Building Income and Asset Value with Affordable Housing

As housing prices continue to break records in Ada and Canyon counties, recent changes to Boise City code that decrease limitations on accessory dwelling units may be a win for owners and renters alike.

The changes voted on by the Boise City Council increase the maximum size of accessory dwelling units from 600 to 700 square feet, while upping the number of bedrooms allowed from one to two and transferring the requirement for dedicated parking from a one-bedroom to a two-bedroom unit. This allows for a more diverse rental market at cheaper prices than more traditional housing options and incentives for property owners. Sellers and renters can now build and market two-bedroom ADUs, gaining additional rental income and property value while increasing inventory in a tight housing market.

Accessory Dwelling Unit Limitations in Boise:

·       Maximum of 2 bedrooms

·       Maximum of 700 square feet

·       Maximum of 1 parking space per 2-bedroom unit

·       Property owner must live on site (not open to corporate landlords)

Accessory dwelling units are additional housing spaces built adjacent to a home on the same property, often taking the form of a backyard cottage or a basement apartment. Current code requires that the owners live on-property, so these dwellings cannot be clustered around other rental units purchased and managed by distant landlords. ADUs have been largely marketed to students as entry-level housing options or aging family as retirement housing, but with more space, the market for accessory dwelling units can be broadened to small families, couples, friends, and roommates that find themselves priced out of other housing options.

For Ada County home owners looking to add value to their property and gain income, ADUs represent the ability to help pay that mortgage. Renting a small residence opens the door for property owners looking for further investment opportunities, and the building of an accessory dwelling unit on existing property will increase your property value and help finance future properties. Here’s how:

The rental income from an accessory dwelling unit is not just a liquid asset but a potential qualifier for future home financing. 75% of potential rent money from a property with an ADU can be used to qualify a home loan borrower with a minimum 3% down payment, according to an Umpqua Bank loan officer. There are caveats to a loan like this, such as proving renter history over a 12-month period and finding comparable properties in the area, but with the increasing popularity of ADUs in Boise, these are potentially minimal obstacles to financing that dream home (too bad the Warm Springs Castle was already sold).  

Some Boise residents oppose the increased density that ADUs bring to residential areas of the Treasure Valley, while others are glad for the alternative to urban expansion into formerly rural parts of the Valley. But overall, the popularity of ADUs has increased in the last year for one key reason: they provide an alternative to the record-breaking height of home prices in the region.

Boiseans, what do you think of the updated code regarding ADUs? Have the changes gone too far or not far enough? Are accessory dwelling units a potential solution to or a growing symptom of decreasing home affordability in the Treasure Valley? Find on social media and share your thoughts, comments, and experiences regarding ADUs and the local housing market. And, as always, thank you for being part of the 208 community.

By: Jake Nuttall