Too good to be ignored: ADUs feel more modern, more attainable than ever, and building one can get you a leg up (while saving the world.)
ADUs Will Change The Housing Landscape
Portland, Oregon makes up one of the central arteries of the ADU (aka Accessory Dwelling Unit, Guest house, granny flat, etc.) revolution — see also: Austin, Denver, Los Angeles, and Vancouver. By some estimates, over 660 units were permitted in Portland in 2018 and 85% of those units will see completion. Portland is also home to one of the movement’s largest ADU tours, which happens annually.
Now is the Perfect Time to Invest in the Future of Housing
Lone Cedar House is an ADU in Portland. It is just one of an infinite number of possible outcomes between a client and a design-build company.
A small team of dedicated ADU sherpas iterated on a theme, striving for a compelling, attainable design that could be permitted rapidly, financed by a local bank without massive amounts of cash, and built quickly with a integrated design-construction team, using local vendors and locally sourced, beautiful materials.
This is an ideal outcome and could become a more common story. For many reasons, right now is the perfect time to invest in the future of ADU housing, and the future of housing will grow to resemble the ADU.
1: Rates help affordability. ADUs are part of the solution to the affordable housing crisis because smaller footprints mean smaller price tags. ADUs have also become more affordable thanks to today’s low interest rates. It’s simple math.
2: ADUs are built at an environmentally ethical scale, because the single most powerful impact the field of residential housing has on the issues of affordability and climate change is by living in smaller more thoughtfully designed homes. Math.
Yes, size, not sustainable materials or tech-oriented energy wizardry, is the single most important factor when determining a building’s initial carbon footprint. Sustainability, energy, embedded carbon all matter, but size tips the scale much quicker. Recently, the size of typical new construction single-family housing footprints has become insanely excessive.
Here’s another way to look at it:
ADUs in Portland max out at 800 square feet, not too much different than what used to be called a starter bungalow (though most are smaller) and small spaces provide a fascinating design constraint. ADUs really are entirely their own type of building, at their best when simple and beautiful.
3: Right now, the City of Portland (and other jurisdictions) are promoting new ADUs by offering massive, sometimes in the range of $10,000–20,000 fee breaks to property owners who are willing to lease as a long-term rental or owner-occupy. Property owners must restrict their deed and comply with these rules for ten years.
The fees that are waived are called System Development Charges (or SDC fees), which go toward maintaining and upgrading new city infrastructure as our population increases. When a new construction “dwelling unit” is added to Portland, the owner is expected to contribute to this fund.
In 2018, fee waiver rules were changed so that no discount is given to ADU owners who want to lease as short-term rentals, or as I like to say, join the micro-hotel revolution, so ADUs being leased short-term rentals do not qualify for reduced fees.
4: That’s okay. Folks who intentionally want to run a great Airbnb — micro-hospitality entrepreneurs, let’s call them — can generate awesome revenue and can handle the expense.
Single accommodation experiences can add a quirky cultural layer to the tourism sector that is a welcome choice from ordinary hotel chains and hyper-branded boutique hotels downtown. In other words, there’s a good reason a lot of our friends stay in cute, funky, and minimalist short term rentals when traveling.
Instead of banning short-term rentals, Portland, and many other progressive cities have moved to incorporate the short-term rental model into the flow of the local economy. The requisite permit for operating an Airbnb in Portland is less than a couple hundred dollars.
The city earns its real revenue with 11.5% local and 1.8% state lodging taxes already collected by Airbnb and other platforms on behalf of the rental operators. A per-night fee passed in 2018 is expected to raise about $1.25 million a year.
The bottom line is that we all want to keep society’s lights on. The fees and associated taxes are designed to sustain the City’s infrastructure, which is a good thing for Portland’s quality of life and reflects our future state values.
If you enjoy a good Airbnb, what is the biggest reason? If not, what is the biggest downside?
5: ADUs fit Portland’s residential scale. The typical Portland lot (which measures 50’x100’ or 5,000 square feet) provides a buffer of light, shadow, sound, and air on all sides. ADUs increase density and also maintain the buffer. And that gets precisely at the heart of why they’re the most well-loved form of housing density.
The quantity and quality of trees and greenery present in Portland neighborhoods makes it easy to forget we’re mostly lined up right next to, or behind, one another.
Most residential zones in Portland feel almost suburban. They form a series of old neighborhoods rather than a city in scale. In this way, Portland feels much more like our past than our recent present.
Generally speaking, Portland lacks the row house feel of truly dense single-family zoned neighborhoods found in other cities (San Francisco, we’re looking at you), but it’s still distinctly more tight-knit than the suburban Americana we can all imagine.
The placement of ADU buildings on the property can complicate this buffer condition so positioning them properly is critical to their success, although oftentimes, realistic options are limited. Positioning may prioritize light and privacy for example, more than the actual ability to scoot a building around or twist the shape of the building into something complicated to build.
While this may not seem like such a huge concern right now — we’ve got lots of room— as housing space continues to become scarcer and more necessary within central Portland neighborhoods, as is starting to happen, city planners, politicians and voters will push to allow sites to become denser in an effort to drive affordability.
My prediction is that we should expect to see more cluster developments and other unorthodox strategies become more feasible and more common as small owners and developers test and succeed at pushing the boundaries of what is possible.
Innovation —Christensen’s disruptive innovation — doesn’t need to happen at large scale to be an important catalyst. It happens right here in our very neighborhoods all the time, carried out by passionate individuals. Buildings last for a long time. These buildings make a difference now and will pave the way for us in the future.
Portland property owners may wake up one day soon to find that four unique units are allowed on the typical Portland lot. Our skills as designers and builders, home-owners and developers must rise to the occasion.
The potential for ADUs to change American cities is absolutely staggering, so what’s the problem?
ADUs are still seen as unattainable by many. Here’s why:
It is expensive, convoluted, risky and stressful to build one-off, unique buildings and yet it’s undeniable that everyone wants customizable buildings.
Finely-built structures are of great long-term value, but they’re initially expensive and typically require some borrowed money. Finding and securing financing for ADUs is tough and loan programs are disconnected and do not evolve in parallel with the city housing code updates. This is not a direct criticism of mainstream banking, but it’s where we stand in the present moment, because…
The ADU asset type is relatively new in legal terms and is little understood by appraisers. In fact, in most of the United States ADUs have been illegal in many jurisdictions until recently — and let’s be honest here — mostly due to classist and racist housing policies implemented in the 1950s. Determining value is therefore more complicated than pulling sales comps on single-family homes in the neighborhood.
Portland is one of the “friendliest” places on earth for ADU dreamers. But it doesn’t help that the process of building an ADU is opaque to most — and not just the physical and logistical process. Layers of zoning and building code compliance can be intimidating and, generally speaking, ADU programs are new creations with ever-evolving rules.
Oftentimes, building what we really want to build requires extensive knowledge of the rules and nuanced strategies to achieve the best solutions. It doesn’t hurt to have a background in design and construction or project management either. Fear of the unknown stops many homeowners from getting started.
That’s the set of paradoxes we’re going to have to wrestle with as builders, designers, owners, and micro-developers if we want to make a difference with ADUs. I believe it’s possible to make a difference — and not only that, we should, and at some level, we have to.
Here’s a fact: In Portland right now, it’s practically impossible to build a new construction stand-alone ADU for less than $150,000, all said and done, and many folks spend over $200,000. In other West Coast cities like Seattle, Los Angeles and the Bay Area, it can be much more expensive.
Also true: no one wants the fast-food version of a $150,000 guest house if they could have something a lot better.
The minimum viable price of building an ADU in Portland (or in Seattle, Denver, Austin, Los Angeles and Oakland) is dependant upon its component costs; for example, a foundation, roof, insulation, heating, plumbing, sewer, electrical, lighting, windows, a mini-kitchen, the city permits, and some nice people to think about how to build it, and some other nice folks to actually build it, and others to order materials, and to transport materials ordered, and on and on, all primarily costs which cannot be slashed or dodged, because as they say, it takes a village and the villagers need to get paid.
While we’re talking about value, one way to think about value is the cost of comparable new construction. Small condominiums are one comparable. A 600-sq. ft. condominium in today’s dollars is about $300,000 plus HOA fees. That’s $500/sq. ft., plus HOA fees.
In comparison, detached ADUs — especially beautiful, well-built ones — are a tremendous value, given that their market value is high, and no other piece of comparable real estate that can perform the same feats, dollar for dollar. An ADU can be built for at least 20–30% less than a condo, with no HOA fees. Larger ADUs would earn a steeper cost advantage because much of the cost is in the infrastructure.
When a loan can be acquired, the difference between the payment and the value of the ADU typically creates a profit when compared against market-rate long term and market-rate short term rental rates.
Many folks pay under $1,000 on a monthly mortgage for their ADU, while making considerably more money on long term or short term tenants.
With current escalating rental prices and historically low interest rates, ownership is cheaper than renting if a homeowner is looking to downsize, house an additional family member, or keep an office close to their residence. What could be better than walking out your back door, coffee in hand, dog in tow, to your office 20 feet across the yard?
There are some truly wonderful owner-DIY built ADUs, but it’s not for the faint of heart. “Sweat equity” translates to taking on an extra full-time job or two if your original job wasn’t being carpenter or construction project manager.
If you’ve explored the ADU process or built your own ADU, what did you find the most challenging?
Now is the Best Time Yet For Beautiful ADU Housing
ADUs can be a contributing solution to many problems at the forefront of our conversations about building an ethical society, including affordable housing, global warming, aging in place, and small scale residential development or tourism entrepreneurship.
I distinguish small scale residential developers from short term rental entrepreneurs because unlike the early wild west days of what was then called the “sharing economy,” these services now profoundly shape our lives and must operate in a regulated economy with business licenses and online reputations. Like them or hate them they are here to stay in some form or another.
In other words, cities and homeowners are now incredibly more seasoned at generating supplementary income (and taxes) with short-term leasing services. The best stays in these little homes-away-from-home are framed as experiences, unique and personal, created by individuals and sold directly to other individuals using platforms such as Airbnb.
No one wants cheaply built, phoned-in copies of buildings, when we already have plenty, some would say way too many, speculative buildings in the form of production-built single-family housing, duplexes, row houses and apartment blocks.
The NIMBY (Not In My Back Yard) critics may be fighting a losing battle, but they’re right on one point: unthoughtful architecture saps the soul out of our neighborhoods and cities. Here’s why I’m YIMBY on ADUs, though:
While it’s hard to give absolutely accurate figure, something like 2,000 ADUs exist in Portland today. But in this city alone, there is the potential for 70,000 ADUs, or enough to supply approximately 10% of residents with individual housing. It’s astonishing to realize how many folks could be embracing a new form of self-sufficient, environmentally-conscious living without filling our neighborhoods with apartment buildings.
70,863 of the tax lots in Portland (about 30 percent) are prime for ADU development
29,363 of those lots are within 500 feet of a transit stop
3,860 of those lots are on an alley, which could allow for a clustering of ADUs that use the alley as a thoroughfare
If only we were on track to seize the moment: at our current build rate, however, it would take us a glacial 35 years to reach capacity. And that already ginormous capacity has the potential to double or quadruple if current thought leadership around residential housing becomes reality.
We believe ADUs become more attainable when builders start speaking a common language of design and construction aimed at future-thinking housing, reducing risk and delivering an excellent build at a viable price and maximum value.
What would make you the happiest about your ADU?
Multi-functional or the keys to a more minimalist, essential life?
There’s a subgroup of small space design enthusiasts devoted to ingenious furniture and storage solutions to small spaces. This trend is especially common in smaller apartments or condominiums that exist within a fixed framework of a larger building, or tiny houses on wheels, much like boat design.
These project types share some similarities to ADUs but are ultimately cut from a different cloth.
While it’s fun to look at these incredible “boxes of magic tricks” they should probably come with a warning: beautifully detailed, super-complex storage systems can become mighty expensive to build and fussy to operate even when well-executed. One project has even become a well-known meme.
Condominium residents usually can’t fuss with their foundation or facade, and tiny house dwellers are dealing with incredible space challenges similar to boats and planes, so it makes considerably more sense to pour the lion’s share of a project’s budget on designing and building a network of interlocking, sometimes utilitarian, sometimes sumptuous, interiors.
Still, almost nothing beats simple, intuitive spaces. If you’re just getting started, focus on the big picture.
Seek the light and soften the barriers
If you’re going to remember one thing, remember that small buildings, probably especially small buildings, will be relegated to shadowy oblivion if not well-lit.
Large windows will let in light while buffers also allow sun, sky, and the atmosphere of each day into the building. Southern exposure is typically the best light source.
However, it’s not always easy to bring the outdoors in. Consider the challenge to design a private ADU on 3,000 sq. ft. lot (30’x100’), which is only 60% the size of a typical Portland lot.
Let’s say this ADU is surrounded by the primary residence, a neighbor, a busy street, and a corner convenience store. Because the primary house occupies the front of the property, the ADU must fit comfortably within about half the available area, about 20% of a typical residential site. This is the case with Lone Cedar House.
Through the use of fencing, slat screens, and tall bamboo, we were able to create an oasis in the middle of the city. The tall windows face south and let in an enormous amount of light.
It would have been easy to make due with small windows here but the large panels of glass transform the space.
Even though it’s directly next to a convenience store parking lot and active commuter corridor, it’s hard to tell from inside the building.
The design principle at work here is to focus on screening the residence from the active urban environment while embracing the modern vision of indoor-outdoor living.
This is important because future laws may allow denser sites in what are now residential zones, meaning that more ADUs per residential lot are likely to be allowed.
What can an ADU really do? Take a trip to Japan.
If you’re looking for real inspiration for small detached urban housing, it’s hard to surpass what has been done in Japan. Case in point, Tokyo (see, there really is a Portland-Tokyo connection).
Tokyo has some of the world’s best small detached buildings, partly due to its zoning philosophy which leads to many tiny, oddly sliced parcels of land. Tokyo residents have embraced small housing that is more affordable to live in, makes for a healthier, more integrated city and is tremendously better for the environment.
Four generations of talented modern Japanese designers have tried just about everything you can think of (and many things you probably wouldn’t). This should give us a rallying cry: even in the deepest of apartment canyons, a clever designer can rise to the challenge and create an ADU that has light and privacy.
Okay, okay, you don’t actually have to travel to Japan. There are so many cool small homes in Japan that an entire micro-industry of English language books has sprouted up to examine small house design thinking around the world.
If you prefer a physical book then you can do no better than by picking up one of the large compendiums published by Equal Books.
Create neighborly goodwill
In Tokyo, one can build without needing consent from their neighbors. However, in Portland, we often have to abide by criteria that is open to neighborhood comments.
Let’s propose, for example, that to the north of your planned new ADU, there is a close neighbor, and each structure will be in sight of the other.
Let’s say you need special planning permission to build your design. Why not consider community impact into the design early and approach the neighborhood with a great solution, win them over, and receive letters of support from the get-go?
Many people would endorse this approach without actually making the human connection. Make the human connection.
There will always be some people who disagree, and they will respond with the critical feedback they always intended to write. However, our experience is that when complex situations are approached with generosity, more often than not, a willingness to trust and communicate with the community creates positive outcomes.
In the Lone Cedar House example, when we argued for increased height of the structure and close proximity to the property lines, we chose to include only one high-up opening facing the neighbor that would reveal only the private beauty of the sky — and a few upward reaching strands of bamboo.
The planning department variance we asked for (called an adjustment in Portland) was approved.
It’s a beautiful feature of the design and one we wouldn’t replace.
What features would make someone’s guest house more neighborly to you?