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Part 3: Single Family to Multi-family Conversions

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Surplus financial resources can be provided to local jurisdictions by high value dwellings through property tax revenues, provided that the cost of services provided to the residents and area of those dwellings remains relatively low. If the value of the dwelling decreases or the cost of services expected increases, this surplus will be negatively affected. The reduction and possible loss of that financial surplus would subsequently not be available to distribute to cover the cost of services in the lower cost housing areas.

Historically, urban centers expanded outwards, as upper middle class and upper class families sought to have larger homes away from the industrial and commercial centers. In the United States, these higher value dwellings radiated outwards of the city center along transportation routes. The introduction of modern utilities like public water and sanitary sewer, electricity, natural gas, and conveniences like telephone opened up more areas for expansion. The construction of large, stately, or complex-style homes characterized these neighborhoods in the late 1800’s and early 1900’s. As seen by the types of high value dwellings being constructed today, building floor area and bedrooms remain as primary design characteristics.

With the introduction of the automobile and the interstate highway system, the opportunity for this migration to extend even further into the suburbs was seized upon by those who could afford it. The result was that the larger dwellings in the urban areas lost value, as they were no longer as attractive on the market place (other socio-economic factors were involved, but not discussed here). They remained a resource, and with their size many became conversions to multi-family dwellings. These conversions may have helped to retain a higher value that a nearby single family dwelling. However, the increased occupancy generated a greater need for services.

History tends to repeat itself. Today, local jurisdictions are dealing with larger dwellings becoming homes to multi-generational families, increasing the number of residents and the amount of services required. Rather than the mortgage or rent being paid by a single “nuclear” family with one or two incomes, several families are moving in together to combine incomes to pay for the housing. This phenomena may be common in other cultures, but it is unanticipated by the Euclidean and mixed use zoning and development patterns of the United States.

Restrictive zoning based upon unit cost has been rejected as a local land use control for decades (see Southern Burlington County N.A.A.C.P. v. Township of Mount Laurel, 67 N.J. 151 (1975) for example), whether by financial value or size. Local restrictions based upon a definition of “family” can also be suspect, as the term does not have a specific legal definition held to be acceptable by the courts. The use of a building code restriction on “kitchens” (one permitted per dwelling unit) does not necessarily limit how many individuals live within a unit.

Therefore, revenues from previously high value units will decline as they become less “high value” from a market perspective. Likewise, history has shown that these units can subsequently be occupied by an increased number of individuals, as families combined resources for housing. Each result results in less of a revenue surplus for the local jurisdiction to provide services for the affordable housing areas. Local jurisdictions should therefore include these impacts into the long-range financial planning for accumulating and distributing revenues.

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