Would Tax Abatements Spur More ADU Construction in Anchorage?
An accessory dwelling unit in Anchorage. (Source: Author.)
A recent article by Alaska Public Media described Anchorage Mayor Dave Bronson’s abrupt effort to kickstart the construction of accessory dwelling units (ADUs) in Anchorage with subsidies offered as property tax abatements.
Like many West Coast cities, Anchorage has been experiencing a housing shortage and escalating home prices, forcing many residents to choose to live outside the city and commute from nearby communities like Palmer, Wasilla, and beyond. Anchorage’s population has consistently declined over the past four years, with most losses attributed to residents relocating to nearby communities. Many are likely purchasing single-family homes, but the housing shortage is still driving up prices on rentals.
Anchorage was founded in 1915, but experienced its most significant growth in the 1960s and 1970s. As a result, it lacks the options available to older cities for expanding housing options, like converting old brick warehouses or renovating historic apartment buildings. A bulk of Anchorage growth since WWII was the result of the 1970s domestic oil boom and construction of the Trans-Alaska Pipeline, so, naturally, it’s a very auto-centric city.
We don’t have traditional neighborhoods with corner stores and mixed-use buildings—instead, we have large swaths of suburban-style, single-family home neighborhoods. Some of the older areas near downtown, like South Addition and Fairview, have had ADUs or mother-in-law apartments long before any debate was raised about them. For decades, they quietly augmented these homes by providing small, separate living spaces to give independence to an aging parent, college student, or anyone who needed a small, affordable place to call their own.
Subsidizing ADUs
In an attempt to incentivize homeowners and developers who may be considering building ADUs, the Bronson administration proposed a 10-year abatement on resulting property tax increases. The Anchorage Assembly heard public testimony on the proposed reduction during its February 15 meeting, where some residents raised concerns the new ADUs would be used as short-term vacation rentals—a valid concern. Tourism is Alaska’s second-largest industry, and the hospitality industry has suffered due to the rise in popularity of online marketplaces like AirBnB and VRBO. Additionally, losing long-term housing units to vacation rental use puts additional strain on the housing market. Assembly member Meg Zalatel has proposed an alternate version of the ordinance, in which only ADUs offered as long-term housing will be eligible for the tax pause. Additionally, it would apply to existing, unregistered ADUs to help bring them into compliance. Zalatel’s alternate version is well intentioned, but seems difficult to enforce and potentially problematic when deeds are sold or transferred.
According to an ADU survey conducted by the city in late 2021, only 14.2% of respondents who had previously considered building an ADU cited future tax burden as a reason they chose not to build. It’s also logical to assume that not every respondent who noted this reason accurately calculated the tax increase and may have overestimated it. Even so, a 10-year abatement on what is likely to be a modest tax increase is unlikely to be the impetus to invest $60,000–80,000 to construct an ADU. If they have the upfront capital and the motivation to build an ADU, they’ll do it.
A local construction company owner is suggesting the city of Anchorage issue grants to property owners looking to build an ADU. In Juneau, a similar program in 2017 issued twelve direct grants at $6,000 each, less than ten percent of the up-front capital required to build an ADU.
Anchorage, AL. (Source: Flickr.)
Regulatory Changes
New ADUs have only been permitted in Anchorage’s R1 zones (single-family) since 2018, and that change came bundled with a handful of stipulations. The owner-occupancy requirement mandates that the property owner live on-site if a renter inhabits the ADU. This is perhaps the most regressive condition, largely considered a NIMBY mechanism to keep renters from their community. Other barriers include design requirements that dictate whether the ADU doorway may be on the same side of the building as the primary residence. ADU owners must provide one off-street parking space to tenants or require a no-car covenant. This is a ridiculous requirement, because no regulations force property owners to use their off-street parking rather than the public right of way. For example, suburban single-family homes must have off-street parking, but there’s typically no law that says you have to park in your driveway; it’s just another barrier.
ADU construction is perpetually hindered by non-ADU-specific zoning requirements, as well, many of which continue to hamstring ADU construction across the country. Zoning ordinances like maximum lot coverage and property setbacks make building an ADU complicated and, in most cases, illegal.
Nearly 24 percent of the ADU respondents who chose not to build one cited zoning restrictions as their reason, while another 13 percent cited the property review process.
The Best Thing the City of Anchorage Can Do to Help Property Owners Build ADUs Is Get Out of the Way
Reducing the number of regulatory hurdles involved with building ADUs is the most cost-effective strategy for the City of Anchorage and embodies the Strong Towns approach:
Humbly observe where people in the community struggle.
Ask the question: What is the next smallest thing we can do right now to address that struggle?
Do that thing. Do it right now.
Repeat.
Even with generous grant funding and tax abatements, we’re still asking homeowners to become developers and landlords to help close the gap in our housing market. This is something many homeowners simply aren’t willing to take on.
The best possible outcome is when hundreds of homeowners construct new ADUs, adding much-needed housing units to established neighborhoods. Still, this is a niche housing segment and ultimately does very little to solve the housing crisis at large.
Over the past few years, ADUs have gotten a lot of press, and the public opinion of them has improved significantly, and why not? ADUs are great, and we should encourage people to build them. Anchorage needs increased housing density. ADUs are gaining favor and may help put a dent in the housing crisis in Anchorage where too many communities remain staunchly opposed to much-needed upzoning and mixed-use development
Mikhail Siskoff is an Anchorage-based visual artist, urbanist, activist, and YIMBY. He decided to launch intrinsic.city after lurking on Strong Towns and Curbed for a few years and deciding he wanted to make something Anchorage-centric that would combine a bit of both worlds. (Sustainability can be aesthetically pleasing, too!)
When he’s not writing about Anchorage issues, he enjoys spending time with his wife, creating new art, and carefully restoring/curating their mid-century ranch home. You can connect with him on Twitter @intrinsiccity.