Accessory Dwelling Units & Tax Incentives: A Housing Solutions Collaborative Update

ChangeLab Solutions’ Housing Solutions Collaborative (HSC) is a year-long learning cohort that convenes cross-sector housing teams in eight small to mid-sized cities across the United States. The primary goal of convening these teams is to confront conditions that impede housing equity in their communities. The HSC provides the teams with technical assistance and a shared foundation for collective problem solving. Read on to learn more about the innovative work pursued by the HSC team in Chesterfield County, Virginia.

Chesterfield County’s Affordable Housing Crunch

What innovative strategies can housing stakeholders use to boost the number of affordable units in a jurisdiction? The Housing Solutions Collaborative team in Chesterfield County, Virginia — a largely suburban county to the south of Richmond — is taking a multi-faceted approach to confronting the region’s housing needs.

Like many other places in the United States, Chesterfield County faces considerable pressures on affordable housing. From 2009 to 2019, rents in the county increased by 27%, while incomes increased by only 12% — a gap that has grown wider due to the COVID-19 pandemic and its economic fallout. More than 20,000 households in the county are cost burdened (i.e., spend more than 30% of their income on housing). Nearly 75% of renter households below 30% of the Area Median Income (AMI) are severely cost burdened, spending more than 50% of their income on housing.

The supply side of affordable housing stock in Chesterfield County is similarly strained. Chesterfield County has very few affordable housing developments in comparison with market-rate developments. Compounding the county’s challenges in producing and providing sufficient affordable housing, outdated state and local zoning laws severely restrict the production of multi-unit housing. Development trends in Chesterfield County reflect these regulatory challenges; in 2017, only 16% of its residential buildings were classified as multifamily, according to the county’s 2019 comprehensive plan. Additionally, prior to 2020, state law prohibited localities in Virginia from enacting voluntary or mandatory inclusionary zoning programs to increase development of affordable housing.

These structural challenges in Chesterfield County call for innovative, cross-sector approaches to increase the number of available affordable units, and Chesterfield County's HSC team is well positioned to provide such strategies.

Meet the Chesterfield HSC Team

The Chesterfield County team comprises representatives from the County of Chesterfield and from the Partnership for Housing Affordability, a nonprofit that promotes affordable housing solutions in the greater Richmond area:

• Jovan Burton, executive director, Partnership for Housing Affordability
• Dan Cohen, director of community enhancement, Chesterfield County
• Jessica Sagara, real estate development and housing coordinator, Chesterfield County
• Nick Feucht, real estate development and housing coordinator, Chesterfield County

In their work together, the Chesterfield County HSC team has been exploring strategies to increase affordable housing while still working within the county’s land use and zoning restrictions. To this end, with support from ChangeLab Solutions staff, the team is investigating strategies that use statewide enabling legislation at the local level to support future development of affordable housing units. In addition, the team has pursued the possibility of renewing and modifying tax incentives intended to spur housing development within the county.

ChangeLab Solutions staff provided the team with a technical assistance memo on some of the strengths and weaknesses of local tax incentive structures that promote equitable housing production and economic development in soft real estate markets. The memo also offered background information on the efficacy of such approaches in spurring development of affordable housing, as well as recommendations for how the county could improve the tax incentive program. In general, the memo advised against tax incentive measures for spurring affordable housing.

“We learned a lot about assessments of similar tax incentive programs elsewhere in the United States from the research ChangeLab did for us,” says Jovan Burton. “Now we’re much better informed about the policies we’re considering.”

Accessory Dwelling Units for Affordable Housing

In addition to working on the tax incentive program and researching state enabling legislation, the Chesterfield County HSC team has also explored several policy options to generate affordable housing, including pathways for development of accessory dwelling units (ADUs). An ADU is a small, separate living space built on the lot of a single-family home. ADUs often take the form of separate outbuildings or converted garages, attics, or basements with their own entrance, kitchen, bathroom, and living and sleeping areas. ADUs are widely acknowledged among housing experts as an effective form of infill development that can readily contribute affordable units to local housing stock because much of the necessary housing infrastructure is already in place. In Chesterfield County, ADUs may be a useful solution for the region’s growing population of older people; projections indicate that households with a person over 65 will grow by 40% by 2040.

Because of the aforementioned zoning and land use restrictions in Chesterfield County, the HSC team has explored additional policy supports to facilitate ADU construction and boost the supply of affordable housing in the area. In particular, the team is exploring the possibility of a neighborhood-scale ADU pilot program. If such a pilot program were successful, policymakers might contemplate a county-wide ordinance to facilitate development of ADUs.

In support of the team’s interest in ADUs, ChangeLab Solutions staff wrote a technical assistance memo detailing possible hurdles to ADU construction. Some of the common challenges to ADU development involve financing, regulatory requirements and processes, zoning rules (including off-street parking and bulk requirements), and property owners’ unmet needs for technical assistance to navigate land use, permitting, and construction processes. The memo also detailed strategy recommendations for addressing these common issues, so that any policy proposal endorsed by the HSC team in the future can avoid potential design flaws that might discourage ADU development.

Lastly, the memo provided examples of other jurisdictions across the United States that have enacted ADU ordinances or made changes to preexisting ordinances. In 2019, Arlington, Virginia, for example, updated their ADU ordinance to permit conversion of pre-existing structures into ADUs and loosened several requirements that were impeding ADU construction. ChangeLab’s memo concluded with a discussion of possible impacts of ADU development on school enrollment and property tax generation.

“Our hope is that ADUs can be a significant part of the solution to Chesterfield County’s housing affordability crunch,” says Dan Cohen. “ChangeLab Solutions and the HSC have greatly improved our understanding of ADUs and the ways that local laws can help or hinder them.”

As part of the HSC learning cohort, the Chesterfield County team will continue to receive support and technical assistance from ChangeLab Solutions as they pursue their policy goals. Learn more about the other cross-sector teams in the cohort and the housing policy approaches they’ve advanced.

By Patrick Glass & Christine Camilleri-Onishi

8/3/2022
Photograph courtesy of Will Parson and the Chesapeake Bay Program