Provo struggles with the problem of illegal basement apartments. While there are many pros and cons to the issue, the economics of this issue are paramount to understanding the problem.
A home with a second dwelling unit sells for perhaps $10-$25k more than a home without one. When a buyer buys that home, he pays for the opportunity to rent out the basement, whether it's legal or not. That home is then priced out of reach of the normal family. And when it resells, it has to be sold as two units, in order to recoup the initial investment.
That is the reality of the situation -- once a home is taken out of the single- family housing stock, it remains out, forever, because of the price increase. (And, ironically, the homes adjacent to the now-two-unit house, lose value. The owner who converts his house into two units adds value to his home, but actually takes value right out of the pocket of his neighbors, unless they too convert their home.)
In 1989, we bought a 3000 sf home that had had, for years before we bought it, an illegally-created basement apartment in it. We needed the space for our teenage children, so we removed the second kitchen. (A kitchen has three elements -- appliances, sink, and cabinets -- removal of one means it is no longer a second kitchen). By taking out the appliances, we enjoyed a nice laundry room in the basement for 20 years. When my daughter and her family got caught in the economic crunch of 2008, they moved back home for a short time. My husband and I bought a stove and fridge and moved downstairs. We also added a temporary door between the two floors. When they left, my husband and I moved back upstairs. Then the other daughter and her family needed to come home for awhile, so we moved back down. They left, and we moved back up. (This game is called "musical grandparents.")
But we now have a complete apartment in our basement that we cannot rent for income, because, although my husband is over 65, I am not. (The city passed an ordinance allowing seniors an exception for their lifetimes -- a charitable concession. When all homeowners on the deed are over 65, they may rent part of their home as an accessory dwelling unit, for as long as they reside in the home. When the home sells, it must revert to a single unit.)
So we lend the apartment out to friends and family for Ed Week, weddings, funerals, etc. We do not charge rent, and our friends stay for a week or less. In two years when I turn 65, we could rent out the basement legally. I doubt that we will. I enjoy having a place to offer people passing through town.
When we sell the home, however, I will insist that the appliances be removed from the basement, and that the home be listed as a single-family unit with one kitchen. I will forego the difference in the price, but my neighborhood will gain a family that needs a big home, and some family will get an affordable place to live, without having to compete with investors seeking rental income.
There are places in town for investors to buy legal duplexes -- homes that have been remodeled into two distinct units. There are other areas of town designated for owner-occupied accessory dwelling units. My daughter and her husband bought their first home in Dixon neighborhood, which allows legal basement apartments IF the owner lives in the home. They bought it when they were both students. They lived in it for 3 years, when they sold to another young family who lived in it, not an investor who wanted to rent out both units. The equity in the home went with them when they left. (Home ownership is the beginning of personal wealth.) But there are areas of town that have been reserved for single-family homes, to preserve the affordability of the places for families. The people who buy in those neighborhoods count on that zoning. And they depend on the city to enforce that zoning.
I am HIGHLY in favor of rezoning to help first time buyers get into a house, and of rezoning to allow seniors to stay in their homes after their families are grown, so that they may "age in place." I am in favor of changing zoning when a neighborhood agrees to the change, and of allowing neighborhoods to evolve into something different. But I am categorically opposed to breaking the law, and deciding, unilaterally, that that the law should be changed.
Who is making that unilateral decision? Usually the seller, sometimes the buyer. But the decision always comes to a head when the house sells. That means a professional, whose license is on the line, gets involved. To seize this moment of opportunity in the life of a home, the Provo Council passed a "Zoning Disclosure Ordinance." It says that any agent selling a home has to obtain an official zoning verification from the city ($25) and inform the buyer of the correct zoning of a home BEFORE IT SELLS. That, unfortunately, too often, means that the buyer gets the form in the stack of forms he signs at closing, which identifies the legal status of the home. It is often overlooked. But it indemnifies the realtor.
Let's talk about realtors. For many years, I have been calling the agents listed on homes in my neighborhood, making sure that they are correctly listing the houses as single-family units. Invariably, I get the same response. It is the same one I got today when I reminded the agent listed on the house up the street that the basement apartment in it is illegal.
I post the response: "Thank you for your concern about our Provo listing. We are advertising it correctly. I'm saying it has a mother in law apt. A mother in law apt is legal is Provo. If we were advertising it as an accessory apt we would be wrong."
According to my understanding, and what I was told by Community Development staff, there is legally NO SUCH THING as a mother-in-law apartment. There is nothing in city code that recognizes the legal status of such a beast. It is a ruse of rhetoric. If a house has a second kitchen, it qualifies as an accessory dwelling unit, and that is allowed under some instances, such as the over-65 rule. (Occasionally, in order to accommodate people who already have accessory units in their homes, the city allows an owner to sign a "second kitchen agreement" -- that is, a document which runs with the deed, which states that although you have a second kitchen in your home now, you agree that when you sell the home, you will sell it as a single unit -- with no accessory apartment. )
The realtors have found a very clever way to word their listings, but it does NOT change the fact that they are teaching, helping, and in some cases encouraging people to get around the law.
The house up the street is NOT a legal duplex, the accessory apartment is not legal, and the realtor should NOT be listing it as a mother in law apartment. I affirm this, not because I suffer from NIMBY (Not-In-My-Backyard) syndrome, but because I fear that some poor buyer is going to believe that that term means that they can rent the basement. And when they do, the city will enforce and the poor buyers will suffer. And what will happen to the realtor?
Therefore I propose amending the Provo City Code, Chapter 6.25, to include a timing element. The amendment would stipulate that the agent must obtain the zoning verification BEFORE he lists, shows, or accepts offers on the home, and must disclose to the buyer before accepting offers. I also suggest adding a financial penalty on any agent assisting in a misleading transaction -- equal to their commission would suffice. I already contact the state realtor's board when I encounter flagrant violations.
I also strongly encourage anyone caught in this dilemma through misrepresentation by a real estate agent, to seek legal redress. I am sure that if one uninformed buyer would sue, enough other people would step forward to make it a class-action suit. And I bet that once a suit is filed, the behavior would change.