The mother-in-law unit

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                                        Image provided by: http://www.servicelane.com/photos/view/5358-Mother-in-law-unit

 

While the debate roils regarding the impacts on housing affordability that mother-in-law rental unit additions might provide, I have seen very little consideration for the practicality of actually stimulating the supply of such units. There appears to be an innate assumption that single family property owners unanimously undertake property use considerations through the highly complex and financially minded lens used by most sophisticated developers. From a zoning and housing affordability perspective adding a triplex to every city block in a city with rampant housing demand sounds great. However, for many a single family land owner adding a mother-in-law unit sounds like a daunting task.

Example Scenario:

Imagine that you are a software developer that works for XYZ.com and (lucky you) were able to buy a residential property early in the recent housing cycle. You have a friend that figured out that your property is zoned for adding a mother-in-law unit. Making some additional cash while making use of unused space on your property sounds great. What do you do next?

Considerations:

How do you finance this project?

You have no experience in financing multifamily unit additions and you don’t have enough cash to either build a single family unit on your parcel or build out a fully functional living space in your basement. You easily have enough collateral + income to finance this project but you have no idea how to make this happen. Will a second loan take a junior position to the home mortgage lender? Will this violate the terms of the home purchase mortgage? Do lenders offer a program that blends residential home lending with multifamily mother-in-law considerations?

Once built: How do you manage a rental unit?

You have absolutely no background in property management. How will I go about leasing this space? What will my lease agreement say? Who will maintain financial reporting for tax purposes? Do I need to establish a reserve account? Security deposit? If there is a flood who do I call? The burden of starting a mini property management company for your mother-in-law unit is overwhelming!

What impact will this have on property value?

You bought this house because it was a great deal and no matter what you tell your friends… this is a significant financial investment. Is there demand in the single family market for mother-in-law unit additions? Will this ultimately make a home sale more difficult due to the financing considerations described above?

Although many scenarios leading up to the addition of mother-in-law units may provide unique solutions to the problems presented in scenario above, the crux of the mother-in-law unit solution is that most single family home owners have absolutely no background in multifamily real estate. The ingredients are there: property owners with the space, the zoning, and an appreciation for additional cash on a monthly basis. Unfortunately, the ability to actually execute on adding such a unit (without completely winging it) is often not feasible.

A Proposed Solution:

A private market solution is needed to make the addition of mother-in-law units a value creation opportunity that is relatively easy and accessible for single family landowners. The hybrid residential multifamily asset, with the proper private market solution could and should have unique financing, management, and value considerations.

A mother-in-law property management solution

If there was a property management company that specialized in managing mother-in-law rental units much of the data and expertise needed to support unique financing, operational, and valuation solutions could be generated. Such a company could provide market analysis, project cash flows, establish reserves and even guarantee a portion of cash flows towards loan payments on behalf of property owners.

How do you finance this project?

            The proposed property management solution could generate a pro forma using data generated from its management activities. It could also provide consulting and development management services on behalf of single family owners, providing access to a professional network of contractors and vendors required to manage risk. By centralizing financial performance data and ensuring best practice property management services, lenders might actually be interested in considering loans unique to mother-in-law properties.

Once built: How do you manage a rental unit?

            You don’t. You let the proposed property management company manage the unit. They take care of leasing, maintenance, legal considerations, banking, and financial reporting. They could provide a swath of rental strategies that best fits the needs of home owners regarding length of lease, access to common amenities (such as a garden or backyard), and or the use of parking spaces.

What impact will this have on property value?

This is a difficult question to answer. The value created by ensuring best in class financial management services for this hybrid asset class is hard to estimate. It would make the addition of mother-in-law units a painless process for landowners while providing assurance of legal and financial regulatory conformance. This could lead to unique home purchase loans that incorporate mother-in-law cash flows into the borrower’s credit considerations.  It would provide home owners and potential home buyers a measured analysis of the financial impacts that mother-in-law units create. It would create a market for single family home owners looking to purchase properties with additional cash flows with little to no burden to the buyer.

 

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Re-Framing Sustainability

In discussing The Carbon Efficient City, frameworks, and strategies of how we can move society and its corporations toward more environmentally friendly and sustainable practices, I began to think more critically about my personal carbon footprint. I recycle, I separate my garbage and compost, I often ride the bus to school, I turn the lights off in my house when I’m not using them, and do my best to conserve energy in my home by turning down the heat and using hot water only as necessary. But if I was asked to quantify my energy consumption and/or my household impact on the environment, I would be at a loss. Of course, I could start by tracking my energy use through bills from Puget Sound Energy, Seattle City Light, and Seattle Public Utilities, and then try to factor in my gas consumption, other transportation related energy uses, garbage and waste, etc, but to do that, I would have to be exceedingly more diligent in tracking these factors, and spend significant time calculating my impact on a rolling basis. And although this is something I might do out of my own personal interest, for the lay consumer this is a lot to ask in the name of sustainability (if they even believe in climate change).

I make this point because, to me, the primary obstacle in fighting climate change and moving to more sustainable practices in daily life is social in nature. Although there are resources for the environmentally minded to assess their impact such as Ducky AS (a browser and soon to be app that allows you to calculate and compete to lower your carbon footprint), as well as various carbon footprint calculator’s, it is my belief that we need to make environmental impacts more easily realized in our daily lives. By framing daily environmental impacts on a personal level, we could begin to alter the public mindset around sustainability and climate change, and start to better educate people on their own footprint. Moving the discussion from the abstract and distant (i.e. glacial melt, sea level rise, CO2 levels, temperature fluctuations) to the personal and at-home would help to change the social dialogue on the subject.

Could we more succinctly demonstrate environmental impacts to the average consumer? Are there tools or nudges we could incorporate into daily life that would help people to better understand their impact? What neighborhood and community actions and incentives could be implemented?

How can we as a society better relate the environmental impact of a full garbage bag or recycling bin, of a gallon of fuel burned by our vehicle, of a 3 gallon flush of a toilet? If we can somehow better frame and relay the impacts of the environmental decisions that we make tens of times a day (knowingly or unknowingly), we could begin to change the dialogue and actions surrounding sustainability, efficiency, and the environment.

Systems Education for Children

Whether it was the volcano project, or the “dropping the watermelon off the roof” example of gravity, these are examples of educating students about systems. For me, in elementary school, we had a program called “salmon in the classroom” where in our hallways there was a fish tank for salmon hatching. Each year, we would watch as salmon eggs hatched and grew in to tiny fish, then we would collect the fish, take them to the UW salmon pond, and they would be released into portage bay. This learning activity was so fundamental to my understanding and appreciation of the life-cycle of salmon, as well as to the historic and cultural relevance of salmon to the pacific northwest. The point being, is that when kids are educated about living systems, that knowledge and appreciation can become so fundamentally ingrained into one’s habits and attitudes during adulthood. So why not use school buildings and school grounds as an example and platform to teach students how energy, water, and humans operate as interdependent systems.

bertschi-school-kids

The Bertschi School in Capitol Hill, Seattle, is a great example of this. The Bertschi School and its’ building/design partners attempted the Living Building Challenge (for the west science-wing of their building), which is essentially a measurement system that sets the goal of creating a building that generates more energy than it uses, captures and treats all water on site (rain, gray, black) and uses healthy building materials. The building is fully equipped to meet this challenge, but due to regulatory barriers and lengthy permitting processes (concerning potable water, utilities jurisdictions, etc), the building does not operate completely as a closed system, yet.

Importantly though, the education programs within the school are tightly connected to these building innovations. A pebble-lined stream runs through a classroom and is a looking glass in to the flow of rainwater being collected from the roof; a teaching lesson for watersheds, rivers and streams. Gardening beds are used every spring and summer, educating students about growing food, all while reusing either treated graywater or collected rain. A vegetated green wall is on large display and showcases the process of phytoremediation. Maximized natural light and clean air are the norm, by using building materials clear of anything toxic. The project involved multiple third parties; architecture firm, construction, landscape firm, etc. and costs were almost completely fundraised. Jerry Seinfeld said that innovation happens when you start by saying: “you know what I’m sick of?”. Well, i’m sick of not seeing more schools like the Bertschi school.

Practical Education for the Future

Educational improvements can have a direct connection with improvements in urban affordability by providing young people with the opportunity to enter well-paying jobs with fewer barriers. I strongly support preschool and primary school strategies for increasing access to a good education, but there are also programs currently in place in Washington that target the high school level. Providing financial support to these institutions and making an effort to connect students with local businesses will have positive benefits at all levels of our communities.

While interning in the Economic Development Department at the City of Burien, my team worked closely with the Puget Sound Skills Center (PSSC) to pair qualified students seeking experience with local businesses seeking talent. I was impressed with the program options at the PSSC, but also struck by the limited exposure of a program that has such practical benefits.

There are twenty skills centers in the state of Washington, funded through the state Legislature and private grants. By supplementing the work of local high schools and creating partnerships with businesses, they are capable of meeting an important need for our community as we deal with dramatic changes in employment options, technology, education funding, and higher education affordability.

The program accepts students for specific targeted tracks, such as nursing, graphic design, and marine science technology. Students participate in an accelerated learning environment while completing their high school requirements simultaneously at their home high school. Many students leave the skills centers with college credit, a certificate that allows them to work immediately, or an apprenticeship position.

This option is available to all students, and can be a supplement to traditional high school classes or a full time strategy for students who do well with alternate learning styles. In all cases, it encourages students to get involved with the local business community. For example, a partnership with Boeing helps to place aerospace engineering students in skilled jobs directly after high school graduation.

This feedback loop between education and industry is critical to the future of our city, but we must be willing to invest the resources to cultivate it. The skills centers need funding, marketing, and exposure. They provide practical skills that have the potential to change the future of a student or the student’s family, but they are not well-known and may have grossly inadequate facilities. The cost for the program is higher than traditional high school, presenting a substantial challenge in our current education funding climate, but the measurable results provide clear evidence that this type of alternative increases long term outcomes for families.

While this program may not be the answer for all students, its’ success warrants additional support. One idea is to levy a fee on new construction projects within the skill center service area to be used exclusively for capital funding needs at the centers. This would provide additional funding to maintain the quality of the facilities, with a direct benefit to the surrounding community by providing youth with the tools to be immediately productive citizens. Creative solutions to support youth education are a clear investment in the future of our city and a step toward affordability in the short and long terms.

Don’t Call it “Climate Change”

When I sat down to dinner with a friend of a friend, I anticipated a philosophical and engaging discussion about politics and life. I did not expect a debate about the merits of climate research, especially coming from a nationally-recognized leader of an Arctic Maritime Research Facility in Alaska – a global warming skeptic in the scientific fields. A mathematician by education, he argued that we could draw no definitive conclusion with merely “half of the equation,” that “so many unquantified variables exist” that doing so would be premature and irresponsible. As an engineer, I found this logic to be fascinating. Sure we only have part of the equation…but isn’t that sufficient? Elementary thermodynamics dictates that the atmosphere must be warming…doesn’t it?

I won’t pretend to be an expert, but looking at global warming in terms of net energy emc22
makes for a convincing “partial” equation. Broken down, the simplicity is surprisingly compelling: Combustion of carbon compounds releases carbon dioxide. Carbon dioxide emissions have skyrocketed since the dawn of the Industrial Revolution. Atmospheric carbon dioxide levels have increased nearly 150 parts per million since the pre-Industrial era. Last year, humans released more than 38 billion tons of carbon dioxide into the atmosphere. Like any atmospheric gas with more than two atoms, carbon dioxide is a greenhouse gas which absorbs outgoing infrared energy.

The First Law of Thermodynamics states that energy can neither be created nor destroyed. So when infrared energy is absorbed into the atmosphere, the atmospheric energy content increases in the form of heat. With the introduction of increased energy into the atmosphere, more energy is a hand for each of the many meteorological cycles: each a function of convection in the atmosphere. Naturally occurring processes simply happen faster and to a greater degree: Windy areas will get more wind. Hurricanes will be both bigger and more frequent. Melting ice caps will melt faster. The world’s weather is caused by the movement of heat – a movement now only increasing.

systems

So perhaps we don’t need the other half of the equation. There are almost certainly other sources of carbon dioxide. The apparent increase in global temperature may well be within an expected margin of error. But we agree that atmospheric carbon dioxide levels are increasing. We agree that the Laws of Thermodynamics are indeed laws. You cannot manage what you do not measure, but in a closed system, there is then one possible conclusion: the atmosphere is warming. This is a simple cause and effect relationship.

Don’t call it climate change. Climate is a long-term pattern of weather, usually over a 30-year time span. Last year was the warmest on record, but it’s true: climate trends fall within a margin of error. Nonetheless, the globe is warming: we have an empirical equation and real-world results that suggest the same. Maybe, just maybe, if we look at the current predicament as a result of undeniable truths – namely the conservation of energy – we’ll agree that scientists really are close enough for all practical purposes.

Transit, Quick and Easy

I lived in New York City for about a year and a half. I found that people my age came in one of two types. One was that you earned enough money to live, but didn’t have any time. Or two, you had enough time, but didn’t have enough money to live. I was the second type. Every month, I kept one paycheck for myself and gave the other to my landlord. What was left, I spent on frozen orange chicken from Trader Joe’s and watery $5 beers at Brother Jimmy’s.

When I moved back to Seattle, people often asked me what I missed most about the city. Half-joking, I replied: the subway. There are a lot of things about New York that I miss more than its hot, crowded, steamy subway system—bagels, for one—but it’s just so dang easy to get around there. For about $2.50 and 30 minutes, you can get just about anywhere you want in the city. As someone who didn’t have much money, the subway made New York City accessible.

My experience with public transportation in New York has made me excited for the extension of the light rail in Seattle. Granted, our system will never offer the convenience of New York’s, which began construction 100 years ago with cheap labor. But the light rail could provide the backbone for diverse transportation modes.

Seattle could learn something from the transportation network from Nairobi, which also has high barriers to implementing rail lines. Nairobi has an informal transit system made up of matatus (minivans) and piki pikis (motorbikes). Matatus run on informal routes around the city. A driver drives, while a conductor swings open the sliding door and collects cash from riders—sometimes 16 people are crammed in a van. There are loosely designated stops that matatus stop at, but often you just flag one down as it drives by. When you want to get out, you simply tell the conductor. Piki pikis tend to hang out on corners and in front of shops—generally you can’t go more than a couple blocks without seeing a group huddled together. Walk up to one, ask them to take you where you’d like to go, haggle a bit about price, and you’re on your way.

If Seattle’s formal transit system adopted the aspects of Nairobi’s informal system, you might see higher transit participation. Imagine a system of Metro minibuses (or motorbikes) zooming about Seattle. You’re walking along the street, turn your head, and see one coming along. You flag it down and ask the conductor, “Heading near Safeco?”

“Yep,” he says, and you hop right in. Three bucks. Venmo is fine.

Milk in a Bag

The first time I saw milk in a bag was in a Ukrainian grocery store across the street from my host mom’s Soviet block apartment building.  In Ukraine, a small milk bag is called a packet.  In Ukraine, you don’t go to the store for a carton of milk, you go to the store for a packet of milk.  At first, I thought that the packet of milk was a dumb idea.  The milk did not stand up in the refrigerator, like a carton, and once opened with a pair of scissors, it could not be closed again.  The packets were small.  The standard size bag could hold about 3 soup cans worth of milk.  The packet was made of a thick plastic-feeling material that, if positioned in just the right way, could balance upright in the refrigerator.

I lived in Ukraine for two years with packets of milk.  Along with the milk packets, I lived with sour cream in a bag, yogurt in a bag, and pudding in a bag.  These bags were much cheaper to produce and produced much less garbage compared to milk cartons and plastic containers, but they’re not ready for American grocery store shelves.  The bags cannot easily stand upright, which does not allow for a brand advertising to be displayed prominently on the product.  Also, Americans buy in relatively large quantities.  If the milk container cannot be resealed, then the milk could spoil faster. It’s probably safe to say that the average American consumer is not ready to purchase their milk products in plastic bags.  Is there another way to package products at a lower cost and provide the same benefits to the American consumer?

American condiments are commonly sold in easily squeezable plastic bottles with a resealable cap.  In Ukraine, condiments came in pouches with twist off caps, similar to the cap on a tube of toothpaste.  Condiments like mayonnaise, ketchup, tartar sauce, and mustard are all sold in the same type of pouch.  When filled, the condiment pouch stands upright displaying the brand prominently on the shelf.  The pouch can be easily sealed after each use.  After all of the condiment is used, the pouch is as flat as a piece of paper.  Think about all of the waste that could be reduced if our condiments came in flat pouches rather than plastic bottles and containers.

Copyright GVMachines Inc. www.gvmachines.com

Tartar Sauce condiment pouch

The maker of these pouches is Nestle, an international Swiss food and drink company.  Nestle, the American consumers are ready for the condiment pouch.