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Real Estate REInvesting: All About Boulder ADUs

For the second event in our Wine, Cheese, and Real Estate REInvesting series, we discussed new regulations on laws governing the use of Additional Dwelling Units built on residential properties. These regulations went into effect on February 1 to mixed feelings. The City Council of Boulder hopes these amendments will create more affordable housing options in Boulder. Here’s what we covered at the event.

A Breakdown of New Regulations

Jill Grano, a former city council member and the current director of community affairs for Congressman Joe Neguse, walked us through two significant changes to the ADU regulations. Previously, in the majority of residential Boulder (RL1 and RL2 zones), ADUs had to be attached to the main dwelling. Now, ADUs can be built as detached units for homes in these zones.

Jill also highlighted a second law that should make things easier for those interested in building a new ADU on their Boulder property. The city’s prior law required a home’s ADU to have a parking space. This space had to be set back 25 feet and separate from the driveway. Jill explained that many times, constructing an extra parking space adherent to the city’s regulations meant cutting beloved trees, but residents didn’t have a choice. Now, the ADU parking space can be the main dwelling’s driveway.

Jill also explained that previous saturation limits dictated that only 10% of homes within a certain area could have ADUs. That limit has been increased to 20%. Most design restrictions and occupancy limits for ADUs have also been lifted.

Regulations Increase According to ADU Size

The City Council passed additional regulations that become more stringent as the ADU’s square footage increases. If the ADU is detached and is less than 550 square feet, you can rent the unit at market rate. Rent for ADUs from 550 – 850 square feet are capped at 75% of area median income.

Attached ADUs also fall under these requirements. Jill explains that if the owner walls off a portion of a basement ADU in an effort to limit the square footage, but allows renters access to additional square feet of the home (laundry room, storage, etc.), the penalties are severe.

What This Means for Boulder

Opening up ADU regulations allow for a higher population density in current low-density zones. By facilitating an opportunity for more people to occupy the property, traffic can decrease and Boulder’s businesses can continue to flourish.

Because housing is high throughout Boulder, many restaurants, bars, and businesses have trouble finding employees to staff their businesses. Potential employees can’t afford to live close enough to work and the commute can become financially unfeasible.

Jill advises that high density is not as scary as it sounds. Higher density cities all over Europe are environmentally friendly and experience minimal congestion. Making affordable space available for new residents will continue to help the economy and put residents within walking distance of their communities, jobs, and amenities.

Current Housing Market

All in all, the City Council of Boulder hopes that less stringent regulations will help the housing and economic markets. It has become increasingly apparent that migration trends into Boulder are inspired by Colorado’s lifestyle and location. Our middle-of-the-country hub is home to world-class skiing, top-rated schools, and a progressive mindset.

Boulder’s equity gain peaked in 2015 and saw offers that were $100k plus over asking price. Since 2016, Boulder’s equity gain has mellowed out, which is a good thing. Normal markets in Boulder are less likely to bubble-out.

Some businesses have left Boulder due to its high cost of living. Small businesses, especially those in the service and hospitality sectors, have trouble finding quality staff because that quality staff can’t afford to live in Boulder. It is the City Council’s hope that the amended ADU regulations will continue to attract potential home buyers to Boulder and retain the current population.

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