ADUs OUT OF YOUR PRICE RANGE? THINK AGAIN
A new Portland startup says it's cracked the code for making accessory dwelling units available for those without big bucks.
Despite Portland's brisk ADU development market, the bulk of them are being built in inner-eastside neighborhoods where homeowners can tap large home-equity loans or have access to loads of cash.
Dweller, led by the city's former urban renewal director, is offering two schemes for the rest of us:
• It can do all the work to install a small ADU in someone's yard and hand over the keys for $125,000.
• Or, it won't charge the homeowner a thing, retaining ownership of the ADU, managing it as a rental, and handing over 30 percent of the rent to the homeowner. After 25 years, the homeowner owns the ADU outright for no cash.
Patrick Quinton, Dweller's CEO, is working on the company's second project near Northeast Alberta Street. He says the model he and company co-founder Brian Lynott created was built to "scale up" to grander size, first to Portland, then to the suburbs, then perhaps into other West Coast cities.
"We think the biggest part of the market is what we're serving," Quinton said during a recent tour of the Northeast Portland project. "We have a unit where I could build thousands in Portland."
Dulcinea Meyers-Newcomb is buying the Northeast ADU for her ailing 78-year-old father to live next to her family. "It creates this whole scenario for people that in the past would have written off an ADU. They could never afford them," she says.
Dweller's model will be "watched not just in Portland but nationally," says Robert Liberty, director of Portland State University's Institute for Sustainable Solutions, which is spearheading an initiative to make it easier to build and afford ADUs.
Quinton had heard about Lynott's vision for Dweller before he left the helm of the Portland Development Commission in 2016. After a spell of consulting, Quinton decided to go all-in on the idea.
Dweller came up with a basic, 448-square-foot design for a prefabricated unit with a modest-size bedroom, bathroom and combined kitchen and living room. It's a simple rectangle, 32 feet long and 14 feet wide.
With those dimensions, a unit built off-site can be plopped into the typical 50-by-100-foot Portland lot without jutting into the setbacks and without requiring city design review. The only thing the city has to do is OK the site plan and foundation and utility hookups.
Dweller cut the costs by commissioning Champion Homes to build the modular ADU in Weizer, Idaho, where labor costs are lower. The design met Oregon's stricter building code, including rigorous energy-efficiency features.
The modular homes are then trucked to Portland and put onto a two-foot foundation. Dweller deployed a massive crane to lift the ADU over Meyers-Newcomb's gable roof. Quinton figures he'll have to use a crane about half the time, but that comes with the $125,000 sticker price.
With either of its two options, Dweller takes the hassle out of adding an ADU. It prepares the site and lays the foundation, connects the utilities, and adds the landscaping.
Storage space in the small units is minimal, and the bedroom is tiny. There is less natural light than many prefer in Portland.
But each unit comes with air conditioning, and straps to secure the unit to the foundation in the event of an earthquake. They're fully outfitted with appliances, including a washer-dryer, microwave and double-door refrigerator. The model uses a durable form of HardiePlank lap siding, and a modest metal shed roof.
Buyers can get a choice of several exterior paint colors, flooring and countertops.
Turnaround times are fast. Dweller started work on the Northeast Portland site at the end of April, and should be done by early June, Quinton said.
ADUs offer a more affordable housing option because they're smaller and the owner doesn't need to buy land. But banks have been reluctant to loan money for construction, even though the units are easily rentable in Portland. But there are signs of that easing up, and Dweller refers would-be buyers to available lenders, Quinton said.
So far, he's getting the most interest from folks who live in less-affluent neighborhoods from the 50s and further east.
"It's definitely a very cool niche that he's trying to tap into, but it's still too early to know how successful it is," said Kol Peterson, an ADU consultant and author of the recently released book, "Backdoor Revolution: The Definitive Guide to ADU Development."
Dweller "could turn into a big thing," Peterson said. "This will allow the people who are on the east side of 82nd to develop ADUs."
Only about 10 percent of the ADUs being built are going east of 82nd Avenue, Peterson said. That's where a sizable share of Portland's population lives, and an oversize share of the city's working-class residents.
Homeowners opting for the land-lease option only have to shell out money for things like expanding their water lines to meet the increased demand or removing trees, Quinton said. Dweller expects that some folks will start off with the ground-lease option, but then buy the units during the course of the 25-year lease. They can do that at any time, and each year that goes by the price is lower, until it's zero at the end of the lease. So, they're essentially building equity in property without having to shell out money.
But Peterson's experience, which includes leading regular ADU tours in conjunction with the city, has shown that most people prefer ADUs of 600 square feet or more. Peterson also thinks the niche Dweller is working with is more limited, say 10 percent to 20 percent of the market, people who just don't want the hassle of working on design and construction.
Meyers-Newcomb and her husband had designed what she calls their "dream ADU," which was 720 square feet. But when they sought bids to get it constructed, they were aghast at the $275,000 price tag and dropped the idea.
A broker with Living Room Realty, she heard about Dweller at work, because a colleague there is handling leasing and property management for Dweller's rental units. When her dad suddenly took ill, the smaller Dweller unit could go up quickly and with minimal hassle, she said.
The Dweller model also could enter into Portland's ongoing quest to provide more affordable housing. So far, when the city builds large affordable apartment complexes, the price tag is going well beyond $200,000 per unit.
The lowest price Peterson has seen for a 400-square-foot ADU built on site in Portland is $140,000, and $180,000 for an 800-square-foot one.
Next to those sums, Dweller's $125,000 price looks pretty affordable. If a public program wanted to offer subsidies, the price could go lower. Once Dweller gets its program fine-tuned, it would welcome partnering with the city or county to do subsidized affordable housing, Quinton said.