Owner-occupied rental housing

In the northeastern cities best known to me (Boston and New York), small multi-family buildings whose owners live in one of the units are a common housing form. The classic types are, respectively the triple-decker and the brownstone row house.  Interestingly, these physical forms became owner-occupied rental housing (OORH)  from opposite directions: the three-deckers were built as rentals for a large influx of immigrants, the brownstones as single-family homes for a growing upper middle class, with servant accommodations.   The three-decker was actually the result of a policy error: after the Boston Fire, the building code was reformed to forbid wooden tenements of four or more units, but it turned out to be cheaper to build three-unit frame buildings than larger brick ones, even with the required driveway separation between them.

Elsewhere in the US, this occupancy is zoned against with the fervor only an ignorant and frightened middle class can gin up against anything of which they have no experience, and that might affect property values — like public transit disgorging hordes of brown criminals into the peacable white heart of Georgetown or Marin County.  This is a pity, because there is a lot to be said for accessory dwelling units in private homes. It certainly worked for me (YMMV); the only good business decision my parents ever made was to buy a brownstone in 1946 and rent the bottom two floors as apartments; we lived in a three-bedroom two-story apartment absurdly above our real financial means, my mother had a sculpture studio in the front of an unusual fifth floor penthouse (probably not strictly legal) and my dad’s workshop was in the back half.  In Brookline, Mass, my wife and I bought a Victorian with a carriage house whose second floor was an apartment. While our kids were growing up, we had an au pair couple in it and my mother lived in the attic apartment of the house after she moved to Boston.  Again, we were living better than our real incomes could normally justify.

A typical pattern is an older family owning the building and living in the largest unit, or two floors of a triple-decker put together,  renting one or two units to students, to an au pair couple, to a young couple just starting out, or to empty-nest grandparents.  The rent helps pay the mortgage  and taxes.  Back in the day of outrageous depreciation rules for real estate, it was possible to live almost free as the landlord in a three-family building, but those days are probably gone; still, insurance, depreciation, roof repairs, water and sewer, and the like can partially offset taxable rental income, so for a modest investment in management and faucet repairs, being the proprietor of one of these is a very good deal in most markets.

More important, the form keeps neighborhood populations mixed in age and status; you don’t get a whole street of suburban single-family houses with an identical family in each one, houses that will all turn over at once when the kids leave and can’t afford to buy a house on the block for a couple of decades.  Grandma doesn’t have to choose between living with the kids and living forty minutes away, and can almost certainly stay independent longer.  There are always kids of different ages out and about.  And these neighborhoods are denser and usually walkable, always a good thing.

OORH landlords do not ignore a leak or a broken window or failing heat in their buildings.  OORH tenants do not trash the place or turn it into a crash pad for dopers.  The owners do not try to gouge every last dollar of rent, because tenants provide useful services (and are anyway very close neighbors), like taking care of the dog during ski weekends and turning off the oven you left on when you went out of town.  What this housing form makes (not without exception, but usually, and much more successfully than automobile suburbs) is stability and a dense network of neighborhood social capital.  Neighborhood social capital is a Good Thing.

Furthermore, it allows efficient, green, use of housing stock (in the case of the converted brownstones and San Francisco Victorians) whose units are too big for modern families with fewer kids and no live-in servants.  Rationalized zoning to encourage this pattern could bring a lot of people back to sustainable living in cities; building more of it from scratch wouldn’t hurt either.

Comments

  1. Dan Staley says

    I think we are going to see houses in McSuburbs start to convert into duplexes along this model. I also think we will be doubling up more as jobs become more temporary, so I’m in complete agreement here and am all for the expansion of this idea.

    I’ve been kicking around the idea of writing about the McSuburb conversion, so thank you for articulating your thoughts on this…hmmm…

    • says

      In addition to the zoning rules that make McMansion conversions legally difficult or impossible, modern suburban design and construction also make this kind of thing a pain. You could turn those things into rooming houses, perhaps, but separate apartments with all needed facilities? Idunno.

      • Dan Staley says

        Zoning can be changed (*takes off planning cap*). And I agree it surely will be a challenge to convert some of these McSuburb designs. The good thing is in most places in this country, you won’t be ruining wonderful craftsmanship in the remodel.

    • dave schutz says

      There’s been staggering waste in building these McMansions – and families with one or two kids have been buying five bedroom monsters in the notion that they would make more money from this leveraged monster appreciating than they would from alternative investments. Now they are underwater, and who wants to heat a two storey great room? So, yes, I think this is the least worst way to salvage something from these hulks.

  2. BroD says

    As an owner-occupant myself, I approve this message. My house, which overlooks one of the largest urban wilderness parks in the U.S., was built in 1897 and converted into flats in 1929 (I wonder why ;~). The rent helps to pay for heat and maintain a grand historic structure.

  3. CharlesWT says

    One of the downsides it that, if your owner/tenant gains the notice of the police, you may find a SWAT team in your bedroom at four in the morning.

  4. Michael O'Hare says

    CharlesWT, that’s a baroque concern if I ever heard one. Speaking of crime, though, an OORH building is rarely completely empty, even when one or another of the occupants is out for the evening, or a week. If I were a burglar, I’d find that perplexing.

  5. BroD says

    “Speaking of crime, though, an OORH building is rarely completely empty, even when one or another of the occupants is out for the evening, or a week.” Absolutely true! My 2nd floor tenant is a reclusive retired librarian who has a phone and knows how to use it.

  6. Dennis says

    I’m expecting to move to Ohio in the not-distant future. My nearest-and-dearest made a mid-life career change from paralegal to English professor, and she landed her tenure-leading job in Cincinnati. My mother-in-law lives here in New Mexico. Over the Thanksgiving holiday we discussed the living situation, and we expect her mom to move to Ohio, too. So we are looking for (at least) a two or three bedroom home with mother-in-law quarters. I think I’ll suggest to her that we look also at three- or four-plexes near a campus. We can live in one unit, her mom in another and we’ll have one (or two) to rent to students.

    I rather like the idea, myself.

    • Ohio Mom says

      Welcome to the neighborhood. You don’t mention the school, but the area around UC has many homes that contain 2-3 apartments. The Clifton/Ludow area is argueably the most walkable neighborhood in Cincinnati, with a lively business district.

  7. KLG says

    Has McKinsey written a report on this?

    Anyway, it’s not just large cities where this will eventually make for a better environment all around. I am surrounded by similar housing in the middle of my medium-sized Southern city that has a large stock of some antebellum but mostly Victorian houses that were originally built for the local cotton and merchandising barons. The dwellings in this ‘hood range from $25,000 to $1,500,000. Talk about inhomogeneous, and much the better for that! My house is a 2-on-2 side-hall antebellum with a basement that used to be “servants’ quarters,” but the next-door neighbors live in a (now) 5-unit Victorian (each a very large unit). Tenants include a professor, police officer, graduate student, and teacher. With dogs! Although my colleagues who live in the northern arc, white-flight, car-dependent suburban ghetto will not believe it, our property and violent crime rates are lower than theirs, largely because people are here all the time. Makes it hard to be a burglar, among other things. Of course, once in a while we have the odd urban problem, but seldom anything particularly bad. Plus, both of us can walk to work in less than 20 minutes. I fill up my Honda Civic once a month, maybe. Now, if only we could get a grocery store to relocate downtown…Any ideas on that?

  8. says

    Chicago, too, has a huge array of owner-occupied rental units. This fact helps combat the false notion that renters necessarily are a scourge and that home ownership is essential for anyone with self-respect.

  9. Jamie says

    I currently live in a rent controlled place, in a bad neighborhood, in San Francisco. It is huge, by any reasonable standard. 3k or so sq. ft. Enormous by SF standards, more space than I can actually use. The landlords like the arrangement, as best as I can tell. At least, they were eager to import me to take the space. I get to move across the country, and know that my rent will be somewhat stable.

    Berkeley gets my daily work, BART gets my faire, about $140 a month, the local coffee shop gets $5 or so on breakfast. I moved a bit abruptly. my new friend Thomas at the hardware store sold me a hammer and some nails. I get to nail some stuff to my wall. What, exactly, is not to like?

    • Dr. Buzzsaw says

      Welcome!

      I’ll never see you as our trains pass each other in the transbay tube while I commute from my still under renovation Oakland 1916 craftsman in a complex mixed neighborhood to my downtown SF job, but I appreciate what you’re doing. With luck our bigger than average house will provide us the flexibility to be owner-landlords, or host an au pair, or to help relatives stranded in otherwise hopeless geographic/economic circumstances over the years.

  10. StevenB says

    I might be feeling a little Professor Kanh-esque sunnyside optimism at this idea – will the collapse of the post-WWII ‘American dream’ bring cure for the psychic and social ills engendered by that dream? Meaning, accepting Mr. O’Hare’s proposition (which seems sound), will such forced re-purposing of suburban hellscapes go some distance towards de-atomizing American society and culture? Perhaps structurally reversing somewhat our country’s headlong rush towards complete (as opposed to partial, natch) egocentric narcissism? Perhaps bringing home the well-trodden trope that without “community,” there is no “democracy?” (All right, I just made that up. Sue me.) I like it. I really, really like it.

  11. Donald A.Coffin says

    I grew up in Indianapolis, which has what I discovered to be a fairly typical midwestern variant, which in Indy was called the “double.” (In Chicago a variant is called a “two-flat.”) The Indy version is generally two mirror-image units sharing a yard and a central wall, typically built by an owner who then rented out the other half. (Not uncommon for the tennant to be a child’s family.) In Chicago, the two-flats have a shared ceiling,floor (“One man’s ceiling is another man’s floor,” as Paul Simon reminded us), rather than a shared central wall. On the block on which I grew up, out of about 15 homes, 3 were doubles; this was a fairly common ratio in lower-middle class neighborhoods.

  12. Donald A.Coffin says

    I should have added that it was also common for the child to inherit the double, thus becoming the landlord, and repeating the cycle. One of the buildings on our block had been in the same family for nearly 75 years.

  13. Lowry Heussler says

    OORH is dying in greater Boston because of gentrification and well intentioned law reform of the 70′s that imposes a rigid sanitary code backed up by lawful rent withholding (no escrow required). A landlord (usually dependent on rent to pay the mortgage) is driven into foreclosure when his tenant loses his job and stops paying rent. LL hires a lawyer (about $5K, although I used to charge $2,500) who starts the eviction process, but a decision will not likely issue for at least 9 months, and the tenant knows he does not have to move, or pay rent, until the eleventh hour. And at that point, of course, the monetary judgment is not collectible. I left law school believing these laws were necessary to protect powerless tenants from the big bad landlords. A few years later, I realized that the landlord-tenant relationship should follow the biological model of symbiosis, but when disturbed by the rent-withholding law, it becomes a host-parasite relationship. In biology, however, evolution ensures that parasites do not kill their hosts for obvious reasons. In Boston’s landlord-tenant world, the tenant can kill the landlord and move on, enriched from the experience.

  14. Brett Bellmore says

    In biology, too, some parasites can survive, (Not necessarily personally, but propagating themselves.) the death of their hosts. This tends to produce evolution towards virulence…

    “Rationalized zoning to encourage this pattern could bring a lot of people back to sustainable living in cities;”

    But zoning IS rational. It’s just rationally in the interests of the people creating the zoning laws, rather than the people subject to it. For instance, the zoning/building code that required me, a single guy, to build an 1800 square foot home on my land, rather than the little 600 square foot starter home I’d have preferred, was a rational tactic on the part of the local government, which could thus drive up it’s property tax revenues. That it harmed people situated similarly to me? Can’t make an omlette… It’s heck being the egg.

    • Dan Staley says

      rational tactic on the part of the local government, which could thus drive up it’s property tax revenues. That it harmed people situated similarly to me? Can’t make an omlette… It’s heck being the egg.

      That’s a feature, not a bug, of the citizenry insisting that no small homes be built nearby to lower their property values. Happens all the time. Ed Glaeser writes about it often enough that it should be common knowledge amongst all ideological groups by now, especially those groups that quote Glaeser finding zoning drives up land rents.

  15. NCG says

    Let’s not forget the extreme importance of good sound insulation, on floors, walls, you name it. Can’t believe no one else mentioned it. My neighbors had a newborn for *months* before I knew it.

    • Dr. Buzzsaw says

      As part of renovating my place I’ve done A LOT of research into building techniques and materials. I agree wholeheartedly. It’s amazing to me how many quality of life issues can be resolved with a little care and proper design and material selection when constructing dwellings. Sound proofing, short piping runs from water heaters to fixtures, well thought out heating systems, and a chair rail here and there can do wonders for domestic tranquility, which does wonders for worker productivity, divorce rates, and I suspect alcoholism.

  16. SamChevre says

    Owner-occupied rental housing is not uncommon in Virginia/North Carolina/Tennessee/Alabama/Georgia; the first apartment in which my wife and I lived after we were married was one of the upstairs units in a large, older house, in which the owner lived on the first floor and rented out 2 units in the basement and two on the second floor. The apartment where I lived in college in NC was similar–owner on the ground floor, tenants in the basement.

  17. Betsy says

    Brett, are you certain that it was not a property covenant or homeowners association rule that required a minimum dwelling size? I have never heard of a zoning law that prevented construction of a certain size house. In fact, in many states that would be expressly contrary to the zoning enabling legislation. Building codes might require a minimum size dwelling, but *certainly* not 1800 square feet.

    I believe you are mis-labeling private foolishness as public (government) foolishness. I’d love to be proven wrong — stun me.