Not just for mother-in-law

Accessory apartments benefit society and the economy, and it's time for tax credits to promote them

Twenty years ago, we separately produced publications urging that governments should provide incentives for the creation of accessory apartments (sometimes called "mother-in-law apartments") in owner-occupied housing. Our writings pointed out that there was a shortage of small-unit housing; that household sizes had dropped, rendering many large homes ripe for partial use by renters; that it was irrational to maintain regulations that discouraged extended families from living next to each other; and that Germany, Japan and Finland had provided such incentives as housing policy.

The idea fell on stony soil. Only a handful of wealthy American suburbs then permitted accessory apartments. The political climate was hostile to new federal programs and "tax expenditures." No need was felt to further stimulate housing-related industries.

Today, all has changed. Most municipalities have accessory-apartment ordinances. California, Oregon, Vermont and Washington state, along with most Canadian provinces, require municipalities to consider accessory-apartment ordinances - laws fostered by the AARP. A Montgomery County task force has recommended that they be allowed as of right, as in parts of Arlington, Va., the District of Columbia and Prince George's County.

Home improvement contractors and appliance manufacturers face economic recession. Millions have over-invested in housing, and many would welcome rental income to avoid foreclosure. Politicians seek stimuli for the economy that do not involve "trickle-down" bailouts or indiscriminate gifts that may be hoarded rather than spent. States struggle with exploding budgets for Medicaid nursing homes because elderly people who want separate apartments cannot live near their children.

We advance a modest proposal: a temporary, three-year tax credit of $5,000 or one-half installation cost - whichever is less - for new, accessory apartments in owner-occupied homes. The proposed credit is temporary because it pays people to do what ultimately is in their interest; it is a publicity device as much as an incentive, and can be removed once accessory apartments become a popular option for builders, homeowners, renters and contractors. Tax credits, rather than financing incentives or grant programs, are appropriate because with the aid of Form 1040 and the tax preparation profession, they would get the word out much faster than programs trickling down from bureaucracies.