Thursday, October 17, 2019
EconomyOuter Banks

A win-win-win solution for affordable housing

It’s called an “accessory dwelling unit,” and with a few changes to township and county building regulations, it could very well solve the Outer Banks’ affordable housing crisis. It’s good for current homeowners, too.

For at least 10 years, Dare County has investigated ways to create affordable housing for seasonal service workers and citizens at the lower end of the economic spectrum. An article in the Outer Banks Sentinel by Neel Keller suggests the housing shortfall is on its way to becoming an economic crisis for local businesses, because the lack of affordable housing is driving away the critical workers who keep our local economy humming.

Keller’s concern is echoed in a recent survey conducted by the Beacon, where 89% of respondents stated they were concerned—66% were very or extremely concerned—about the region’s lack of affordable housing.

Another recent article by Bob Muller notes that one way to help resolve the crisis is for businesses to raise their minimum wage—a sentiment also supported by a majority of Beacon survey respondents. The National Low Income Housing Coalition suggests $17/hour is needed to afford a 2-bedroom rental in Dare County.

Muller also recommends actions that require government involvement. One is for the county to lease its land to developers only if they agree to build affordable rental housing. Another is to ease the regulations that prevent homeowners from building accessory dwelling units (ADUs) on their properties.

Accessory dwelling units as a win-win-win solution

Building ADUs can benefit businesses, low-wage employees, and local residents. An ADU is simply a small, separate living space on the property of a single-family house. Often referred to as a secondary suite, mother-in-law suite, or granny flat, examples include a finished room over a garage, a tiny house built elsewhere on the property, or a daylight basement apartment.

The typical ADU is an efficiency or 1- or 2-bedroom apartment big enough for 1 to 3 people. For many homes in the Outer Banks, such a space could be created under the main living area of a house, between the stilts.

The floorplan below shows how an ADU could be created on the ground floor of a typical 1,000-square-foot beach box. The ADU is about 490 square feet and includes 1 bedroom, 1 bath, a full kitchen, a stackable washer-dryer in the bathroom, and a fairly large closet/storage room. Notice that it still leaves enough garage space to fit two midsize cars.

Building ADUs in Dare County would require local governments to modify regulations. For example, The Town of Kitty Hawk Residential Building Guide states that single-family homes cannot have more than one full kitchen and must have a parking space for every 600 square feet of heated space. Further, the house, walkways, driveway, and overhang cannot cover more than 30% of the lot.

For many of the small 7,500-square-foot lots in the Outer Banks, the coverage limitation will make it difficult to provide the minimum required parking space. However, if towns are willing to work with residents who want to build ADUs for long-term affordable housing—not for short-term summer or AirBnB rentals—it seems likely that reasonable compromises can be reached. County and local townships could also promote ADU construction by offering some property tax relief and possibly some assistance obtaining loans.

ADUs offer a low-risk approach to solving Dare County’s affordable housing problem. They benefit not only people in need of housing, but also local businesses and the economy. For instance, businesses will benefit from the increase in service-sector employees who can live and work in the area, instead of commuting. And when employees actually live in the area, they contribute to the local economy.

Are ADUs a good investment for homeowners?

As one would expect, construction costs are the biggest concern for the homeowner. The costs can vary significantly, especially for detached ADUs. As for attached ADUs, a study in Portland, OR—a leader in addressing affordable housing—showed that most units cost between $20,000 and $80,000. A survey by Building an ADU puts the costs a bit higher, at about $230/square foot. That equates to about $110,000 for the floorplan above.

Those figures assume the entire job is contracted and involves no “sweat equity.” They also suggest that, from an economic perspective, building the ADU as large as allowed makes the most sense, because the additional costs are marginal.

One of the factors that affects the potential benefit for homeowners is the 30% rule. It says that to meet affordability standards, a dwelling’s rent must be less than 30% of the renter’s income. For instance, a single person working 40 hours/week at $13/hour would gross just under $2,200/month, or about $1,740 after taxes. At 30%, his or her rent should be about $520/month ($1040/month with a roommate).

Now, let’s assume you borrow $115,000 at 6% interest for 30 years to construct a one-bedroom ADU. Your monthly principal and interest payment would be about $690. But various factors will decrease your cost, especially the tax deductions you can claim. The following table gives a very crude example.

Figures exclude state tax advantages and assume a fairly high interest rate. Other factors could also increase the bottom line, including investing sweat equity and adding square footage to create a two-bedroom unit.


Adding an ADU to your property may have downsides—the potential headache of being a landlord, the need for an accountant to help with taxes, and the cost of maintenance. But doing so could profoundly improve life for low-income workers, strengthen the workforce for the local business community, and provide a source of income for Dare County residents.

Rare are the opportunities to contribute to society and make money at the same time. For homeowners, building ADUs opens such a door. Contact your town officials and encourage them to consider this win-win-win solution.


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Beach Nana

While I agree with the concept, OBX municipalities should not relax the lot coverage rules because doing so will just create more flooding in rainstorms. We need to be very cognizant of stormwater.

losing faith in the beacon already

win win win? funny. not accurate but funny. Even the HOAs here forbid dual residency, and those won’t change because it’d take a vote of the entire membership and you would be trashing the values of a neighborhood to open it up to an influx of low-income people, and drastically changing the nature of the neighborhood.

then you have the fact that most people don’t want to be landlords. if they do, they already are. you also toss pie in the sky numbers like everyone would profit. Most rentals here do not make a profit, all they do is provide a partial return on the investment. are you personally interested in taking out a loan to build an ADU and have seasonal workers live right next to your family so you can “help the OBX business owners”? you go first.