Should Pittsburgh consider turning some areas zoned multi-family back into single-family? (Rochester: apartments, condo)

[trackstar13]

Originally Posted by eschaton

Incentives would cost the city money, even if they amounted to tax credits. In contrast, just altering the zoning code is free.

Yes, but it is a risk that may be worthwhile because it could reinvigorate certain areas and there could be increased revenue from building permits and the subsequent increase in real estate tax revenue due to property value increases. Areas that are mostly owner occupied tend to be more stable and stability is a good thing when it comes to tax revenues. The "free" alteration of the zoning codes is unfair to landlords who purchased these properties as multifamily investments or converted them and maintained them over the years.

[selltheburgh]

They re-zoned a lot of areas in the last decade. For example, you can't turn a house into 3 units in most neighborhoods. Turning a house into a 2 unit versus a single family often isn't worth it because you'll lose equity even with the monthly cash flow.

On the other hand, houses that have an occupancy permit for 3 units (in an R2 zone) will likely never be single family houses again unless they are run into the ground or foreclosed on and a neighborhood CDC picks it up and turns it back into a single family (which is what FDA and ELDI have done).

[eschaton]

Originally Posted by selltheburgh

Values of single family homes in desirable neighborhoods outweigh those of 2 unit properties.

A perfect example is my previous house in Highland Park. It is 2 units. Very nice inside (owner occupant quality) with the 1st unit being standard and nice enough. The 2nd unit has 3 bedrooms, 2 baths (master suite with granite, jacuzzi, heated floors, laundry), etc. I had 2 appraisals done and they averaged around 240k. Appraisers can only use multi-units as comps, not single families. Most multi-units don't sell or aren't as nice as my house was, so comps were limited.

At the same time, 3 single family houses on the same block sold. 2 in the lower 300's and one almost at 400k. I've been in all 3 and I know for a fact that my house was nicer than 2 of them and comparable to the most expensive one.

With that said, the cost to turn it back to a single family, taking out the 2nd kitchen, combining gas and electric, re-doing the 1st floor kitchen, and opening up the 1st floor plan to make it less choppy would have cost a lot of money (40-50k).

I decided to keep it as a rental for the next 10 years or so.

240+50=290. You'd still walk away with around $100,000 profit from the conversion. While I could easily see you getting twice that over ten years through rent, this wouldn't all be profit. Further, money from a sale can be plowed into another project, whereas money from rent can only help incrementally.

[tabinekotaro]

Originally Posted by trackstar13

Yes, but it is a risk that may be worthwhile because it could reinvigorate certain areas and there could be increased revenue from building permits and the subsequent increase in real estate tax revenue due to property value increases. Areas that are mostly owner occupied tend to be more stable and stability is a good thing when it comes to tax revenues. The "free" alteration of the zoning codes is unfair to landlords who purchased these properties as multifamily investments or converted them and maintained them over the years.

Changing the zoning wouldn't be unfair to landlords, because as eschaton said, existing multi-unit properties would be grandfathered in. The change would just prevent further conversion of houses from single to multi-family.

Now if you combined the two approaches, changing the zoning to stem conversion and creating incentives for property owners to restore the houses to single family, that could be very effective.

[eschaton]

Originally Posted by trackstar13

Yes, but it is a risk that may be worthwhile because it could reinvigorate certain areas and there could be increased revenue from building permits and the subsequent increase in real estate tax revenue due to property value increases. Areas that are mostly owner occupied tend to be more stable and stability is a good thing when it comes to tax revenues. The "free" alteration of the zoning codes is unfair to landlords who purchased these properties as multifamily investments or converted them and maintained them over the years.

As I said, zoning allows for prior use indefinitely. So if an area gets zoned back to single-family, it means merely that no new houses can be subdivided. The currently subdivided rented houses can stay so until someone decides to buy them and convert them into a SFH. The only exception is if the landlord wants to do a major construction project on the home (adding more units, raising the roof, etc), in which case they'll need to go through zoning and get an approval.

[selltheburgh]

Originally Posted by eschaton

240+50=290. You'd still walk away with around $100,000 profit from the conversion. While I could easily see you getting twice that over ten years through rent, this wouldn't all be profit. Further, money from a sale can be plowed into another project, whereas money from rent can only help incrementally.

Yeah, it was a tough decision, but the biggest factor is that I didn't have the 50k...or access to it.

Also, I don't think I'd get 390k. There is a big bath on the 3rd floor and 2 bedrooms. 4 Bedrooms and 1 normal bath on the 2nd after removing the 2nd kitchen. Not an ideal setup for most families.

Plus, with only 12 years left on the mortgage, it makes more sense to continue paying it off and depreciating it and writing off interest, etc. I'm looking at it as a college fund for my kids.

[eschaton]

Some random thoughts looking at the zoning map.

The only areas in East Liberty zoned for single-family housing are Alpha Terrace and the run-down residential area west of Sheridan Avenue (and not even all of that).

I also find it funny how most houses in Bloomfield south of Liberty can be subdivided into two units. Those houses are so small as it is.

Oakland has a surprisingly high amount of areas which are zoned single-family. Even blocks near the core of Central Oakland, like much of Coltart Avenue and Oakland Avenue. I wonder how many houses are illegally subdivided?

A huge area of Squirrel Hill is zoned either R-2 or RM. This is a bit surprising, because I've seen comparably few subdivided houses in Squirrel Hill, and the only true apartments tend to be around Hobart or Forward.

[tabinekotaro]

Originally Posted by selltheburgh

Values of single family homes in desirable neighborhoods outweigh those of 2 unit properties.

A perfect example is my previous house in Highland Park. It is 2 units. Very nice inside (owner occupant quality) with the 1st unit being standard and nice enough. The 2nd unit has 3 bedrooms, 2 baths (master suite with granite, jacuzzi, heated floors, laundry), etc. I had 2 appraisals done and they averaged around 240k. Appraisers can only use multi-units as comps, not single families. Most multi-units don't sell or aren't as nice as my house was, so comps were limited.

At the same time, 3 single family houses on the same block sold. 2 in the lower 300's and one almost at 400k. I've been in all 3 and I know for a fact that my house was nicer than 2 of them and comparable to the most expensive one.

With that said, the cost to turn it back to a single family, taking out the 2nd kitchen, combining gas and electric, re-doing the 1st floor kitchen, and opening up the 1st floor plan to make it less choppy would have cost a lot of money (40-50k).

I decided to keep it as a rental for the next 10 years or so.

I ran into the same issue of limited comps when I refinanced my house last year. Apart from being in Morgantown rather than Pittsburgh, the houses sound similar, except that I have 3 units--two "standard and nice enough" and one that is very nice indeed. It's in a historic district that doesn't have many multi-units, so the comps were pulled from surrounding neighborhoods, where the housing stock is much less nice and mostly owned by slumlords that rent to students.

Turning it back into single family would be complicated because of renovations done since it was converted in the 20s. Keeping it multi-family works for me right now, but if I eventually sell the place and can swing it financially, I'd consider doing the single family conversion. It would add probably $100K in value, and might make it easier to sell to a normal human. I can't bear the idea of selling it to an investor (nothing against them in general, just the ones in Morgantown turn whatever they buy into crap student housing), or just as bad, parents who buy something for their kid and their friends to live in and trash while they go to college, then become absentee landlords after they graduate.

Turning things back to Pittsburgh, if I owned a multi-family here (something I'm considering), I would definitely be interested in living in it with tenants for a few years while building up savings, then converting it back to single-family. If the city were to offer incentives to do that, it would be a compelling option.

[trackstar13]

Originally Posted by tabinekotaro

Changing the zoning wouldn't be unfair to landlords, because as eschaton said, existing multi-unit properties would be grandfathered in. The change would just prevent further conversion of houses from single to multi-family.

Now if you combined the two approaches, changing the zoning to stem conversion and creating incentives for property owners to restore the houses to single family, that could be very effective.

Are the grandfathered multifamily units able to be sold or transferred to family members as multifamily units or do they have to be converted back at that time?

[tabinekotaro]

Originally Posted by trackstar13

Are the grandfathered multifamily units able to be sold or transferred to family members as multifamily units or do they have to be converted back at that time?

I'm pretty sure the property is grandfathered in regardless of owner. I know that was the case when I bought my house, but since it's in a different state I can't say definitively that that's the way it works here. I bet eschaton and selltheburgh know for sure.