complex” process for getting permits.”

    No matter where the lines get drawn, effective enforcement is a bear. I think this debate is going to go on for a very long time. Prudence dictates protecting and preserving housing for locals and neighborhood integrity while we discern how best to enforce whatever regulations may happen in the future.

    I’ll also note that I haven’t found a single neighborhood “Plan on a Page” that encourages Short Term Rentals of any sort, and many outright advocate against them. When City Council arrived at its compromise position of allowing for Homestays and disallowing whole house STRs, it left this gray area (ADUs) that’s become the focal point. When Council made it easier to build ADUs just about a year ago, the purpose was to increase the number of more affordable units not to increase tourist accommodations in our neighborhoods.

    • The Real World

      I don’t know if this comment is from City Councilman – Gordon Smith, or not (name above says Smit). But, hopefully it is so that my comment gets seen my those who have a vote.

      From Mtn X – 185-room downtown Embassy Suites hotel on Jan. 10 Council agenda — it is city council that is dumping the AVL market with short-term rentals. If you vote affirmative for that new hotel, YOU are saturating this market with too much supply, more 240 and downtown traffic, all while prohibiting property owners from utilizing their properties in a personal beneficial manner and you’re disallowing a different, unique option for visitors.

      Do you recognize the perfect storm you are headed toward?

      • Deplorable Infidel

        maybe Council will MAKE them have some ‘affordable’ rooms for the less fortunate, so they can visit AVL too …;)
        OH, there already here you say ? oops my bad.

      • SueZ

        I agree with the comments that we do not need more hotels downtown. Enough already! I would way rather have affordable options for travelers that also offer local folks the opportunity to make money or help them to afford their homes (short term rentals). Sure, some rules are needed. But feed us, not development companies please.

        Lots to discuss regarding this issue. Thanks, Cecil, for getting the dialogue going.

  6. Lulz

    LOL, maybe city residents should start questioning why they’re paying for county schools? Anyone who lives in the city proper have kids in county schools? You folks use county services? Why are there redundant city and county offices here? Why is the county manager getting 40K yearly pay raises?

    If you really were like someone who had an ounce of integrity instead of the mouthpiece for the RAD and your rich friends and claim that city taxes are affordable, you’d actually put that into context when spewing that crap. Especially when double taxation for absolutely nothing of value to those that are that are being fleeced beyond their means is a disgrace. And you go around leading a bunch of useful idiot buffoons in protest against the rich of Wall Street but not Riverside Drive or Lyman Street.

    • Deplorable Infidel

      Lulz…I’ve been questioning the STUPID ‘need’ for TWO government screwl systems in Dumbcombe County, but absolutely NO one
      will say a word about it…it is the most guarded nasty governmental domination of all, UNNEEDED DUAL SYSTEMS! How many
      MILLION$$$ would be saved with a logical ONE government screwl system ? ? ? I’m waiting to hear from the 3 new county commissioners on this right now…thus far no responses…but really WHERE is the racial justice and DIVERSITY ‘for the children’?
      Two systems is totally opposite of the progressive ‘ALL ONE’ proclamations! WHEN will we ditch this antiquated NON progressive ‘education’ separation in Dumbcombe County ?

  7. Fin

    How many comments does the xpress censor? Got to keep those safe spaces going. And when did bothwell become a voice of reason on the council?! I’m sure the mayor can sit just fine in her 1/2 million home in north Asheville but for some vrbo is a way to afford this town. Spread the wealth around not just for hotels. As being a landlord, not being able to vacation rent my home doesn’t mean I’m cutting the rent down, especially since the city continues to raise fees and taxes.

    • Deplorable Infidel

      Maoyoress Manheimer has her tail in a crack right now, totally embarrassed over the bond scam mess!

  8. To be clear concerning hotels. City Council has virtually no regulatory power over hotel construction. If a property is zoned for commercial use owners can do whatever suits them unless they want a zoning variance. Most of the recent hotels have not needed or required any oversight by Council.
    Very large developments are defined as Level III (changed from 75,000sf to 175,000 in 2010 – I voted no). Level III projects like the forthcoming Embassy Suites do come to Council in a quasi-judicial hearing, but even then we are sharply constrained in our judgment. There are seven criteria that a project must meet and we can only reject based on those critieria. If we vote as a body in a way that is noncompliant, the City can be sued. If we as individuals vote in a way not justified by the law, we can be sued individually.
    So it is incorrect to suggest that Council has in some way boosted hotel construction. We haven’t.

  9. Oh, and this: While Council has requested that Staff bring forward a rule change that would bring all hotel projects before Council for review, that won’t do much in terms of regulation. We will be able to ask about a developer’s intentions, but we cannot block projects because we don’t like them or don’t want another hotel. Private property rights are closely protected under NC law.

    • The Real World

      C Bothwell – appreciate the clarifications.

      But, you say, “Private property rights are closely protected under NC law” — so let me ask, if that’s the case why does council seem to have such restrictive ability over residential private property?

  10. Andrew Weatherly

    So Cecil, you asked for middle ground. I could be willing to temporarily try the ADU idea with a few painful stipulations. First, if there is a problem the neighbors have to deal with from the nightly visitor, then there is an automatic incredibly stiff fine (say $1,000 the first time, double the next) that both the nightly renter and the owner have to pay. Second, that enforcement for that proviso is realistic and responsive to the neighbors. IT would be a wise idea for the owner to have conversations with his/her neighbors in advance.

    • My take: If we charge say $1,000 for an STR permit, then losing a permit would be a very similar penalty.
      Excellent idea to have hosts inform neighbors, including a 24/7 phone contact number.
      Enforcement will be much easier if we get AirBnB to implement the “New Orleans” rule – apparently they only list properties in NO with permits. I’m in touch with the AirBnB legal department, seeking a similar rule here.

      • The Real World

        Another view: $1000 is a punishing amount of money for either a permit or a fine. Pls be serious.

        Yes, we need to have regulations but I can sense two other things going on with many comments over the last year about this issue: 1) Some are mentally spinning-out envisioning all manner of extreme scenarios. That is not helpful. These are likely people who have never stayed in an Airbnb or VRBO. There’s so much misinformation floating around about how it works. Facts and reality, folks, let’s work with those. 2) It’s also clear that some appear to have envy for those that have the type of property where a STR could be incorporated. It’s money and opportunity envy, imagine that. That is not helpful either and is a personal issue.

        Btw, I do not have a horse in this race as of yet. But, I could have a rental in my lower level — be it long or short-term — but am waiting to see if this city is going to be reasonable in how they define all this before spend the money to remodel.

        • Well, the previous Council implemented a $500 per DAY fine, so I’m not clear that a $1000 permit fee is crazy high. Maybe $500 is better?

          • Andrew Weatherly

            Fine, $500 for the first infraction, and $1,000 for the second one.
            Yes, the zoning rules here are restrictive in favor of developers rather than homeowners. I’d love to build 2 more houses on my 15.000 foot lot And I’d do it for low income and as green as I can afford. BUT the city says I have to enough enough street frontage, and I don’t.

          • The Real World

            Way before we talk about permit fees and fines we need to hear much more about this, “Private property rights are closely protected under NC law.”

            It sounds like we ALL might not be up to speed on that as it relates to residential property. Let’s get clear.

        • Andrew Weatherly

          Yes, let’s speak realistically. Here’s an example from real life here in Asheville. A friend’s neighbors decided to turn their garage into an ADU for rent. Then they built a pool. Then people rented it out and would go swimming at all hours of the night. Then my friend had loud parties happening thirty feet from her bedroom windows. Talking to her neighbors whose place this was did not result in any change. Calling enforcement occasionally would result in legal assistance that quieted things down for a week or two, then it would all start over again. This is a real life example of the problem. Personally, as long as the neighbors aren’t bothered, I’m all for folks making money from renting out their rooms, house, or ADU. And we’ve got to protect the neighborhoods.

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