Portland's new housing stock is tilting to Accessory Dwelling Units
Portland's new housing stock is getting miniaturized, with builders planning nearly as many accessory dwelling units as regular single-family houses.
Newly released data show the city issued 615 building permits for new accessory dwelling units or ADUs in 2016, approaching the 867 permits issued for regular houses.
Once a tiny niche in the market, ADUs — also called granny flats or mother-in-law apartments — now are poised to surpass regular home construction in the city. Data from the Bureau of Planning and Sustainability and Bureau of Development Services shows ADUs are growing in popularity each year, while the number of new regular houses seems to have plateaued.
In contrast, a decade ago, the city issued 30 times as many permits for single-family houses as ADUs.
"If you look at the growth chart (in ADU permits), it looks kind of exponential," says Eli Spevak, a developer of co-housing, ADUs and other innovative housing, and a member of the Portland Planning and Sustainability Commission.
The city permit data likely undercounts the number of new ADUs, because many Portlanders are known to do garage conversions without getting permits, or remodel their basements and attics to provide new rentable spaces. The City Council and Planning and Sustainable Commission also are debating a proposal to allow two ADUs on many city lots as part of the city's infill housing strategy. One ADU would be allowed inside the house and one as a separate building in the yard.
One reason single-family construction seems to have plateaued is the lack of
undeveloped large parcels of land, forcing homebuilders to focus on infill homes on vacant lots or replacing demolished homes, rather than traditional subdivisions. But lenient city rules allow an ADU to be built on most single-family lots, meaning there are tens of thousands of available sites remaining. Homeowners can build them next to their main homes without buying land, or paying for costly utility hookups and driveways.
The average cost to build ADUs these days in Portland is about $160,000, typically for the maximum 800-square-foot unit, says Kol Peterson, an ADU consultant and blogger, and co-owner of Caravan, the Tiny House Hotel on Northeast Alberta Street.
The housing affordability crisis and growing traffic congestion are driving up the popularity of ADUs in Portland, especially in close-in neighborhoods. ADUs provide separate spaces for in-laws, adult children returning from college, or for private rentals that supplement homeowners' incomes. Some are turning their ADUs into Airbnb rentals, which, in desirable locations, often yield higher incomes than regular rentals.
There's also a growing "cottage industry" of ADU players, Peterson says. Those include developers, builders, architects and lenders. Banks have been slow to gear up lending for new ADU construction. But many people are now financing their ADUs via home equity lines of credit, Peterson says.
Portland has encouraged ADUs like few other municipalities, starting with a 1998 ordinance when Vera Katz was mayor that allowed one on nearly every lot that had enough space.
Perhaps the biggest boon to the ADU industry was the City Council's moves — starting in 2010 — to exempt ADUs from systems development charges levied on other new development to cover the impact on roads, parks and utilities. So-called SDCs add several thousand dollars to the development cost of new homes.
In 2009, the city issued only 27 permits for new ADUs, but that number more than tripled the next year, when the SDC waiver took effect. The City Council has renewed the waiver twice since then; the current one expires in July 2018.
Peterson fears if the waver isn't renewed, it could destroy momentum in the ADU market. In his annual tours of ADUs around town, attended by several hundred people interested in adding ADUs to their lots, he asks people if they'd build them if they had to pay $17,000 in SDCs. About three-fourths of the people say they wouldn't, he says.
Spevak isn't so sure, because fees for ADUs could be based on their size, making them half the price of SDCs for regular single-family homes.
"It all has to do with how they're set," says Spevak, who owns Orange Splot LLC. "It's fair to charge SDCs for new ADUs," he says. However, in his view, "they should be quite a bit less than single-family homes."
While developers and homebuilders often face the wrath of neighbors when they build infill houses or demolish homes to build replacements, there's been relatively little neighbor opposition to ADUs.
Just because the city issues a permit for an ADU or a single-family house doesn't mean it will get built. But a permit for an ADU costs $5,000, Peterson says, so he calculates that 92 percent of those getting permits wind up building. A permit to build a new single-family house costs even more, says Ross Caron, spokesman for the city Bureau of Development Services, so those shelling out such sums usually wind up building.
Peterson, who is writing a book about ADUs, says Vancouver, British Columbia, has issued about 6,600 permits for them, tops in North America. With unpermitted ADUS added in, that city claims more than 20,000 of them, he says.
Portland has the most in the United States, with some 2,200 ADU permits issued cumulatively, he says. Industry observers calculate that there is a far larger number of units here that were never permitted, though Peterson senses that share is declining.
What is an ADU?
Accessory dwelling units are secondary homes on residential lots. They can be inside a house or an outbuilding in the yard.
Under city rules, they can be no more than 800 square feet in size or three-fourths the size of the main house, whichever is smaller.
What about tiny homes?
There's also a parallel boom in Portland for "tiny homes."
Those can get smaller than 300 square feet, and could be classified as an ADU if they are built as permanent housing, such as on a slab of concrete or a foundation.
But many tiny homes are built on wheels so they can be moved easily. Under current city code, they are classified as RVs for residential purposes, making them illegal for habitation in peoples' yards.
As with ADUs, though, tiny homes can provide an economical solution for Portland's housing affordability crisis. City officials and homeless advocates are exploring ideas to make tiny homes more widespread in Portland.