On May 2nd, Portland City Council voted to permanently extend the waiver on System Development Charges (SDC) for Accessory Dwelling Units (ADUs). This waiver has one concession: the ADU cannot be used as a short-term rental for ten years.
What does this mean?
System Development Charges are fees assessed to new developments which, when collected, help offset the impact the development will have on public infrastructures like storm and sanitary sewer systems, water and street systems, and parks and recreation. In 2010 the City Council waived SDC fees for ADUs. An ADU is a dwelling– attached or detached from the main house–that exists on a lot with another house. SDC fees for an ADU can be as low as $12,000 and go as high as $19,000, so this is a big win for ADU advocates.
We are in favor of the new restriction on offering this waiver for AirBnB type dwellings. Folks are still welcome to create short-term rentals with their ADUs, but there is no reason that we rate/taxpayers should subsidize this enterprise.
ADUs have been legal in Portland since 1981, but few residents were building them until 2010 when the city issued a temporary waiver on SDC fees. The waiver created an ADU boom; the city issued 86 permits for ADUs in 2010, by 2016 that number increased to 615. The recent vote makes the waiver (initially set to expire July 31, 2018) permanent, a change that many believe will spur more ADU construction because it removes unpredictability from the ADU development market. Knowing that ADU development costs are stable may encourage investment and support from financial institutions. Could we see a standalone ADU loan product in the future?
Why is the City giving ADUs a break?
Unless you've been asleep in Portland for the last decade, you're aware of the housing crisis including skyrocketing home prices and rents, gentrification and displacement. Given our urban growth boundary, the City is being forced to explore ways to increase housing density to accommodate the influx of residents. This ADU subsidy also potentially enables more residents to purchase homes because it reduces a financial barrier for those looking to offset housing expenses with rental unit income.
Resources for Homeowners
Kol Peterson is an ADU owner and advocate in Portland offering a wealth of educational content on multiple websites (accessorydwellings.com, pdxadu.blogspot.com, and accessorydwellings.org). He has also written a book "Backdoor Revolution: The Definitive Guide to ADU Development" and offers a course on building an ADU.
If you're interested in having an ADU on your property but don't currently have the capital to build one, you might want to consider partnering with Dweller. They can build and install an ADU, arrange for a reliable 3rd party property manager to rent out the ADU, and then they split the revenues with you, the homeowner, 70/30. Their offering is flexible, for example, you have the option to purchase the ADU over time or rent it out yourself.
Regulations, requirements, and assistance are also available on the City’s website.