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In October 2022, ECONorthwest convened three focus groups and a series of follow up conversations to explore challenges and opportunities in planning and building ADUs in the Twin Cities. The groups represented regional leaders working as architects and builders, funders and advocates, as well as city staff. CHALLENGES Costs versus building form expectations is challenging in the Twin Cities market. Codes limit ADUs to be approximately the same size of a residential garage (maximum of 675 square feet) and people often underestimate the cost of an ADU. At the low end for a prefab construction ADU, a homeowner can expect to pay approximately $250,000 which is high given the limited size The winter climate in the Twin Cities drives a strong regional preference for covered parking, which will directly increase costs. Owners with capital for ADUs, for example, typically want parking for one or two cars. This need, combined with substantial requirements for frost footings for residential structures, often involves demolishing an existing garage and rebuilding a garage with an ADU on the second floor. Converting an interior space to an ADU is often very difficult. Many older homes throughout the region may not support an ADU because of their size and layout. First- ring suburbs, many of which were developed after WWII, may be a better fit due to their housing structure. However, in many cases, converting an interior space to an ADU does not add significant value because it does not change the overall square footage. Local cities do not have dedicated ADU planning staff. Permitting an ADU is technical and relies on support from multiple departments within the city. For example, Minneapolis has parallel applications for building and land use, as well as a process that involves staff from zoning, building codes, and other departments that are needed to shepherd the application through to completion. It is challenging for staff to need to explain the process to applicants because it is inherently confusing and different rules often overlap. Saint Paul requires dedicated water and sewer connections which presents a financial barrier that is unique to the city. Other neighboring cities do not require dedicated water and sewer connections. Saint Paul also requires a dedicated sidewalk leading from the ADU to the front of the primary home. This is a financial and potentially logistical challenge depending on the cost of the added sidewalk and lot coverage limitations. Well intentioned ordinances, such as requiring that ADU siding match the primary home, may be challenging in practice. For example, if a primary home has asbestos siding, requiring an ADU to match is problematic. Inconsistent and disconnected city governments generate a range of ADU ordinances that lack regional consistency. Roughly half of the cities in the Twin Cities have adopted ADU ordinances while the others do not. Individuals and developers are challenged by inconsistent expectations rather than turning to broader regional coordination. Financing ADUs is a challenge in the Twin Cities and other regions alike. When other communities, such as those along the West Coast, began building ADUs housing costs were markedly less. Therefore, given current higher building costs, more time may be required for ADUs to proliferate in the Twin Cities compared to other regions in the country. 14