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Fewer people seek permits for accessory dwelling units since lucrative fee waiver was made permanent.

COURTESY OF KOL PETERSON  - Kol Peterson explains how ceiling heights affect the ability to convert a basement to an accessory dwelling unit, during a 2018 tour by municipal officials visiting Portland to learn about ADUs that was sponsored by Portland State Universitys Institute for Sustainable Solutions. Go figure.

Ever since the city of Portland granted a permanent fee waiver to those building accessory dwelling units — shaving costs $14,000 to $19,000 — the pace of new development has been cut in half.

Kol Peterson, a consultant who helps people build accessory dwelling units or ADUs, calculated that the city issued 59 new such building permits per month in the year and a half before a temporary waiver of systems development charges was made permanent on Aug. 1. In the next five months, that fell to 24 permits per month.

He predicts construction of accessory dwelling units will fall in half this year to around 300, compared to 600 per year the past three years.

The consultant, who co-edits the Accessory Dwellings blog and released a book on such units last year, traces the decline to two factors.

Many Portlanders were trying to rush their projects before a temporary fee waiver expired in August. Then, when the City Council agreed to make the fee waiver permanent, some people balked because of a new restriction: the fee waiver is no longer available for those who use their accessory dwelling units for Airbnb-style short-term rentals, at least for the first 10 years.

The slowdown is noticeable, Peterson said, as many architects and designers specializing in such units suddenly have more time on their hands.

But the slowdown might not last long.

City planners calculate that the development rate of accessory dwelling units will double, back to around 600 a year, if the city adopts the Residential Infill Plan as currently proposed.

That plan will allow people to build at least two such units on a typical city lot, one freestanding one in their yard and one in a basement, attic, garage or other internal space.

"Six hundred a year is actually a really good clip for Portland," Peterson said. "Who knows, maybe it will be more than that."

In addition, some companies are pioneering the use of prefabricated units that are being sited on peoples' lots in Portland, which can cut the costs and boost the pace of development. And lenders, led by Umpqua Bank, are devising better ways to help people finance construction of accessory dwelling units on their own land.

Under city rules, such units can be no more than 800 square feet, and don't require extra parking or separate sewer, water and electric connections. Those factors, plus the fee waiver, tend to lower residents' costs when they want to add such a unit. The fact that they already own the land also saves a significant chunk of money compared to building a house on a separate lot.

Outside of Portland and Bend, there's been relatively little accessory dwelling units development lately in other cities around the state, Peterson said. Despite a 2017 law passed by the Legislature aimed at removing barriers to construction, most metro-area cities, aside from Tigard, have balked at loosening up their rules, Peterson said. Some of those rules, such as one requiring new off-street parking for accessory dwelling units and requiring the owner to live in the units, have served as "poison pills" that keep the trend largely limited to Portland and Bend, he said.

Though it's gotten little attention, a provision in House Speaker Tina Kotek's proposal, House Bill 2001, would bar some of those provisions.

If that passes, Oregon might see a surge in accessory dwelling units construction in other cities facing housing affordability crunches.

Who's building what?

Here's a snapshot of the 1,248 accessory dwelling unit projects the city of Portland authorized in 2017 and 2018:

• 529 of the units are for detached new construction.

• 131 units are additions to existing structures, such as adding a story above a garage, house-lifts, basement expansions, or other bump-outs from the primary dwelling.

• 142 units are conversions of existing garages.

• 264 units are conversions of basement or other spaces attached to existing homes.

• 28 are existing unpermitted units that owners are trying to legalize; those are in basements, garages or above garages.

• If past patterns hold true, 85 percent of the 1,248 permit holders from 2017 & 2018 will actually complete their ADUs, giving Portland roughly 2,900 permitted ADUs on the ground by 2020.

Source: Kol Peterson

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