Courtesy of Downtown Albuquerque News, August 22, 2023

The mayor’s housing bill passed in June, albeit with some major modifications. Now what happens?

There are plenty of X-factors, but the answer may well be ‘not much’

Parking and other restrictions seen as major impediments to construction

A Q & A guide

Squeakers don’t get much squeakier than this.

Following several contentious marathon public comment sessions often stretching late into the night, the City Council on June 21 passed a bill that makes it easier to build casitas on properties that were once the near-exclusive domain of single-family homes. It did so on just a 5-4 vote, and even then only after removing key components that likely would have put even more smaller housing units into production. Three members of that majority are set to retire at the end of the year, and it’s not at all clear if the same bill could pass next spring.

Nevertheless, it is now law. What was formerly a patchwork quilt of rules that alternately barred casitas altogether or allowed them only after a gauntlet of hearings and approvals is now gone. In its place is a new rule that says they are allowed outright.

As he signed the legislation into law, Mayor Tim Keller called it a “big big deal for Albuquerque” and promised a thorough implementation.

But if the experience of other parts of the country is any indication, what comes next could be more of a trickle of casitas than a deluge. It may turn out that the most momentous thing that happened on the local housing front this year was not the technical details of casita liberalization but the sheer fact that political leaders dared to touch the third rail that is zoning in single-family neighborhoods. Having done it once and lived to tell about it, they may well do it again.

So what will the coming months and years look like on the casita construction front? Here’s a Q & A guide with some answers:

What is allowed now that wasn’t allowed before?
The key word here is “detached.” You can now build a casita on property formerly reserved for single-family homes provided it is a separate building. Putting up a new structure will work, as will converting a detached garage or shed. But if that outbuilding is attached to the main house, or if you simply want to turn a house into two living units, that’s considered a duplex and is still not allowed. The original bill had proposed to authorize such duplex conversions in addition to detached casitas, but that part got taken out of the legislation the night it was passed.

There are a few other restrictions: The casita must be no larger than 750 square feet, must be the same or similar color as the main house, must not exceed the height of the main house, and must be spaced at least five feet away from either the side yard or backyard property line.

The Downtown area in particular was a patchwork of casita rules. What’s changed on that front?
Long before the mayor’s Housing Forward plan came along, neighborhoods like Barelas, Huning Highland, and South Broadway allowed casitas provided there was some measure of neighbor approval – a process that planners call a “conditional use” (DAN, 12/5/22). In the Downtown Neighborhoods as well as parts of Sawmill and Wells Park, they were allowed outright with some restrictions about overall lot size and the size of the casita itself.

Those rules were liberal relative to the rest of the city but conservative relative to the new proposal. The Keller administration let them stand as they were in the original draft of the bill on the theory that doing otherwise would have required a tedious quasi-judicial process involving mailed notices to all affected property owners – one of the procedural proclivities of changing things in those so-called “small areas.”

The idea that a discrete collection of neighborhoods largely in the city center would wind up with more conservative rules didn’t sit well with councilors, especially Brook Bassan, who successfully passed an amendment bringing them in line with the rest of the city even as she ultimately voted against the larger bill.

So what happened to the idea that such a change would require an entirely different and much longer process? Different lawyers, it seems.

“The advice that [the City] Council got from their legal staff was because it affected all of those areas equally it counted as a legislative change,” city planner Mikaela Renz-Whitmore said. “If they had started picking and choosing which ones it changed, then they probably would have had to go through the quasi-judicial process.”

So it’s now super easy to build a casita? 
It’s easier but not easy. Construction costs, both for labor and material, are still frightfully high. They also seem to fluctuate so often that even formerly confident industry experts are now shy about estimating such things. But assuming a price of $300 per square foot, a 750-square-foot casita would set you back a cool $225,000. Also, those who (understandably) need to borrow to make that work are paying very high interest rates these days for the privilege.

There are also plenty of legal restrictions that remain on the books, and they could stop a project before it begins. Some lots, for example, are so small that the only practical way to build a casita would be to make it taller than the main house – perhaps by putting it over a garage – but this is not allowed.

There are two even bigger obstacles, however, and the first is the requirement that casitas – known formally as accessory dwelling units (ADUs) – be detached from the main house. That will translate into more exterior walls, more roofing, and more pipes/wires going for longer distances than would be the case for conversion projects within existing structures.

“That eliminates an affordable ADU strategy for pretty much everyone in Albuquerque unless you have some kind of outbuilding,” said Johanna Gilligan, the chief external affairs officer at Homewise, which offers a specific loan product for casita construction.

The second big hurdle is parking. Three-bedroom single-family homes, for example, already require two off-street parking spots, but add a casita to the mix and that number goes up to three.

Making that happen is “geometrically difficult or impossible,” said Kol Peterson, a prominent advocate for the construction of accessory dwelling units based in Portland. “Furthermore, it adds $10,000 of costs.”

What sort of homeowner is most likely to build?
Given the current costs and rules that foreclose on cheaper options, Peterson reckons that building a casita in Albuquerque with the goal of renting it out is probably not going to make a lot of financial sense.

Spend some time with an online home equity loan calculator and it’s easy to see why. Should you happen to have $200,000 in equity available and a contract with someone who will build a casita for just that much, you can in theory pay for it with a 30-year loan that features an interest rate approaching 10 percent and monthly payments of $1,732. But even if you rented that unit out for 50 percent more than the median price of an Albuquerque one-bedroom apartment, you still wouldn’t cover the payment, much less maintenance costs.

Turning it into a short-term rental might be more possible, but it’s far from a sure bet. It’s easy to find casitas listed on Airbnb that would only cover that monthly payment if they were booked far more often than such units typically are.

But if people looking to make extra money (in Peterson’s experience, the bulk of casita builders) are largely out of the game, that still leaves another major category: families looking to live somewhat apart but still pretty close. People in those situations may care less about a traditional return on investment. If they have the money to spend, Peterson said, they may just go for it.

What is the city doing to encourage casita development?
There’s a two-pronged approach. First, it is assembling a collection of off-the-shelf plans: “I’d like us to have at least a dozen templates available that have already gone through the review process,” Planning Department Director Alan Varela said. “When somebody submits one of those with their application for a building permit, it can sail through the review process … I’m trying to make everything as easy as possible for people.”

Second, the administration is trying to smooth out the financial situation, though how far they can get with this is TBD.

“You’ve got to find a way for people who aren’t sitting on 100-150 grand to get this done,” said Eric Griego Montoya, one of Keller’s top housing deputies. “We’re talking to the more progressive credit unions, we’re talking to Mortgage Finance Authority, we’re talking about all sorts of ways … to figure out how to create the funding.”

What’s the upshot? Trickle or wave?
It’s looking like a trickle for at least the near-to-medium term. The goal set by the mayor’s broader housing initiative was 5,000 new units by 2025 above and beyond what would have been built otherwise, and 1,000 of them were supposed to be casitas. But Peterson said he has never seen a jurisdiction with Albuquerque’s parking requirements permit more than 100 per year.

What could change that situation in the long term?
All kinds of factors. The politics of zoning have been changing fast and may well continue to evolve in a more permissive direction – a story that has played out in states as liberal as California and as conservative as Montana. For those hoping to remove parking requirements or revive duplex conversions, the prevailing winds look favorable in the long run.

Costs are likewise a moving target. Should interest rates or construction expenses go down (or median rents go up), the calculus becomes more favorable to casitas. City-sponsored financial initiatives could turn out to be a small factor, but they could also pack a surprising punch. Other private or non-profit institutions may also dream up separate financial instruments to smooth the way.

Builders themselves are also a factor. The market is not typically geared toward small projects, Gilligan said, but if the right people decide to dive in and get really good at it in the process, that could change things dramatically.

“You really start to get traction on this when contractors become specialists in the building type,” she said.

Should some enterprising New Mexican decide to get into the business of prefabricated casitas, that could also change the equation. There is already such a firm in Washington State, Wolf Industries, that sells casitas for as little as $64,000 – though it costs quite a bit extra to actually deliver them, permit them, put in appliances, and hook them up to pipes and wires.

How will we know how many have been built?
We won’t know much for a year. The city’s computer system doesn’t presently have a way to distinguish casita projects from other types of construction, Varela said, but that will change with a software upgrade set to go live in September of 2024.

So where does all that leave us? 
Like many other cities, Albuquerque made looser zoning laws one piece of a home-building campaign, and like many other cities, it left out some key parts that might have helped it more thoroughly achieve its goal.

“Most cities don’t do it well,” Peterson said.

That may come as a relief to people who oppose the increase in density in the first place, often by arguing that they bought into single-family neighborhoods on the expectation that they would more-or-less stay that way.

But for people like Peterson, who want to flood the zone with casitas, duplexes, and more, an initial modest effort has some upsides. He thinks we screwed up when writing our new casita rules but applauds us for having the conversation in the first place on the theory that it could lead to more. Further zoning liberalization, he adds, may prove even easier if this first round doesn’t actually produce a lot of casitas.

“It will not be a big deal at all,” he said. “Nobody will care.”