More Iowa cities exploring accessory dwelling units as affordable housing solution after Cedar Rapids policy expansion

This is the first installment of an occasional series on housing.

CEDAR RAPIDS — On long drives from Missouri to Canada for occasional fishing trips, Alex Lohr recalls seeing Quaker Oats from a distance as he sped by Cedar Rapids on the interstate — never imagining he’d one day call this city home, or that factory his workplace.

But near the end of December, after graduating from Missouri University of Science and Technology with his bachelor’s in engineering, the 22-year-old landed a job as a supply chain associate at Quaker Oats. His girlfriend took a veterinary technician job at Abraham’s Equine Clinic.

Newly employed, the two ventured from the familiarity of Missouri to their new home in northwest Cedar Rapids.

Their abode isn’t like most residential structures in Cedar Rapids, though. Lohr and his girlfriend are living in an accessory dwelling unit — a structure with its own kitchen, bathroom and sleeping area that shares a lot with the main house.

ADUs — also known as granny flats, in-law suites, coach houses and casitas — are overall uncommon in Iowa. But a growing number of communities around the state have looked at policy changes to spur development of these units to create sorely needed housing and boost density in neighborhoods.

Lohr’s unit is a two-bedroom, two-bathroom space on the upper half of the structure. His neighbors reside in the lower half, where there’s a detached garage.

Initially, Lohr said he anticipated moving into more of a traditional home — something you might expect to see in a downtown area where the houses are closely packed together.

He was hooked by the modern feel to his unit, the new appliances and the fact that they’re the first tenants. And for the most part, he appreciates the quiet atmosphere — unlike the fraternity house where he previously lived.

“We really didn't think we were going to go for the suburbia feel, like 15 minutes (from) downtown,” Lohr said. “We thought we were going to be close to everything, but it's been really nice that we're out of the way in this style apartment.”

ADUs ‘part of the puzzle’

More people are looking to ADUs as a housing solution for several reasons. These units can generate rental income, shelter aging parents or give growing children a place of their own that’s still right in the backyard.

They can be made through basement or garage conversions, additions, or newly built backyard “tiny homes.” Sometimes, ADUs may not even be obvious from the street because they can be internal to a house.

AARP, the national organization that works on issues affecting people age 50 and older, has been key in advocating for policies that foster ADU development.

ADUs create more affordable housing for everyone, said Brad Anderson, the Iowa state director for AARP. But for older Iowans, ADUs provide more long-term care options where families can keep their loved ones nearby instead of in a nursing home. And for Iowans on a fixed income, they can build and eventually rent out an ADU for rental income.

“We understand that they're not the end all be all when it comes to affordable housing … but certainly ADUs are part of the puzzle,” Anderson said.

For Cedar Rapids, which expanded its ADU policy in 2021, these units are something Assistant Community Development Director Adam Lindenlaub said officials intentionally wanted to encourage. They check several boxes across city plans — whether it’s promoting intergenerational living with the Age-Friendly Action Plan or walkable, “15-minute” neighborhoods in the Community Climate Action Plan.

“In our traditional, more historic neighborhoods, there are still a lot of similar housing types in the area,” Community Development Director Jennifer Pratt said. “This provides one other option that’s different.”

ADUs allow for infill development in a way that fosters a sense of community, said Sandy Locke, owner of Prairie Rose Rentals, who has built some ADUs. She envisions ADUs as a place where divorced parents can live separately on the same lot, or long-term renters can comfortably settle into a residential neighborhood.

“A place like this lets them blend into the neighborhood, and from the front it looks like a house,” Locke said. “That's the goal rather than settling into one of the larger developments.”

Learn the ABCs of ADUs

Visit AARP.org/ADUs for more information on ADUs. The AARP’s Iowa page offers more state-specific information and highlights the Des Moines and Cedar Rapids policies.

Policies look to spur development

Cedar Rapids’ policy on ADUs is considered the progressive gold standard other Iowa communities can look to as they explore policies to spark ADU development in their own municipalities.

In 2021 code changes, the city allowed ADUs by right in all residential districts. Previously, these units only were allowed as a conditional use in suburban character areas.

The policy changes increased the maximum size of ADUs from 800 square feet to 1,000 square feet, or less than the primary structure. There also may now be two ADUs per lot instead of only one.

Lindenlaub said when the city first started to allow ADUs in 2019, there were three that received building permits. Another two received permits in 2021. After the policy expansion, there were three permitted in 2022. These units have been spread out across the city.

Des Moines followed suit in 2022 with relaxing its zoning code to encourage accessory housing construction. Mike Ludwig, Des Moines’ interim development services director, said the biggest change was allowing the units to go on any property, regardless of zoning, within a quarter mile of a transit route. The code changes roughly quadrupled the number of properties qualifying for these units to be built.

In Johnson County, Bill Gorman, a member of the county’s Livable Community for Successful Aging policy board, said the Board of Supervisors-appointed panel is working with cities to develop code language to allow ADUs and educating them that this option even exists — while leaning heavily at Cedar Rapids’ code as a model.

Johnson County, Iowa City and Solon already allow ADUs, so the policy board is prioritizing working with other cities in the county that have no policies allowing ADU construction.

Encouraging cities to adopt more ADU-friendly policies typically means battling misconceptions first, Gorman said.

Since cities generally allow single-family homes to be rented, Gorman said it’s not that different for an ADU to be rented, though he encounters concerns that renters may trash property.

Still, if local leaders are hesitant, they have options.

Des Moines, for example, requires a homeowner to reside on the property if they rent their ADU. In Cedar Rapids, owners can rent ADUs without living on the property but must register their unit and obtain a landlord business permit.

Ludwig said he wouldn’t rule out a policy change in the future, but this is what city officials were comfortable with as Des Moines eases into ADU development.

Though he favors Cedar Rapids’ ADU rental policy, Gorman said, requirements like Des Moines’ could be a good first step to get communities on board with allowing ADUs.

He also supported Cedar Rapids’ allowance of both on- and off-street parking with the requirement for one parking space per ADU. Plus, the city allows ADUs to be built with different materials than the primary structure, which Gorman and Anderson said can help people use more affordable building materials than if they matched the materials to the original space.

“There are a lot of different options,” Gorman said. “The key is getting comfortable.”

Financing still a challenge

Like other housing projects, developers and homeowners still typically need some level of financial support to make projects financially feasible.

Some local developers sought funding for new ADUs through about $38 million in federal Community Development Block Grant derecho recovery funds allocated to Linn County housing projects.

Gutschmidt Properties applied for the disaster funds to support 38 units across 26 sites throughout the county, but was not awarded any money. Eric Gutschmidt, owner of the Cedar Rapids-based company, said without those funds, there are two in the pipeline for now.

“That's the issue with the ADUs, is that they still don't pencil out,” Gutschmidt said. “No rental housing in Cedar Rapids pencils out without subsidy, including ADUs. But ADUs are just closer than some other types of housing.”

Still, Gutschmidt said ADUs are a more efficient use of land to add density in neighborhoods as development occurs. He thinks more ADUs could be impactful to the growth of neighborhoods such as the New Bohemia District or Kingston Village that were devastated by the 2008 flood.

“The property taxes that get brought in on single-family residential don't pay for the upgrades to even the street and sewer and water infrastructure in front of that residential parcel,” Gutschmidt said. “The city can't expand in the suburban sprawl way that it has forever. It just isn't possible financially.”

To incentivize ADU construction, Des Moines offers a 10-year, 10 percent tax abatement on the increased value ADUs generate — which Ludwig said is comparable to what the city offers for high density multifamily residential in the downtown core.

Stephanie Murphy, executive director of the Neighborhood Finance Corp., which operates in both Des Moines and Cedar Rapids, said when appraisers determine the value of a house, they look at similar homes in a neighborhood. There aren’t natural comparisons for ADUs, she said, so these units may not appraise as high as they will in the future as they become more popular.

In Des Moines, Murphy worked with nonprofit HOME Inc., which built the city’s first ADU. Murphy said it sold for the same amount as if it were a single-family home, despite having a whole other home attached.

Neighborhood Finance Corp. offers $15,000 forgivable loans to eligible property owners in its lending areas, which Murphy said can come in handy to making ADU construction work on the front end. Some also may be eligible to have NFC count a portion of ADU rental income in the loan, whereas lenders often need a history of renting before they'll count that income.

“To do high-quality ADU development, homeowners will have to have some equity to make that upfront investment or it’s going to need a subsidy,” Murphy said.

ADU growth anticipated

While many Iowa cities are still in the exploratory stages with ADU policies, Anderson said AARP has been inundated with outreach from communities interested in supporting ADU development since Cedar Rapids and Des Moines eased requirements.

Anderson said some cities still have cumbersome zoning processes for those wanting to build ADUs. Navigating red tape to figure out if a property is zoned for an ADU is an immediate barrier, he said, but more cities are looking for guidance to relax their policies.

“A lot of cities don't have empty lots, like maybe some suburban areas or rural parts of the state, but they certainly have backyards,” Anderson said. “And so how do we take advantage of these backyards to help solve this affordable housing issue that is really becoming worse and worse as housing prices continue to increase?”

“A lot of cities don’t have empty lots … but they certainly have backyards. And so how do we take advantage of these backyards to help solve this affordable housing issue that is really becoming worse and worse as housing prices continue to increase?” — Brad Anderson, Iowa state director for AARP

Cedar Rapids officials anticipate they’ll continue to see growth in ADU development, Pratt said. They may not be logistically possible on every lot, but they can be another tool in the toolbox.

“There is an investment into these that has to be made, so it has to be right for the property owner, meeting a specific need,” Pratt said. “We love that it’s available for people.”

Des Moines, too, has seen more inquiries about accessory housing requirements since the HOME Inc. project wrapped up.

“We're hoping that with our incentives and other changes that we made, it will start to grow as an option for people,” Ludwig said.

The Johnson County policy board hopes for a greater uptick in ADUs around Iowa, Gorman said, as they help build the tax base to give local governments more revenue and offer individuals more affordable options that meet their living needs.

“That's another way to provide more people who will buy in their local downtown areas, more customers in their restaurants, in their coffee shops and grocery stores,” Gorman said.

Comments: (319) 398-8494; marissa.payne@thegazette.com