DENVER | Main Development Thread #7

[laniroj]

Originally Posted by mr1138

...In fact - it probably isn't too big of a stretch to say that some of the small-scale developers who will do this kind of infill may not even be in business yet. There are likely investors out there right now who are still in the very early stages of formulating their business plans and watching real estate trends...

...What we do know about California's new laws (as was cited during one of the recent public hearings) is that they have seen a ten-fold increase in applications for ADUs. This makes sense as these tend to be homeowner-initiated applications for properties they already own, so they can gear up much more quickly than the developers who do infill. It also shows just how much interest is out there to already see such a steep uptick in permit applications.

^You're right on the money. This is exactly the intent of these zoning laws. Open up small scale development to people on the block. The current industry requires significant expertise, capital, and patience alongside a whole lotta risk. Buying a single family home and turning it into a duplex or fourplex is something many folks can do on their own, much like it was 100+ years ago. This opens the door to attainable/incremental competition, supply, and housing diversity. Back then, you didn't see these huge projects or giant community developments. Instead, you saw a land developer plat a couple blocks at a time and then sell lots individually to many small mom and pops - thus the range of development we saw...different strokes for different folks. Everyone sees the world differently, which is a great thing, but our planning and zoning regulations only allow for an extremely limited and rigid view of things.

[laniroj]

Originally Posted by TakeFive

It goes to my libertarian side


I'm not a fan of NANNY Government. At the Federal level it's more typically liberals but at the state level it can be either. Just look at all the idiotic laws being passed in Red States. Too many people with too much power want to tell others what to believe and what they must do to satisfy those in power.

Bottom Line is I don't like the State dictating to municipalities because a small group of legislators think they know what is best for everybody else. The other thing is that there is a Big difference between The City of Denver and suburban communities.

But above all else any supposed improvements will only be at the margins. There's other things that are much more important for attaining affordability. What about property taxes for example? They handed our a few nickels to make everybody feel better. So typical of Blue States.

If you lean libertarian, as I do (I'm like a toppled Tower of Pisa in that regard), then what about property rights? Zoning has crushed property rights. Regulation has crushed property rights. Local control (emphasis on control) is the antithesis of libertarian as pertains zoning/regulation.

I'm in total agreement with you regarding the approach the legislature is taking, but the end result is closer to a libertarian outcome than if that approach were not taken. The ends justify the means, in this case.

[mr1138]

Originally Posted by laniroj

^You're right on the money. This is exactly the intent of these zoning laws. Open up small scale development to people on the block. The current industry requires significant expertise, capital, and patience alongside a whole lotta risk. Buying a single family home and turning it into a duplex or fourplex is something many folks can do on their own, much like it was 100+ years ago. This opens the door to attainable/incremental competition, supply, and housing diversity. Back then, you didn't see these huge projects or giant community developments. Instead, you saw a land developer plat a couple blocks at a time and then sell lots individually to many small mom and pops - thus the range of development we saw...different strokes for different folks. Everyone sees the world differently, which is a great thing, but our planning and zoning regulations only allow for an extremely limited and rigid view of things.

That certainly is the hope! This article is an old favorite of mine on this topic, though I'm sure many on this forum are already familiar with these ideas. Incremental growth in existing neighborhoods is a fundamentally different way of planning than what is intended under strict single-family zoning. I think there's a good argument that developments should always be approved with zoning for slightly more density than what the developer intends to build, so the proper zoning is already in place when the first lifespan of the houses begins to reach its end. Ripping the band-aid off statewide (so to speak) actually seems like a good idea to me. In fact, it would probably take development pressure off of more suburban locales in the short term.

I do think that it may be a bit optimistic to think that individual homeowners can build a duplex or fourplex - doing so takes quite a bit of capital, not to mention finding somewhere else to live in the meantime, so realistically it would still take some pretty deep pockets. But ADUs on the other hand - of course this is something that many individual homeowners can and will do! Plenty of people remodel their homes and add square footage all the time using their own savings or equity, so it makes perfect sense they would start adding ADUs if allowed to do so.

But even if individual homeowners can't always build townhomes themselves, I'm guessing we're still talking about very different developers than the Lennars and the Mertiage Homes' of the world - many of whom may not have even considered going into business until they learned of the new legislation. Not that those big companies couldn't pivot too - but it would be a major turn for their business models to start buying up land in existing neighborhoods, going through a new and different planning process, and then producing fewer homes at each project site. That kind of change in business model would take time, and is also subject to real estate and interest rate cycles.

[Stonemans_rowJ]

ADUs are like Sprinter vans. Best for trust fund millennials. Pretty small market.

[UrbanT]

Originally Posted by Stonemans_rowJ

ADUs are like Sprinter vans. Best for trust fund millennials. Pretty small market.

Currently they are a small market because they are not zoned for in 70% of the city. Also, you spelled "boomer's with money" wrong.

[mhays]

Originally Posted by TakeFive

With respect to "infill" within Denver, there's plenty of land still available but none of the developers so far are interested in duplexes or fourplexes; they all want to build higher density units like 5 stories and up. I 'may' have read that Fox Park may include some missing middle housing.

What an odd argument. In an area like Denver, developers will build the highest and best use. In areas that allow density, when more than a single house lot is available they won't build four townhouses. That sort of project will only proliferate when they're allowed on typical SFR sites.

As for ADUs, Seattle permitted nearly 1,000 last year, also more than 10x the typical old rate. It's a deep market.

[TakeFive]

Originally Posted by laniroj

^You're right on the money. This is exactly the intent of these zoning laws. Open up small scale development to people on the block. The current industry requires significant expertise, capital, and patience alongside a whole lotta risk.

As previously stated I'm not against "four-plex" zoning. Where we would disagree is who should determine that, the state or the municipality.

I was mildly surprised the City (mayor and city council) were against the state plan..... but maybe I shouldn't have been?

The City has poured blood, sweat and tears into their neighborhood/area plans taking up to three years to complete. While 4-plex zoning wouldn't be that disruptive, I assume it's the whole notion of giving up the ability to decide what is best for your own residents.

So I'll wait for the city to decide when this should happen.

Note of caution

I can see this issue as potentially important for the next elections in 2024. Such land use issues are not easily defined by Republican versus Democrat or even liberal versus conservative.

[mhays]

Land use codes are much like codes for pollution, gun control, and other things....piecemeal doesn't work very well on a systematic level. It needs to be at the state level at minimum.

[TakeFive]

Originally Posted by mhays

Land use codes are much like codes for pollution, gun control, and other things....piecemeal doesn't work very well on a systematic level. It needs to be at the state level at minimum.

Can I assume you prefer representative government as opposed to totalitarianism? Things can go against what you want and even stuff passed by a legislative body can be undone and changed.

Interesting observation

The conservative talkers that I listen to before I nod off think that Biden will change his mind about running in 2024 before the end of the year. I wouldn't disagree but only time will tell. In any case I don't have a good feeling about the 2024 elections.

[Stonemans_rowJ]

Originally Posted by UrbanT

Currently they are a small market because they are not zoned for in 70% of the city. Also, you spelled "boomer's with money" wrong.

They are economically not viable. Anyone who understands real estate investment knows this. Most boomers are getting squeezed big time and the ones who aren't don't need or want a rental in their backyard. I happen to know quite a bit on the topic. But, you're entitled to your opinion. Why don't you buy a house and build an ADU. Report back.

[Stonemans_rowJ]

Originally Posted by mhays

What an odd argument. In an area like Denver, developers will build the highest and best use. In areas that allow density, when more than a single house lot is available they won't build four townhouses. That sort of project will only proliferate when they're allowed on typical SFR sites.

As for ADUs, Seattle permitted nearly 1,000 last year, also more than 10x the typical old rate. It's a deep market.

Virtually every TU lot or MU zoned lot in central and NW denver that was a candidate for a scrape over the last 8 years (meaning the existing house was functionally obsolete and land was best use) got redeveloped into higher/more dense use.

If E. Colfax or Mayfair was zoned MU or MX it'd look like Sloan's/Jefferson Park/W Colfax today. Literally across from my kid's school in Mayfair, there's a single 50s house bought 1.5 years ago ($565,000), torn down recently, lot is 75' wide, I expect 3 townhomes, or possibly "luxury" duplex but likely 3 units. 9+CO area. There are hundreds/thousands of homes in the immediate vicinity like this that are tiny 50s houses, large lots, but they carry SU zoning. Only a small area immediately adjacent to the hospitals got the more dense zoning.

[mhays]

Originally Posted by TakeFive

Can I assume you prefer representative government as opposed to totalitarianism? Things can go against what you want and even stuff passed by a legislative body can be undone and changed.

You mystify me. I can only guess at your point.

Perhaps you're suggesting that state-level legislation is totalitarian, despite being passed by representatives?

[laniroj]

Originally Posted by mr1138

...I do think that it may be a bit optimistic to think that individual homeowners can build a duplex or fourplex - doing so takes quite a bit of capital, not to mention finding somewhere else to live in the meantime, so realistically it would still take some pretty deep pockets...

There are three homes on my block whose owners I know and operate the houses as rentals. They've owned the houses forever and have no debt. Each one of them would be capable of building a duplex and likely interested in doing so. Remember, single family building/code regulations are LIGHT YEARS easier than large commercial/multifamily ones. You're talking about 15-20 pages of plans vs hundreds of pages on the commercial side and maybe $50,000 of out of pocket expenses to get to construction (vs a couple to several million for large stuff - not including land).

Don't underestimate the moms and pops! People who have been around a long time generally have a ton of equity locked up in real estate often with little/no debt. It's not for everyone, but it is for some people.

[laniroj]

Originally Posted by mhays

As for ADUs, Seattle permitted nearly 1,000 last year, also more than 10x the typical old rate. It's a deep market.

^Denver throws tens of millions per year at affordable housing and definitely doesn't get 1,000 units/year consistently. Turns out, a simple zoning change can generate 1,000 affordable homes per year with no assistance needed from the gubment!

[laniroj]

Originally Posted by Stonemans_rowJ

They are economically not viable. Anyone who understands real estate investment knows this. Most boomers are getting squeezed big time and the ones who aren't don't need or want a rental in their backyard. I happen to know quite a bit on the topic. But, you're entitled to your opinion. Why don't you buy a house and build an ADU. Report back.

I have two friends building ADU's, but not for economic reasons. They're building them for their parents who are aging and on the cusp of not being able to take care of themselves. The choice was subsidize their folks $3k/month of the $4k total for assisted living in another state (b/c they're all full) or invest $250k in an ADU that costs them $1,500/month once built and adds several hundred thousand to their home's overall value. Yes, they are lucky to be able to afford to make this decision and this is certainly not the majority, but there are many people in this situation. The folks are lucky their kids care so deeply for them!

[Interzen]

Originally Posted by laniroj

There are three homes on my block whose owners I know and operate the houses as rentals. They've owned the houses forever and have no debt. Each one of them would be capable of building a duplex and likely interested in doing so. Remember, single family building/code regulations are LIGHT YEARS easier than large commercial/multifamily ones. You're talking about 15-20 pages of plans vs hundreds of pages on the commercial side and maybe $50,000 of out of pocket expenses to get to construction (vs a couple to several million for large stuff - not including land).

Don't underestimate the moms and pops! People who have been around a long time generally have a ton of equity locked up in real estate often with little/no debt. It's not for everyone, but it is for some people.

This is similar to the situation on my block. I've been here 17 years and the zoning has supported ADUs the whole time but they are just starting to be built.

The house across the street sold in 2017 and the new owner built an ADU in 2019. She moved into the ADU and rented the house short term until the city cracked down. Now she rents both out and lives elsewhere.

Next door the owners moved to the burbs 20 yrs ago when their kids where school age but kept the house as a rental. They are finishing up an ADU with garage and plan to rent both out until thier kids leave home then move into the ADU for retirement while still renting out the house. They spent ~300k total.

My neighbor 3 doors the other way has permits in hand but is still trying to finalize a contract with a builder. He has been calculating more like $380k but his may be larger and or nicer and the other neighbor started 2 years ago. I don't know his rental plans but he could legally go short term as he lives in the house up front.

I have no mortgage and have toyed with the idea of building one but will need to rebuild the back half of my dilapidated house first. I need to access it from the alley so it will have to wait.

One caviat that makes this block different from most areas that are being rezoned now is that we are directly downtown adjacent so rental rates might be a bit higher.

[UrbanT]

Originally Posted by Stonemans_rowJ

They are economically not viable. Anyone who understands real estate investment knows this. Most boomers are getting squeezed big time and the ones who aren't don't need or want a rental in their backyard. I happen to know quite a bit on the topic. But, you're entitled to your opinion. Why don't you buy a house and build an ADU. Report back.

"They are economically not viable." - I know
"Anyone who understands real estate investment knows this." Most of us probably do understand that, at least I'd hope that on this nerdy forum most do. I was merely pointing out that your comment on "Trust fund millennials" was dumb and singling out generations is also silly, that is why I poked on Boomers but seemed to be misunderstood. I just hope we permit ADU's to be built in more areas so costs go down. Look at what other cities have done in regards to opening up accessibility for building ADU's. Seattle is now permitting more ADU'S than single family homes. Mhays is correct that piece-mental zoning is ineffective in regards to ADU's.

[Stonemans_rowJ]

Originally Posted by laniroj

I have two friends building ADU's, but not for economic reasons. They're building them for their parents who are aging and on the cusp of not being able to take care of themselves. The choice was subsidize their folks $3k/month of the $4k total for assisted living in another state (b/c they're all full) or invest $250k in an ADU that costs them $1,500/month once built and adds several hundred thousand to their home's overall value. Yes, they are lucky to be able to afford to make this decision and this is certainly not the majority, but there are many people in this situation. The folks are lucky their kids care so deeply for them!

Interesting. What neighborhood(s)? Specifics would be helpful. Maybe you've cracked the code. I question the $250,000 build cost and the $1,500 a month. Can you elaborate how those numbers are possible? a simple stick built 2 car garage is $50k. Did they do a cash out refi and change their first lien to 6.5%? Did they use their 8% heloc? 2nd mortgage? construction loan? self financed in cash? specifics matter because they speak to why these are not possible at any scale for individual people. You basically admit that your friends are wealthy and are subsidizing their parents. Small demographic able to do that in my experience and the ones who can may stick their folks in a nice condo nearby. Much better and safer investment.

My parents moved here two years ago. They bought a house close to me with 100k down payment. Mortgage out the door at $2,500 in Central Park. Likewise, in-laws did the same thing in Wash Park. Downsizing into 400-600' ADU off a disgusting alley, up a flight of stairs? Wake up to the sound of garbage trucks? Yea, this has mass appeal.

Again, this is niche at best (which you admit) but I don't doubt that you have a "couple friends" who did it, even if I do doubt your numbers. I don't see "many people" wanting to do this, or being able to. I see some people thinking it's cool- mainly the Airbnb bros (that market is already cratering).

Where it makes most sense is on new build or new construction, or large corner lot, basically you need an alley, where are utilities? you are going to run new sewer and water all the way back around the existing house? Isn't ADU required to have separate water/sewer? There are so many logistical and economic hurdles beyond the zoning is my point.

Upzoning what we have is the answer. Polis is trying.

[Stonemans_rowJ]

Originally Posted by UrbanT

"They are economically not viable." - I know
"Anyone who understands real estate investment knows this." Most of us probably do understand that, at least I'd hope that on this nerdy forum most do. I was merely pointing out that your comment on "Trust fund millennials" was dumb and singling out generations is also silly, that is why I poked on Boomers but seemed to be misunderstood. I just hope we permit ADU's to be built in more areas so costs go down. Look at what other cities have done in regards to opening up accessibility for building ADU's. Seattle is now permitting more ADU'S than single family homes. Mhays is correct that piece-mental zoning is ineffective in regards to ADU's.

Most comments on ADUs fail to acknowledge the economics and how the economics do not make any sense.

How would costs go down if we permit ADUs to be built in more areas?

[TakeFive]

Originally Posted by Stonemans_rowJ

Most comments on ADUs fail to acknowledge the economics and how the economics do not make any sense.

How would costs go down if we permit ADUs to be built in more areas?

Just curios? How much would you say the cost of construction has gone up over the last several years, like pre-pandemic to now for ADU's?

Isn't the average lot for 50's built homes neighborhoods ~6,200 sq ft? How does lot size impact building a new multi-plex. You mentioned 75 feet width on your example.

Nicer new developments - say ten years ago in Scottsdale - offered a model with an attached accessory unit up front with it's own entrance (obviously).