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Facilitating the development of accessory dwelling units in Portland, OR

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Facilitating the development of accessory dwelling units in Portland, OR

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Overview

This case study examines the adoption of policies in Portland, Oregon that provide homeowners greater flexibility to build or convert Accessory dwelling units (ADUs) on their property. Also known as granny flats, garage apartments, or mother-in-law suites, ADUs are secondary units created as part of a homeowner’s property. Because ADUs are usually small in size and capable of being built in areas where there are few or no vacant lots, they provide an important opportunity for expanding the stock of lower-cost homes, including in resource-richA term to define neighborhoods that offer abundant amenities, such as access to quality schools and public libraries, streets and parks that are free from violence and provide a safe place to play, and fresh and healthy food. areas where there are few lower-cost options.[1] They also provide a means of gently increasing density, which can have environmental benefits when used to increase the availability of housing near jobs, retail centers, and public transit. Finally, when rented out, ADUs provide a revenue source for existing homeowners, which can help them afford their housing costs.

Portland’s changes to its ADU policies have been implemented to achieve the following policy objectives, as presented by the Portland Bureau of Developmental Services to the City Council in March 2010 and reflected in the 2010 and 2016 resolutions:

  • Increase the housing capacity in Portland while fostering balanced communities, housing diversity, and housing affordability;
  • Foster neighborhood diversity;
  • Decrease the number of individuals building ADUs without a permit;
  • Increase urban density in an environmentally sustainable way;
  • Create small-scale construction projects that [are] more attainable for homeowners as well as a struggling construction industry.[2]

Portland first started relaxing its ADU policies in 1998 and eliminated certain fees associated with ADUs in 2010. Between 2009 and 2018, the number of permits issued yearly for ADUs increased from 25 to 472. Local officials credit the fee waivers, combined with the earlier policy changes that facilitated ADU construction, with contributing significantly to this increase in ADU volume.

Key takeaways

Localities interested in changing or creating ADU policies can glean the following from Portland’s experience:

  • Eliminating restrictive policies such as parking requirements, owner occupancy requirements, and the prohibition of constructing detached ADUs may lead to an increase in the number of legal ADUs constructed, urban density and neighborhood diversity.
  • In addition to changing land use regulations that can facilitate the construction of ADUs, localities should consider other steps to facilitate the development of ADUs, including educating homeowners and builders about the ADU process, marketing ADUs to them and to renters as a viable housing option and helping owners finance their construction.
  • The waiver of permit or service connection fees for ADUs can help to increase the construction of ADUs.
  • Requiring homeowners to pay higher development fees if they seek to build an ADU as a short-term rental can reduce the risk that additional ADUs are used as short-term rather than long-term rentals, but may reduce the overall number of ADUs being constructed.

Description

Since 1998, Portland has changed its development policies in several ways to make it easier for homeowners to build ADUs. While ADUs have been permissible in most residential zones in Portland since 1981, initial policies restricted ADU construction to conversions of existing internal space, and ADUs were only allowed for primary dwelling units that were at least five years old. While the pre-1998 policies provided for some flexibility, such as not requiring ADU owners to provide parking for ADU tenants, changes to development policy in 1998 permitted greater flexibility in how units could be built, including the elimination of a requirement that a property owner had to live on the property during and after conversion of an ADU for the unit to be permissible.

Additional changes came a decade later, in 2010. Prior to this time, homeowners interested in building ADUs were required to pay a system development charge, which presented a major barrier to their construction.[3] Since 2010, however, these charges have been waived for homeowners interested in building ADUs as a long-term housing option, with a caveat added in 2018 to reduce the number of short-term rentals being built. This change is part of an effort to increase the affordable housing capacity of Portland, and as a result, there has been a significant increase in the number of ADUs developed, especially from 2009-2018.

Process & timeline

This section describes steps Portland has taken since 1998 to change policies related to the permitting or ADUs.

1998

Portland’s relaxation of ADU regulations started in 1998, due in part to a need for more affordable housing options in the city, as well as to align policy with city and state urban planning goals.[4] The changes made included the elimination of a restriction that prevented the addition of an ADU to any home less than five years old (a regulation intended in part to prevent simultaneous new construction of a home and an ADU). Portland additionally chose not to require the homeowners to live onsite (although the Oregon Department of Environmental Quality found that 64% choose to anyway) or secure approval from their neighbors, requirements that have presented significant obstacles to ADU construction elsewhere in the country. While developers were largely in favor of the changes, there was significant pushback at the time, especially from homeowners’ associations, who were worried about the elimination of the occupancy requirement and the implications for neighborhood viability and stability.[5]

2010 

Until additional policy changes were implemented in 2010, homeowners who were interested in building an ADU were required to pay a one-time development fee called a system development charge to the City. These fees represented a significant barrier to ADU construction, especially for typical homeowners that were interested in building ADUs, who tend to have concerns about their own housing costs and see rental income from ADU tenants as a means of offsetting those costs. Prior to 2010, typical system development charges for ADUs ranged from $7,000 to $12,000 for each unit.[6] In the interest of encouraging more development, the Portland City Council passed Resolution 36766 in March 2010 to suspend the fees through June 2013. Co-sponsored by Commissioner Randy Leonard, Mayor Sam Adams, and Commissioner Nick Fish, the Council members spoke of ADUs as “an affordable housing option, a thoughtful way to maximize the use of available land…[and] a housing option for elderly citizens who want to remain close to family, and an opportunity to create jobs in a struggling construction industry.”

2012 and 2016

The popularity of the program in the years after its initial passage was evident in the number of permits issued for ADU construction. In 2009, prior to the policy change, 25 permits were issued. After the policy change, the number of permits issued jumped to 70 in 2010 and 85 in 2011.[7] This resulted in City Council’s decision in December 2012 to extend the suspension of system development charges through July 2016, and again in April 2016 to extend the suspensions through July 2018.

2018

As a result of the program’s popularity and the significant increase in ADUs constructed seen in the eight years after the policy change was implemented, the Portland City Council permanently removed system development charges for ADUs. However, this change came with a caveat: homeowners seeking to build an ADU cannot qualify for the system development charge waiver if they plan to list it as a short-term rental on platforms such as AirBnB at any point in the next ten years. The charge was raised to $22,000 in 2020, further disincentivizing the construction of ADUs for short-term rental purposes.

Key elements of and changes to Portland ADU regulations since 1981[8]

1981-1997 initial regulations

ADU had to be an internal living space within primary dwelling, basement, or attic only (detached ADUs were not allowed)No parking or design requirement for ADUs Primary dwellings had to be at least 5 years old for an ADU to be allowed. Primary dwellings had to be occupied by the owner at the time the ADU was added and had to remain owner-occupied Number of residents was not to exceed allowance for one household in both primary and accessory unit. An ADU was prohibited if the primary dwelling was one in which a resident used the home as their place for work and either one employee or customers came to the home. ADU construction had to comply with existing zoning requirements, such as setbacks Homeowners had to pay a system development charge for ADU construction

1998 changes

Internal space requirement relaxed, which allowed ADUs to be internal to, added-on, or detached from the primary dwelling. A parking requirement was added but only in two instances: 1) for simultaneous new construction of a primary dwelling and ADU, or 2) for ADUs located adjacent to a narrow road that may not have sufficient on-street parking. Age requirement of primary dwelling was eliminated, allowing ADUs to be added to homes of any age. Occupancy requirements were eliminated. Design requirements were added to require exterior materials, roof, trim, windows and eaves of ADUs to match the house. Zoning requirements were changed to allowed detached ADUs if set back 40 ft from the front lot line or located behind the rear wall of the house

2010, 2012, 2016 changes

2010: System development charges suspended for ADU construction through June 20132012: System development charges suspension renewed through July 20162016: System development charges suspension renewed through July 2018

2018 changes

System development charges permanently waived as a part of city policy unless the homeowner intends on listing the ADU as a short-term rental at any point in the next 10 years

Other steps taken by the city of Portland and partners to promote the adoption of ADUs

In addition to making policy changes to support the development of ADUs, the City of Portland has taken several steps to promote ADUs. The City’s Bureau of Development Services developed and made available on its website a detailed guide on the steps involved in designing, permitting, and constructing ADUs. Additionally, the City partners with stakeholders to educate residents about ADUs. For example, Portland is the home of the founders of the website AccessoryDwellings.org, a one-stop-shop for ADU education and advocacy, and the City has partnered with the organization on events to raise awareness on ADUs, including annual ADU tours in the Portland area. Additionally, the City has partnered with the Oregon Department of Environmental Quality (DEQ), which promotes ADUs as part of its campaign to encourage space-efficient housing. The Oregon DEQ has prepared a guide to financing ADUs in the Portland area in partnership with AccessoryDwellings.org and Earth Advantage, an organization that promotes sustainable building practices.

Outcomes

The number of permits issued increased every year from 2010 through 2018, indicating the popularity and increased feasibility of building ADUs in Portland.[9] In 2019 however, after the permanent adoption of the policy, the number of permits granted for ADUs dropped significantly (though it still remained above 2015 levels). According to AccessoryDwelling.org, which has monitored changes to Portland’s ADU policies, there are two main factors that could explain this drop. First, there might have been an “important psychology of a temporary time-limited incentive which effectively spurred a strong flurry of activity and interest in ADUs up to 2018.” The second important factor was that, as mentioned previously, the 2018 policy contained a caveat that required those building ADUs for use as a short-term rental dwelling to pay the system development charge fee.

Numbers from email exchange with Ken Ray, Portland BDS Public Information Officer.

Recent data on the affordability of ADUs in Portland are not available; however a 2014 report by Oregon’s DEQ found that 80 percent of ADUs in Portland had rents similar to or slightly above similarly-sized market rentals, 5 percent rented for less than $500, and 13 percent rented for free (in many cases by friends or family of the primary homeowner). The report also indicated that close to 80 percent of ADUs were in use as long-term residences at any given point in time. In considering these data on ADU rent levels, it’s important to remember that ADUs tend to be small, and that smaller units tend to have lower market rents than larger units, so ADUs in Portland still rent at levels that are lower than the overall average. As noted in the report, the rent levels of ADUs may also reflect a premium based on perceived neighborhood amenities, although this was not specifically studied.

Policy significance

In much of the U.S., ADUs are difficult to build under current zoning rules. A New York Times analysis found that in 2019, it was illegal “on 75 percent of the residential land in many American cities to build anything other than a detached single-family home.” In addition to zoning barriers, there are a range of other barriers that inhibit the development of ADUs, including challenges: 1) accessing information on ADU rules and how to develop them, 2) obtaining financing to construct ADUs, 3) identifying, screening and supervising contractors, and, 4) being a landlord. Municipal policies that facilitate and encourage the development of ADUs can help expand the supply of lower cost housing units and facilitate the inclusion of lower cost homes in areas that are otherwise unaffordable for lower income households.

Through its elimination of the significant cost barrier that system development charges presented for ADU construction, in addition to relaxed parking and building regulations, Portland has taken substantial steps to facilitate ADUs and is now producing sizable numbers of ADU units each year.

Related resources

Footnotes

  1. Oregon Department of Environmental Quality ADU Survey
  2. Portland Bureau of Development Services 2010 Presentation; 2010, 2016 Resolutions
  3. Numbers from email exchange with Ken Ray, Portland BDS Public Information Officer
  4. 2010 relevant meeting minutes; 1997 City Council Notes
  5. Testimony presented to the City Council in 1997
  6. 2010 Resolution
  7. Portland Bureau of Development Services 2010 Presentation; 2010 and 2011 numbers from email exchange with Ken Ray, Portland BDS Public Information Officer.
  8. Planning Commission Recommendation presented to City Council 09/26/1997; 2010, 2016, 2018 resolutions; https://www.portlandoregon.gov/bds/36684https://efiles.portlandoregon.gov/Record/13232338/Planning Commission Recommendation presented to City Council 09/26/1997
  9.  Numbers from email exchange with Ken Ray, Portland BDS Public Information Officer.
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