Below are a few questions and answers that have been asked regarding ADUs. The below questions and answers may not fully apply to your ADU, but should be helpful to understand how DHCD administers its ADU program
I am looking for an ADU to purchase, or rent. Where should I begin my search?
ADUs are often advertised for sale and for rent through traditional real estate marketing channels. In addition, households that seek to purchase or rent an ADU are encouraged to utilize www.dchousingsearch.org. In fact, many for-sale and for-rent ADUs are required to be listed on this website.
What is AMI?
The Area Median Income (AMI) is the median income of a certain geographic region defined annually by the US Department of Housing and Urban Development (HUD). The maximum income for a household that rents or purchases an ADU is determined by adjusting the listed AMI by the stated percentage and by household size. The 2010 AMI at 100% for the DC metropolitan area is $103,500 for a family of four. This is the median income for a twenty-jurisdiction metropolitan area that includes the District of Columbia, five Maryland counties, and fourteen Virginia cities and counties.
What is an affordability/ADU covenant?
Affordability restrictions such as the length of time a unit remains affordable, the targeted income level for the unit, annual reporting requirements, and the resale restrictions, are typically detailed in a covenant, a document recorded in the District’s land records maintained by the Recorder of Deeds. A property may have one or more covenants associated with it, and these documents define the specific rules with which the property must comply. You may order copies of specific covenants from the D.C. Recorder of Deeds.
What constitutes a household?
The U.S. Department of Housing and Urban Development defines a "household" as all the persons who occupy a housing unit. The occupants may be a single family, one person living alone, two or more families living together, or any other group of related or unrelated persons who share living arrangements. Your household size may determine what size ADU you are eligible to purchase or rent.
Does it matter how many people are in my household?
Income limits increase in proportion to household size. For example, the income limit for an ADU for a single (1) person household is lower than the income limit for a four (4) person household. AMI is calculated annually and is adjusted by a factor of 0.1 for every household member above or below four (4) for local programs.
The size of a household may also be a factor in the size of the unit for which a household may qualify. DHCD is currently guided by the Inclusionary Zoning program, where appropriate, in applying occupancy pricing standards and occupancy limits to ADUs.
How are initial ADU prices determined?
Initial ADU sales prices are typically set at the amount that a household at the designated income level can afford, assuming a reasonable mortgage loan interest rate and terms, down payment percentage, insurance costs, and condominium or homeowner’s association fees. Subsequent sales prices are generally determined by the methods described in the above FAQ about maximum resale prices.
If I own an ADU, am I still responsible for condominium or homeowners’ association (HOA) fees?
Unless your affordability covenant states otherwise, ADU owners are responsible for paying the same monthly condo or HOA fees that market-rate owners pay.
I own an ADU and wish to sell. How do I know what restrictions there are on the resale of my home?
Review the provisions of your ADU covenant and deed. These should be included among the documents you received when you purchased your home. Alternatively, your deed and ADU covenant are available from the D.C. Recorder of Deeds.
- Identify the party responsible for enforcing your ADU covenant. If that party is one of the entities listed in the bullet points above (e.g. RLA Revitalization Corporation), then DHCD is now responsible for administering your ADU.
- If DHCD is the party enforcing the ADU covenant, submit to DHCD a copy of your deed and related covenants, along with any other supporting documents and a letter stating your intent to sell.
- DHCD will take the appropriate actions required by the ADU covenant (e.g. determine the maximum resale price or provide income certification of prospective owners) and respond to you in writing.
- ADU unit owners are encouraged (and may be required) to list their ADUs for sale on www.dchousingsearch.org, which is a free listing service available online and via telephone in English and Spanish.
My ADU Covenant says that the District must determine my maximum resale price. How is this price calculated?
If your covenant requires that the District, a District agency, or a third party (e.g. RLA Revitalization Corporation) provide you with a maximum resale price, contact the Housing Regulation Administration (HRA) to request a maximum resale price. HRA will review the documents and, as appropriate, provide a maximum price determination letter. The maximum resale price is determined by taking the highest of three different values. These values, or the methods for calculating them, are:
- The purchase price of the current owner: The maximum resale price of an ADU will never be below the price the current owner paid for the ADU.
- Applying the Inclusionary Zoning program procedures and policies: This involves re-calculating the initial sales price using the Inclusionary Zoning Program and increasing this value to the level appropriate for the current year using the Determination of Maximum Resale Price calculation in the IZ administrative regulations.
- Specific covenant language regarding the Area Median Income (AMI): Calculate the sales price by what would be affordable to a household in the covenant’s AMI category expending 30% of their monthly household income on housing cost adjusted by household size. The monthly tax, insurance, and fee payments are considered in this analysis to determine the maximum monthly mortgage payment the household can afford. The corresponding home value is calculated assuming a 5% down payment, a thirty year term, and a slightly above-average interest rate. The Inclusionary Zoning Program and Inclusionary Zoning Maximum Rent and Purchase Price Schedule are used as a reference tools for this analysis.
My ADU covenant requires that I live in the ADU as a primary residence; does this mean that I cannot rent out the ADU I own?
If your covenant contains this requirement then you must live in the ADU and are not allowed to rent out your unit. Some covenants allow the District to grant waivers to rent and/or not live in the ADU under special circumstances (see the next FAQ for more information). If you do rent your ADU without prior approval, the District is able to take appropriate action to enforce the requirement. If you are aware of an ADU that is being rented in violation of the ADU restrictions, please contact DHCD at (202) 442-9505.
I will be temporarily transferred overseas through the military. Can I get a waiver of the primary residence requirement?
Under exceptional circumstances and if allowed by the covenant, DHCD will waive the primary residence restrictions on an ADU and allow the owner to temporarily rent the unit to an approved household at the appropriate income level for that unit. Examples of circumstances that may warrant a waiver include the owner enrolling in an academic program more than 150 miles from their ADU or being temporarily relocated for military duty.
If you own an ADU and seek such a waiver, send your request along with supporting evidence to the Housing Regulation Administration within DHCD (see address below). If your request is approved, you will be granted a Conditional Waiver of Covenant Restrictions and must annually certify that you meet the conditions that qualified you for the waiver. A waiver from the primary residence restrictions under an ADU covenant is not a waiver of any primary residence restrictions established by a condominium or cooperative regime or through any financing requirements.
My ADU covenant states that an eligible purchaser must be at 60% Area Median Income (AMI). What does this actually mean and how is it translated to an income limit?
In this specific example, an eligible purchasing household must earn no more than the AMI (defined below) multiplied by 0.6 (for 60% AMI) and adjusted by household size. Income limits for most local and federal programs used in the District may be found on the DHCD website. If required by the covenant or other controlling document, DHCD will provide an ADU seller with the maximum resale price for their unit and the maximum household income of a prospective buyer, upon written request from a seller. DHCD may also be responsible for certifying the income and eligibility of a potential buyer.
My ADU covenant states that I have to use best efforts to market my ADU unit. What does “best efforts” mean?
DHCD current policy and procedure defines best efforts as widely marketing your ADU unit at or below the maximum resale price allowable under the ADU covenant for at least 60 calendar days. Best efforts also include advertising the unit on www.dchousingsearch.org and at least one additional publication, including, but not limited to, the Washington Post (Classified Section), Craigslist, and the Metropolitan Regional Information System (www.mris.com), to ensure that District residents are made aware of the ADU availability.
When I bought my ADU, I also purchased a market rate parking space. Do I have to offer the ADU separate from the parking space?
In most cases, ADUs must be offered for sale independent of any parking space also purchased by the current owner. The goal of many ADUs is to maintain the long term affordability of the housing stock. If a seller requires that an ADU be purchased with the market rate parking space, the ADU may be unaffordable to prospective buyers that are within the income limits.
I have an ADU question that was not addressed in the FAQs or on the DHCD website. Whom should I contact?
If you have a specific question regarding an income restricted for-rent or for-sale unit you can contact one of two divisions within DHCD:
If your for-rent or for-sale unit is funded by DHCD through the Housing Production Trust Fund (HPTF), Community Development Block Grants (CDBG), HOME Investments Partnership Program (HOME), and/or Low Income Housing Tax Credit (LIHTC) programs, then you should contact the Office of Program Monitoring (OPM) at (202) 442-7200. These units are not traditionally known as “ADUs”.
If your for-rent or for-sale ADU was created through any other program, or if you are unsure of which programs were used, please contact the Housing Resource Administrator at:
Housing Resource Administrator
Housing Regulation Administration
Department of Housing and Community Development
1800 Martin Luther King Jr. Avenue SE, Washington, D.C. 20020
Tel. (202) 442-9505