Price break on ADUs ease Portland's growth
PORTLAND, Ore. – The city of Portland estimates that, over the next 20 years, 123,000 more families will move to Portland. Where will they all live, and will Portland become a vertical city of apartment buildings because there's no more room for houses?
To help with that growth, the city decided to save homeowners tens of thousands of dollars if they build what are affectionately known as "mother-in-law" apartments. And new numbers show, it's working.
In Sellwood, Judd Eustice is running quite the business.
"The one thing that is very nice about Airbnb is, everyone gets reviewed," said Eustice as he raked leaves in his front yard.
Three years ago, he converted the detached garage in his backyard into a slick studio apartment for family to visit.
It's called an accessory dwelling unit, or ADU; complete with kitchenette, bathroom, Murphy bed behind the couch, and bright windows looking onto the garden.
"We realized we had a lot of empty space in between visits. I listed it on Airbnb and got tens and hundreds of hits really quickly," he said.
He started out charging $65 a night on the owner-operated vacation home website, and is now at $85 and going up. It's booked solid.
"I can limit how many people come and go," Eustice says. "We make the income from it but we're not tied to just one tenant."
Airbnb says hosts in Portland make about $7,500 renting their primary residences 85 nights a year. Eustice is getting a lot more than that.
ADU permits spike in Portland
In the last five years, ADUs have become the hot mode of construction in the Rose City.
Here's why. In 2010, to promote growth and jobs after the recession, Portland officials decided to drop the $17,000 in fees associated with building them, called System Development Charges, or SDCs. They pay for that extra tenant to use parks, roads, water and sewer lines.
And this is what happened. ADU permit applications before 2010, were in the two dozen range, hovering around 25-30 per year. This year, we're at 314 so far. That's 12 times as many.
"There are other things driving popularity of ADUs," says principal city planner Eric Engstrom. "The high price of houses, the economics of it's harder to get a mortgage for a house so more people are in the rental market."
Those $17,000 in fees are set to kick back in July 1, 2016, but Engstrom says officials will debate whether to extend the waiver.
"It's a less intrusive form of development that doesn't involve demolition and it fits in better with existing single family neighborhoods," he said.
This map of all ADU permits issued in the last 10 years shows they're widespread in Portland. The highest concentrations are in the closer-in neighborhoods on the east side.
It's where more and more builders are making ADUs a priority in new home construction. A row of six new attached homes in Northeast's Sabin neighborhood, all come with one-bedroom ADUs. The city allows them to be as large as 800 square feet,
New ones are popping up everywhere.
Tenants see living in an ADU as an easy way to get into a desirable neighborhood and, according to realtors, new home buyers are demanding them.
"The price point for new homes in the Portland area, especially close in, is becoming very high, and putting an ADU in the basement helps the homeowner cover the expense of the mortgage," says realtor Brian Porter, with JMA Properties.
It's not free money, though. An ADU could trigger a jump in your property tax rate. You have to consider construction financing and it means less parking on your street.
But it could be a smart answer to some of our growth woes, at least while the price break lasts.
"Getting motivated to do something always [starts] in the pocketbook," said Judd Eustice.