Waiting for the Cottage Building Elves
Posted by Roger Valdez on Monday, July 8, 2019 · Leave a Comment
After a long enjoyable weekend away, I came back to Seattle thinking about what would I say this week in this space. My first thought was to address (again) the fact that recent legislation passed by the City Council will not, in my estimation, add lots of new supply of backyard cottages. Why? Households that have eligible backyards can’t pay for the process and costs associated with building cottages. And why is this? It is by design. As I pointed out on Twitter, Councilmember Sawant who opposes the idea of profit or return on investment on anything said she supported the legislation specifically because she so no potential for anyone to make money. That’s right, most of the momentum behind this legislation was built because the Council could claim a “win” for density in single-family neighborhoods while at the same time knowing that it wouldn’t happen. It’s called politics, and it is what has caused our “crisis” is housing.
So before I even got here, I had a response on Facebook from a cottage advocate suggesting that the financing piece (which I’ve written about a couple of times) would be part of a “phase two.” Here’s my lecture. Yes, I am as tired of hearing my voice on these topics as you. But we just can’t seem to get beyond landscaping and new curtains when what we need is to knock down the whole house and rebuild it. Maybe I’m mixing metaphors and cottages and housing and whatever. Here’s the response.
That sounds fine. But I think you need to understand that the idea that “nobody can make money at this” while a selling point for people like Sawant et al is at the heart of why the legislation won’t lead to a realization of the potential.
And playing Cassandra and/or Laocoon (again) when that part IS figured out, the resentment about businesses being able to make money while adding supply will lead to the ban of the product.
We saw this years ago with small-lot housing. Not a single advocate of these as has asked me about that. We were advocating, then, for more single-family in single-family. The resentment of existing single-family homeowners against smaller, energy efficient, and more affordable housing was pretty vicious and foreshadowed the ugly demise of microhousing.
What is important here is that in order to lower the price of housing, more people need to be able to make money at that. The left doesn’t believe that, it’s an article of faith that it is impossible to loosen the code AND lower prices. As a result, we get lots of self-congratulation at changes in the code without the mechanisms to fuel financing the product. Going back to small-lots; had that practice — building on smaller single-family lots divided from larger lots — been allowed to continued and encouraged, we’d have more single-family housing priced for people who are ready to move out of apartments.
You heard, I’m sure, lots of doomsaying about how developers would somehow make money from DADUs. You also didn’t hear from YIMBYs reminders of what happened with small-lots and pressure on the Council to make the building of cottages, yes, profitable. It has to be. As I said, there are no DADU elves that will show up in people’s backyards and bang these things out.
I do think that eventually, lenders will see the potential and create a loan product that will create a stream of capital based on the rent potential of the unit. This would mean no HELOC and no mortgage on the existing house. But until we — you and other supporters — change the mindset about resentment toward people who build housing and the need to make it pencil, then we’ll always see good ideas killed by needless regulation.
I’m just giving historical perspective and advice and I’ve done what I can to move the needle on the finance piece. But it will take time. That day will come. But will the changes to underlying attitudes? That I’m not so sure of.
