A year after Anchorage loosened rules for accessory dwellings, the impacts are unclear

Last year, Anchorage loosened city rules for accessory dwelling units, often called in-law apartments, on residential properties. It’s not yet clear whether that legislation is spurring more development of the units as intended — and that’s likely due to several complicating factors, according to a new report this month from the Planning Department.

The changes went into effect last February, supported by the Anchorage Assembly and Mayor Dave Bronson’s administration in an effort to encourage construction of more backyard cottages, above-garage apartments and separate living units attached to homes. Accessory dwelling units are often seen as a small but meaningful aspect of potential solutions to Anchorage’s housing shortage, and city land use plans call for an additional 1,000 new ones constructed by 2040 in the Anchorage Bowl.

The Planning Department report says that, between May 2023 through the end of the year, the city issued just 11 building permits for ADUs. That’s about half as many as were built in 2022 and in 2021, according to the report.

City permit data show a similar downturn in all new residential construction, said Daniel McKenna-Foster, senior planner with the city, who prepared the report.

The number of new residential units permitted by the city dropped by more than 37%, from about 380 units in 2022 to 240 units in 2023, according to the permit data.

But it’s also not clear if the the number of permits, as stated in the report, reflects the actual number of ADUs built. The planning department is missing about three months of ADU data in 2023, because when the city changed its rules for the structures, it lost its previous mechanism for tracking them, according to the report. So it’s possible a few were missed in the winter months, McKenna-Foster said.

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In May, the city added a checkbox on new building permits that indicates whether the construction includes an ADU. Previously, owners of properties with ADUs were required to file a document with the Planning Department affirming that they reside on the property.

The legislation last year expanded where the units can be built, changing from just single-family lots to any residential parcel. The measure also allowed larger units in some cases, and removed a requirement that the homeowner lives on the property, among other changes.

The city doesn’t know exactly how many accessory dwelling units exist in the Anchorage municipality. Some people may convert a garage, basement or another space into a separate living unit — sometimes without permits and without following city code standards — and that’s not something that is easy to track.

City property assessment data recorded 726 single-family homes with ADUs in 2023. That’s 53 more than in 2022 — and far more than the 11 permitted by the city in 2023.

The difference “could be due to changes in assessment methodology, formalization of ADUs in the wake of reforms, unpermitted ADUs, or a mixture of any of these,” the report states.

City property assessment data on ADUs also can lag by years. Municipal Assessor Jack Gadamus said that staff try to physically inspect a property every six years and try to contact owners to ask questions, and sometimes find out that a garage or other space has been converted or a detached ADU built.

“We’re trying to make sense of an imperfect world, and we’re trying to do our best, trying to get the best data from that,” Gadamus said.

In at least two instances, potential ADU projects last year were hampered by other aspects of city zoning rules, according to the report. However, the Assembly recently changed some of those rules, also in an effort to encourage development of more housing.

While there hasn’t been an increase in ADU construction permits so far, the planning department has received more than 40 calls from people interested in building ADUs, according to the report.

The cost of housing development and construction has risen drastically in recent years. That, plus high interest rates, has potentially deterred property owners from pursuing housing additions, according to the report.

“You look at the cost of building an ADU now, and it’s insane,” McKenna Foster said. “I think for the average person to add on an ADU now, it would be a serious outlay of cash.”

Generally, ADUs are smaller units added onto properties with larger houses or duplexes. But some people have been looking to flip the norm, McKenna-Foster said.

“I got a lot of calls from people who seemed interested in building a small house now, and then building a larger house later, so that the first house would become an ADU,” McKenna-Foster said. It’s a trend he wants to examine over the next few years, he said.

“That would be this sort of latent demand of ADU use; that people were using the new regulations to build, but just over a longer time period and when the financing made a little more sense,’ he said.

It’s too soon to understand the full impacts of the legislation, and it will likely take time, more data and improving mechanisms to collect that data, McKenna-Foster said.

“I think we’ve got to wrap our heads around how to track (ADUs), and then maybe look at some of the examples and see how people use them,” he said.