Garden Suites in Edmonton: a private investment in the public good

Over the past 5 years, I’ve watched as an increasing amount of research has emerged surrounding Accessory Dwelling Units (ADUs) — or, as they’re frequently called in Canada, “Garden Suites.”

I started paying attention to this form of housing during my undergraduate studies at Dalhousie University in Nova Scotia, where I majored in sustainability and sociology. Initially, I had no idea what an “ADU” was, I was just drawn to the idea of downsizing, reducing our environmental footprint, and the idea of “living within our means.” At first I looked at these concepts from a perspective of culture and consumption, and then later, became intrigued by the potential of our built environments to influence health, happiness, and social well-being.

I decided to do my undergrad thesis research on ADUs in my hometown of Edmonton, Alberta. ADUs seemed to be a unique housing form that people like myself would want to build and/or live in — and might have the ability to foster social, environmental, and economic sustainability in cities.

Existing literature made some consistent arguments for the potential of ADUs.  Sources like Nichols & Adams (2013) and the University of Delaware argued that ADUs are a flexible, adaptable housing form that allows citizens to age in place, with the potential for combating sprawl and encouraging urban densification.

However, I felt a key issue remained unexamined: the ability of ADUs to function as affordable housing.  So while I made the first comprehensive survey of the owners of detached ADUs in Edmonton, I kept a special focus on the subject of affordability.  In particular I investigated whether affordability was influenced by the relationship between the owner and occupant of the ADU.

The results in a nutshell

Why people built ADUs: 44% of respondents said that their primary motivation for building their ADU was to obtain additional rental income, 31% were motivated to create a separate living space for a household member or helper (adult child, senior parent, nanny, etc.), and 11% were motivated by the flexibility of the space and potential to be used in different ways in the future.

How ADUs were being used at the time of the survey: 73% of respondents were renting their ADU as a primary residence, while 18% were using it as an extra space or workroom for occupants of the main dwelling.

How much the ADUs cost to build: The median cost to build an ADU was $135,000 [all cost figures are in Canadian $].

ADUs and cars:  ADUs were associated with an average of 1.05 cars/dwelling, compared to the average for Alberta of 1.87 cars/dwelling.

Who was living in the rentals: 36% of occupants of the ADU were family, 12% were friends, and 52% were strangers.

How much ADU rentals cost and how relationships influenced it:

• The average monthly rent for an ADU, regardless of the relationship between owner and occupant, was $926.
• When relationships were considered, rents differed markedly.  The average monthly rent for family members was $504. The average monthly rent for strangers was $1,154.

ADUs & affordability:

• At $926, the average monthly rent in Edmonton ADUs (irrespective of relationship)  was slightly less than the local average for rentals of comparable size, $1000.
• However, the distribution of ADU rents was unusual, with some zero and very low rents that would not be expected in the rental marketplace.
• Combining the zero- and very-low-rent units, 25% of Edmonton ADUs were <$700/month, which are affordable rents in Edmonton by many definitions.
• 89% of the occupants of these free-or-clearly-below-market rentals were family members of the owner.
• ADUs rented to strangers did not differ significantly in price from comparable market rentals.

Who built the ADUs:  72% of ADU owners had a household income greater than $100,000/year.   This is relatively high for Edmonton, where only 33% of all households make >$100,000.

ADUs and affordability in context:

• A notable fraction (25%) of Edmonton ADUs demonstrated “voluntary affordability” — i.e. the landlord had freely chosen to charge below-market rent, without the benefit of a subsidy.  Similar results have been observed for ADUs in Portland and the Bay Area.
• The fact that these low-cost rentals were overwhelmingly occupied by family members does not change the basic fact that the rents were low.  If the tenants did not have ADUs to live in, they presumably would have needed to procure housing at market prices, or with the help of government subsidies.
• The homeowner-developers behind such ADUs are not acting like traditional landlords.  They are prioritizing something other than profit.  In fact, some seem to not consider themselves landlords at all.  Speaking of the rent being charged, one ADU owner commented… (emphasis mine)

 

“It is just enough to be mutually beneficial but I believe it is somewhat under for what an actual landlord would charge.”

In conclusion:

• ADUs, or Garden Suites as they are known in Canada, are a fascinating form of development in that a notable fraction of developers choose to not maximize profit.
• Citizens who build and house family members in ADUs are essentially making a private investment in a public good.
• Unfortunately, at this point the financial and social benefits associated with ADUs seem more available to wealthier families, who can more easily afford to build them.
• ADUs should not be viewed as the universal remedy to the affordable housing crisis in Canada, but as one important piece of the affordable housing puzzle.
• Policy changes that make ADU construction more accessible and affordable for middle income Canadians would enable greater numbers to reap the benefits associated with ADUs.

You can read more details below, and even more in my full thesis.

ADUs in Edmonton, Alberta, Canada

Edmonton, Alberta is Canada’s fifth largest municipality and is home to close to 900,000 residents. It is a typical prairie city with vast suburbs, and large, uniform, residential lots. In the early 2000s, the City of Edmonton established a vision for becoming a compact, sustainable city, and as of 2010, Edmonton’s Municipal Development Plan set out a goal that a minimum of 25% of all new housing in the city should be located in existing neighborhoods.

This goal prompted a number of policy shifts aimed at encouraging more infill development, including policies surrounding ADUs, which are referred to as Garden Suites in Edmonton. One of the most influential policy changes relevant to ADUs was made in 2015 as the City of Edmonton made it possible to build a detached ADU on almost every residential lot in the city. These changes have helped spur the growth of ADUs to the point that exponential growth is now being observed, as seen below.

With the number of ADUs growing quickly in Edmonton, my study had two main purposes:

• To establish an original baseline dataset that examines everything from construction practices, costs to build, and motivation to build, to affordability, and occupant/owner demographics, and;
• To examine the concept of “voluntary affordability”, first coined by Brown & Palmeri (2014), whereby owners of ADUs voluntarily charge occupants low or ultra-low rent.

I used census survey methods to gather my data with surveys distributed in-person to all 122 residents who own Garden Suites.

Voluntary Affordability

One of the most significant findings that arose out of my research pertains to voluntary affordability. My data show that Garden Suites are primarily being used as an alternative form of rental housing, distinct from other forms of rentals such as apartments, where the relationship between owner and occupant is directly correlated to the amount of rent charged.

Specifically, owners of Garden suites choose to charge low to ultra-low rents to occupants who are family members, while occupants who are strangers are charged at or above market rate, thus demonstrating how Garden suites serve as a form of unregulated “volunteer” affordable housing dependent on relationship.

As seen below, I found that the average monthly rent for family members was $504, while the average monthly rent for strangers was $1,154. By combining the zero- and very-low-rent units, I found that 25% of Edmonton’s Garden Suites are <$700/month, which are considered affordable rents in Edmonton by many definitions.

 

My data also indicated that 89% of the occupants of these free-or-clearly-below-market rentals are family members of the owner.

These findings corroborate those of Brown and Palmeri’s (2014)  as they found that 18% of ADUs included in their study were rented at ultra-low (< USD$500) or zero rent, of which 85% were rented to family members or friends of the owner.

In addition to the monetary data that demonstrates the presence of voluntary affordability in Edmonton’s ADU stock, 51% of ADU owners also self-reported that their relationship with the ADU occupant directly influences the amount of rent they charge. Of those who said that their relationship is correlated with rental rates, 71% of respondents made reference to charging family or someone they know less than they would charge a stranger.

This can be seen in the following responses to the question, “In what way does your relationship with the occupants influence how much rent you charge?”

• “Mother in-law is disabled and wishes to remain living with family so this was the option.”
• “I’m not going to charge my father who’s a senior a lot for rent due to having a fixed income (plus he’s a family member).”
• “We charge her nothing. If this was an unrelated we would charge at least $1,300 or $1,500 including utilities.”
• “It is just enough to be mutually beneficial but I believe it is some what under for what an actual landlord would charge, considering the cost of basement apartments.”
• “Student, family member, very respectful of the space and takes great care of it.”

These data support the idea put forward by Brown & Palmeri (2014) surrounding voluntary affordable housing that owners of Garden Suites, who act as landlords, voluntarily choose to charge lower rent to occupants based on relationship alone. It suggests that a significant proportion of the homeowner-developers behind ADUs are unusual kinds of landlords as they seem to prioritize familial social relationships over economic return.

ADU owners are taking on the role of homeowner-as-developer and homeowner-as-landlord, in order to create alternative living spaces for family members who would otherwise have to find housing elsewhere in the city, likely at a higher rental rate. Family members housed in these ADUs may also need the affordability that the “family subsidy” provides which if not provided by family, may have to be by society.  So, it seems there is a potential benefit to society, not just the family – it’s a private investment in a public good where homeowners are acting as affordable housing providers.

Furthermore, 31% of ADU owners in Edmonton said that their main motivation for building their ADU was to provide a separate living space for a household member such as an adult child or elderly family member. This demonstrates that there is a trend towards care networks being embedded in people’s decision to build. A number of respondents stated they were motivated primarily by the Garden Suite’s utility as an independent, yet close-by living space for a loved one who needs some form of care. That being said, it should be noted that the remaining ADU owners were motivated by additional rental income and the flexibility the space affords them.

ADUs as a Solution to the Affordable Housing Crisis?

When considering affordability on the whole, regardless of the relationship between owner and occupant, the average monthly rent for a Garden Suite in Edmonton was $926. In comparison to CMHC’s 2016 Rental Market Report for Edmonton, the average rent for a 1-bedroom unit in Edmonton was $1,000. 1-bedroom units are the closest available comparison for Garden Suites. This shows that ADUs are rented, on average, for just below market rate.

When looking at who is living in ADUs and who may be accessing their voluntary affordable housing benefits it seems that ADUs in general, occupy two distinct spaces and serve two different purposes. First, they serve as a form of rental housing for young, single individuals. This group of renters has no relation to the owner of the suite and is charged at or just below market rate. Second, they serve as a form of affordable housing for seniors and adult children if the owner and occupant are related. Over half (61%) of the occupants in my study were between the ages of 18-34, while 22% were over 55. This suggests that overall, Garden Suites were mostly serving the housing needs of younger, single people, without children. However, isolating the subset of Garden suites that were rented at affordable rates, I found that the owner’s parents were the main occupants, thus suggesting that seniors are benefitting from their adult children’s investment in a Garden Suite.

The conclusion that many ADUs are voluntarily affordable is a critical piece in the ADU conversation, however, the question must be asked; are ADUs serving the needs of citizens most in need of affordable housing? Is this a solution to the affordable housing crisis?

From what I found, it seems that only certain kinds of people with certain kinds of social and economic capital are able to leverage Garden Suites as an affordable housing option. Owners of Garden Suites are among the City of Edmonton’s highest earners. Of the individuals who construct Garden Suites, 72% earn greater than $100,000 annually (only 33% of all Edmonton households earn >$100,000.

With the median cost of construction at $135,000, building an ADU is financially unattainable for a large number of Edmontonions. This means that it is unlikely that someone who occupies a middle or lower-income bracket would be able to easily reap the social and economic benefits associated with Garden Suites. Furthermore, it seems that the occupant’s social capital plays a direct role in how much they are charged; with family charging family significantly less than they would charge someone they don’t know.

In Edmonton, right now, a large proportion of the people benefiting from these suites have close ties to family that are in upper-income brackets. It is unlikely that someone who occupies a lower income bracket and has lower social capital would benefit from Garden Suites without government intervention, thus, they are serving the needs of a population with access to social capital, rather than those of people in desperate need of affordable housing without anyone to lean on. If one does not have family ties to someone who owns a Garden Suite they may still benefit if they can afford to rent it at slightly below market rate. Otherwise, if rented at market rates, the additional units increase overall rental housing stock, reducing rental rates in the aggregate.

Garden Suites represent one piece of the infill puzzle that is being put together in Edmonton. Overall, a diversity of housing typologies is necessary for environmentally, socially, and economically sustainable urban growth. Garden Suites are not a “silver bullet” with which to resolve Canada’s affordable housing crisis, but they do hold potential to provide affordable housing for the middle class under certain policy conditions. In addition, the market alone leaves a large subset of the population wanting when it comes to affordable housing. Public sector leadership and participation, in addition to progressive infill policies that recognize the socio-economic realities of Garden Suites can help address this shortfall.

Current Trends

Within the past year, Garden Suites have become an increasingly popular point of discussion in Edmonton and an attractive option for homeowners. As of August 24, 2017 more permits have been issued for 2017 as were issued for the entire year of 2016. It is expected that 2017 permits will far exceed previous years, and that the exponential growth of ADUs in Edmonton will continue.

Since my research, several key policy changes have been made to encourage even more people to build suites. These changes came into effect September 1, 2017 and include: moving Garden Suites from a discretionary to permitted use, increasing the maximum floor area of suites 60m2 to 75m2 (646 sf. to 807sf.), and decreasing the minimum site area to allow suites on smaller lots.

Several organizations are championing and advocating for the development of Garden Suites including YEGarden Suites, an organization I co-founded in March 2017, and the Infill Development in Edmonton Association (IDEA). Several media stories have been written about Garden Suites including:

• Suite Concept Takes off in Edmonton – CTV News
• Garage Suites create “voluntary affordability” in Edmonton – Globe & Mail
• Edmonton’s garage suites remain the realm of the privileged – Edmonton Journal
• Secondary suite changes could spur more affordable housing – Metro News
• Edmonton Garage Suites often built for family or friends – CBC News

In Edmonton, like several other North American cities leading the way on ADUs, discussions continue to center on how to create favorable conditions for the growth of ADUs so that we may house more people in our existing neighborhoods, while managing the needs and desires of existing residents. In Edmonton’s case, our own backyards and laneways remain a largely untapped resource, however, it is encouraging to see so much interest being generated surrounding Garden Suites and permit applications increasing year after year. It is clear that many residents have a desire to build a suite, but that cost remains a barrier. With such a limited number of suites citywide, the hope is that build costs will come down as more builders enter the market.

If ADUs have the potential to function as a form of privately funded affordable housing, I would argue that a citizen who chooses to build an ADU for family is making a private investment in a public good.

Cost reductions combined with smart policy decisions is what will facilitate further growth of ADUs and what will allow citizens to carry out one of the biggest acts of city building they can individually achieve.