HomeMy WebLinkAboutCost impact of ADU ParkingCost Impact of ADU Off-Street Parking
Creating an ADU that can be used for affordable workforce rental is a challenging exercise in making it “pencil out” as addressed in The ABCs and 123s of ADUs and the ADU calculator
available on the HSN ADU webpage. The City of Port Townsend requirement (See Appendix) of a 9’ x 19’ off-street parking space for an ADU could contribute to construction costs, which
in turn would contribute to the ADU rental rate, which could then impact the affordability of the rent by a member of the workforce. This note addresses how such costs would translate
into increases in the rental rate. The actual cost for the off-street parking space would be site dependent and is not addressed in this note.
It is assumed that the cost of the off-street parking space would be part of the overall financing need for the ADU project. As addressed in The ABCs and 123s of ADUs, the main financing
options include home equity loans, refinancing of the primary residence, and borrowing from local investors. Each of these options could have somewhat different loan durations and interest
rates. Local lenders tend to expect loan repayment in about 5 years. Home equity loans or Home Equity Lines of Credits tend to require repayment in 10-20 years. Conventional refinancing
mortgages could have up to 30-year loan repayment. Current interest rates could range from 3% to 5% for all of these.
This chart shows the corresponding increment in ADU rental rate for different costs associated with the off-street parking and for different durations of a 4% loan. For example, an
off-street
parking space that cost $10,000 would lead to a $101 per month increase in the ADU rental rate if the project was being financed by a 10-year loan with a 4% interest rate. For reference,
affordable rents (including utilities) range from about $750 for a minimum wage worker to about $1,600 for a household making the Area Median Income (AMI).
The impact of this increase rent can be looked at through the lens of the increase of income needed by the tenant to pay the rent. Using the guideline that housing costs should not exceed
30% of the household gross income, the rental increment can be converted to the income increment needed to pay the rent. For example, the $10,000 off-street parking space financed by
a 10 year loan at 4% translates into about a $4000 increase in household income needed to make this rent affordable. For reference a full time minimum wage worker earns $30,139 while
the AMI household earns $57,693.
Small changes in interest rates have only a minor impact on the rent that would need to be charged to pay for the off-street parking space. For example, for the $10,000 cost of off-street
parking, the impact on the rental cost would vary from $97 to $106 for loan interest ranging from 3% to 5% for a 10 year loan.
Appendix
From City of Port Townsend ADU General Information
“Per PTMC 17.72, Off Street Parking and Loading, two on-site parking spaces, each a minimum of 9 feet wide by 19 feet long, are required for each single-family residence, and one additional
9-feet wide by 19-feet long on-site parking space is required to establish an ADU, provided the off-street parking requirements for the other uses on the site are continuously met.
If the property owner can demonstrate that there is no way to provide parking on-site, an on-street parking space may be proposed, subject to approval by the Public Works Director (PTMC
17.72.080, Footnote 1).”
Footnote 1 – “The design, placement and proposed construction standards of all on-street spaces proposed to satisfy this requirement shall be reviewed and approved by the public works
director, and meet city street standards unless waived or modified based on documented factors including consideration of topography, surrounding conditions, drainage, preservation
of pervious surface; and be available on the same side of the street fronting the residence where the ADU is located.”