The Portland City Council gave preliminary support to new proposed accessory structure design guidelines, which are expected to simplify the permitting process and lower construction costs for accessory dwelling units.

Recommended draft revisions to Portland’s Accessory Structures Zoning Code breezed through Thursday’s regular council meeting. A second reading and a vote will take place later this month. A focus group of citizens helped guide formation of the proposed changes, which were compiled over the past 12 months. They were approved by the Planning and Sustainability Commission in September.

The revision process was a joint effort between the Bureau of Planning and Sustainability and the Bureau of Development Services. Planners and technicians sought to have all detached structures treated with greater uniformity and consistency, and the permitting process be more streamlined, according to BDS Director Paul Scarlett. He told the council that average customers could save up to $2,600 on adjustments, and waits of up to 10 weeks could be eliminated.

Accessory structures are defined as those of a secondary importance to a site’s primary use. This category has grown over the past 25 years to include a grab bag of outbuildings – sheds, pool houses, artist studios, mechanical outbuildings, garages, ADUs and others. A major goal of the code revision project was to plan based on an accessory structure’s “form” over its “function.” And in looking at areas to address, the focus group zeroed in on the rules that builders most commonly ask to be tweaked.

“What we’re doing is trying to create a uniform approach,” planner Matt Wickstrom said.

Today, the city on average issues four to five permits for accessory structures each operating day. Most are for garages, though the BDS has seen a large increase in ADU permits since 2010. In this five-year period, the city has issued 400 adjustment reviews (29 percent of permit applications) – including 83 for height.

Wickstrom said that under the changes, approximately half of those 83 height adjustment reviews would not have been necessary.

Under the revisions, the height limit would be set at 20 feet for all accessory structures. And instead of being required to strictly match the style and materials of a property’s main structure, ADU designers would be allowed greater design flexibility. Setback requirements would be eased to allow more small buildings at a property’s sides and rear. Rules restricting the placement of attached and detached mechanical equipment would be softened.

Commissioners asked questions about historic tree protections, mechanical buildings’ noise impacts and the city’s waiver on system development charges for ADUs, which is set to expire in July 2016. Six members of the public addressed the council; none opposed the revisions.

“I just want to convey that these changes are extremely popular with homeowners,” said ADU advocate Kol Peterson, who noted that he has spoken with more than 200 homeowners about the Accessory Structures Zoning Code Update project. “And I think they’re fantastic as well.”

Peterson told the council that if SDCs between $15,000 and $18,000 are reinstituted, ADU construction could suffer significantly.

Also, ADU builder Joe Robertson said that rather than use ADUs as rentals, many people he knows use them to house elderly relatives or grown children between careers.

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A citywide tour of Portland’s accessory dwelling units – or ADUs – will take place later this month.

Portland’s Bureau of Planning and Sustainability, Metro, the Oregon Department of Environmental Quality, Caravan – The Tiny House Hotel and Earth Advantage will host “Build Small, Live Large: Portland’s Accessory Dwelling Unit Tour” on May 29-31. The self-guided tour will feature 25 ADUs across Portland and give attendees access to the owners, builders and designers of the secondary housing units constructed on single-family lots.

The tour will coincide with a three-hour workshop on May 29 called “Getting Started with Permitting, Financing and Design,” of ADUs. It will take place from 6 to 9 p.m. at Alberta Abbey, 126 NE Alberta St. The cost $30 until May 23 and then goes up to $35. Continuing education credits are available for Oregon real estate professionals through Earth Advantage.

On May 30 from 10 a.m. to 4 p.m. attendees can take a self-guided tour of 12 ADUs in Northeast Portland, followed by a party with live music and food from 4 to 8 p.m. at the Caravan—Tiny House Hotel, 5009 NE 11th Ave.

The tour will conclude on May 31 with 13 ADUs in Southeast Portland on display from 10 a.m. to 4 p.m.

Early-bird tickets for the tour are available until May 23. The early-bird prices are $30 for a one day tour, $50 for both days and $75 for the workshop and the two-day tour. After May 23, the prices increase to $35 for a one-day tour and $60 for two days.

More event information and registration details are available

In 2010, the city waived system development charges for ADUs. Since then, the number of permits for ADUs in Portland has soared from approximately 30 a year to more than 200. This led the Portland City Council to approve extending the waiver until July 2016.

After the success of the inaugural Portland ADU tour held last year, which had 850 attendees and 12 ADUs on display, organizers planned an expanded event this year. Another citywide ADU tour is already planned for later this year on Nov. 6.

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Home builders who specialize in accessory dwelling units might have cause for celebration this Wednesday.

The city council is scheduled to vote on a resolution that would extend a suspension on system development charges for ADUs for another three years to July 31, 2016. Adopted in 2010, the suspension was slated to expire in 2013.

ADUs are small apartments – often converted garages or mother-in-law cottages – that are built onto existing residential properties. While the price to build one can start at $80,000, the SDCs alone can often cost between $8,000 and $13,000.

Matthew Grumm, policy manager for Commissioner Dan Saltzman’s office and the Bureau of Development Services, said the existing suspension had proven to be successful in promoting ADU development. In a Sept. 25 article in the Daily Journal of Commerce, Hammer and Hand owner Sam Hagerman said the SDC suspension had increased the number of yearly permits for ADU construction from a couple handfuls to a couple hundred.

The goal of the resolution is to foster continued ADU development. Wednesday’s city hall meeting begins at 9:30 a.m. and is located at 1221 S.W. Fourth Ave. Information on the resolution can be found .

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If you go:

2012 Build Small / Live Large housing summit

When: Oct. 26, from 8 a.m. to 5:30 p.m.

Where: Portland State University’s Smith Memorial Student Union, 1825 S.W. Broadway

Cost: $95 for general registration; $70 for Cascadia Green Building Council members and people participating in the EcoDistricts summit; $35 for students.

More information: .

 

Jenelle Isaacson, the owner of , sees an opportunity in the Portland housing market.

She sees it every time her company’s 40-some agents gather around the table to discuss recent real estate activity. Each agent, she said, is working with at least six active buyers looking for something they can’t find – small, smart and community-oriented spaces in the urban core.

As the housing market recovers, Isaacson and other industry professionals see big prospects for small-scale urban developments. But while strides have been made to make pint-sized projects pencil out, numerous challenges still exist.

“The overarching story that we’re trying to tell is that people need to start thinking of what the Portland homeowner is looking for,” Isaacson said. “Keep it dense, keep it in the city and keep it green and you’ll have a buyer for it.”

This month, Isaacson will be among a number of speakers who will deliver that message at the at Portland State University. The event will bring together industry professionals to discuss creative solutions for financing, designing and building small-scale urban infill developments.

The demand for square footage has decreased since the economy crashed five years ago, Isaacson said. More people – especially those seeking luxurious spaces between $500,000 and $1 million – are abandoning sizable homes in the suburbs for smaller, material-rich flats in the city.

“The other shift we’re seeing is that the lifestyle is surpassing the house (and) surpassing the amenities of the house and that people are really looking to live in denser urban areas so they can walk to amenities,” Isaacson said. “We call it the café lifestyle. They can enjoy breakfast, lunch or dinner just a walk away.”

Ross Chapin, a Langley, Wash.-based architect who has designed several small-scale developments in Portland, isn’t surprised by the trend. The demand for smaller, more intimate communities harks back to a need for social connection, he said.

Last year, Chapin – who also will speak at the upcoming summit – published a book titled “.” It offers architectural ideas for fostering interaction among neighbors. The pocket neighborhood is characterized by relatively small homes clumped around communal green spaces.

“The message that I’m trying to bring across is that we don’t just live in houses; we live in neighborhoods and neighborhoods are made of neighbors,” Chapin said.

One hurdle, however, is the traditional notion that more square feet equates more profit. But Chapin contends that many rooms in larger homes often aren’t used. Smaller, denser and more efficient designs provide greater opportunity for constructive use of limited space.

One way to increase the feasibility of smaller homes is by decreasing minimum lot sizes. Eric Engstrom, a principal planner for the city of Portland, said that about 10 years ago the city significantly reduced its minimum lot sizes for multifamily zones to encourage infill development.

But he said more can be done and noted that the city is now weighing whether to tweak design standards for accessory dwelling units.

Presently, the city requires that ADUs replicate or match the architecture of the existing house. But that may not be ideal in some situations; for example, a proposed ADU could be required to feature unsustainable materials simply because they’re in the existing structure.

Another issue is the relevance of some of the city’s older zoning codes.

“One overall theme is that many of the codes we have today were developed out of model codes from the last century and they were designed for suburban development and don’t work with compact urban settings,” Engstrom said.

Eli Spevak, the owner of , also will speak at the housing summit. He has developed numerous small-scale projects around Portland. He emphasized the need for accurate ADU appraisement – a challenging task when no comparable properties are present. A highly anticipated paper on that very subject is due to be released in the next couple months by Portland appraiser Taylor Watkins and researcher Martin John Brown.

Spevak said he hopes to share some of the solutions he has come up with for small-scale development, and help others build more sustainably.

“The biggest population growth happening in Portland is young folks out of college, (age) 25 to 35, and downsizing baby boomers,” he said. “Both those groups are looking for smaller space and yet a lot of spec lots in Portland are being built out with 2,600 square feet – three-bed, two-and-a-half-bath houses. Those homes really aren’t a good match for this group of people that are out looking for homes.”

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Two years ago, Sam Hagerman, owner of construction company , met with officials from several local banks to discuss a problem. Many potential customers were contacting him with interest in building accessory dwelling units, but they couldn’t secure necessary financing.

He put together a PowerPoint presentation on ADUs and how they worked. ADUs could not only pay for themselves, Hagerman said, but also generate income.

“They all looked at me and said, ‘Great idea. We’ll (offer loans for ADUs).’ And none of them have,” he said. “I’ve sent dozens of clients to these banks and none of (the financing) works.”

The problem is that because ADUs are between a duplex and a single-family home, appraisers aren’t sure how to value them and lenders aren’t sure they want to finance them.

Jeff Miller, mortgage department manager for Rivermark Community Credit Union, said ADUs pose a bit of an enigma and therefore a risk.

“What it does is it presents collateral that is difficult for us to liquidate if we ever had to take it back,” Miller said. “If they ever default, we have to be able to remarket that property. That’s a smaller niche for someone that would want to purchase that property than a normal four-bed, two-bath home. Now I’ve got this whole other house out there and what am I going to do with it?”

Hagerman said the funding difficulties also affect the city of Portland, which in April 2010 initiated a three-year moratorium on system development charges for ADUs in an effort to increase urban density. The waiver can generate project savings totaling approximately $7,000 to $14,000.

Only about 12 building permits were issued for ADUs in 2009 (before the moratorium), but nearly 200 permits are expected to be issued this year, Hagerman said.

“That’s pretty great,” he said. “That’s more than a tenfold increase in three years, but I think there’d be far more ADUs built if people could get financing to do them.”

The cost to build a typical 500- to 800-square-foot ADU is approximately $80,000 to $150,000. Jason Siri, owner of Siri Construction, also builds ADUs and said most of the projects he sees are either self-financed or funded via a home equity line of credit. But most people don’t have that kind of money or equity available, he said.

Rivermark finances ADU construction via home equity lines of credit. But Miller said Rivermark is challenged to do more because it sells many of its loans to Fannie Mae and Freddie Mac. Both have stringent requirements, and ADUs often are ineligible because too few comparable sales exist to support their appraised value.

Tom Unger, regional communications manager for Wells Fargo, said it faces the same issue. Taylor Watkins, an appraiser and the owner of Watkins and Associates in Portland, said that’s because people aren’t appraising ADUs for their best use.

“I think a lot of appraisers and underwriters have difficulty trying to get their hands around how to categorize a property with an ADU,” he said. “Because at first blush, the zoning of single family makes it look like it’s an illegal use when it’s not. And so financing can be difficult; trying to explain to the bank that it’s legal use, that the highest and best use of many properties with ADUs is an income-producing property.”

Next month, Watkins and Martin Brown will make that case in a report that examines 14 Portland properties. The report looks at properties’ income value with an ADU, without an ADU and compares it to the sales price.

An income-based approach (opposed to a sales-based one) yielded valuations that were more stable and approximately 7.2 percent to 9.8 percent higher on average. The report says that’s a compelling argument for the creation of new loan programs.

One such program that can be used for ADU construction is Advantis Credit Union’s Rehab Mortgage. The program lets people borrow more money than a home’s purchase price in order to make improvements.

Darin Walding, a real estate loan manager for Advantis, said the program is based upon the Federal Housing Administration’s 203K fixer-upper loan program, but is a lot more flexible. ADUs are allowed and buyers can borrow up to 90 percent of a home’s “after improved” appraised value.

Portland resident Brian Fuller recently used the program to build a 670-square-foot ADU when he purchased a house on Northeast Ninth Avenue. Fuller borrowed $300,000 with a 4.5 percent, three-year adjustable rate mortgage.

Of that amount, $204,000 went to purchase the property and $82,000 went toward construction of the ADU – which was recently featured on the city’s Build it Green! home tour. Fuller lives in the ADU and rents out the house.

“I’ve been a renter in Portland for the past seven years and I knew approximately what I could rent the house for, or what I could rent an apartment-sized ADU for, and how much the mortgage would be for the project – and it just really made a lot of sense,” Fuller said. “My rental income pays for about 85 percent of my total mortgage payment, which includes the financing for the ADU.”

Hagerman also is hoping to get some new loan programs rolling.

He said he was recently contacted by a large national organization interested in making $50 million available for ADU construction. It just needs a local retail partner to administer the money; Hagerman said he hopes to set up a meeting to accomplish that within the next three weeks.

That could be a boon for companies like Hammer and Hand. He said that of the approximately 150 homeowners he’s visited in the past two years that were interested in building ADUs, only 10 or so have been able to afford it.

“Inevitably, the question is: ‘How do I pay for it if I can’t write a check,’ ” he said.

The post ADU construction still faces financing gap appeared first on Daily Journal of Commerce.

Did the mayor of Troutdale build an illegal building on his property? Did he use his influence to get that building approved?

We may soon find out. Troutdale Mayor Jim Kight because of concerns about a new building he added to his property.

The $15,000 expenditure on the investigation still needs to be approved by Troutdale City Council, but the council authorized staff to start the process last week. According to , the investigation would look at whether Kight used his position as mayor to influence how a building he calls “accessory office space” on his property was permitted and approved. It’s a problem that was first raised this May, when the city council it’s had with Kight; after which he .

The issue, according to the Outlook, is that the building may or may not fit a classification as a “residential” building. Residential buildings have specific requirements and charges involved, which Kight didn’t have to fit because he claimed the building was not residential. The structure, which he hired a contractor to build, includes kitchen space, which may mean it meets the classification of a “dwelling” unit. (I’ve given Mayor Kight a call and will update this post if I hear back from him.)

Accessory dwelling units are a big trend in construction these days: the structures were a requirement in the annual Street of Dreams showplace this year… but they are also quite complicated. Our reporter Lindsey O’Brien reported on some of the issues that come up with ADU’s, specifically under Portland’s rules:

The idea seems simple enough, but the practice of actually getting an ADU built, financed and appraised is very complicated at this point,” said Taylor Watkins, owner and principal appraiser of Watkins & Associates, a Portland-based residential appraisal firm. (Read the whole story here.)

And even earlier this year, reporter Nick Bjork reported on the costs and financing issues — including a recently-eliminated system development fee — that provide more hurdles when building ADUs.

Oh, the murky regulations that come with building on your own property! What happened to the days when you could just build a treehouse and be left alone?

The post Troutdale mayor may be in trouble for building an office in his backyard appeared first on Daily Journal of Commerce.

In April 2010 the city of Portland began waiving all development fees for accessory dwelling units; 78 building permits have since been issued – more than double the number for any of the three previous years.

But local contractors say difficulties related to financing are holding back ADU construction from an even bigger boom. So the city has brought together builders and lenders to find financial solutions.

The city’s elimination of system development charges for ADUs can result in project savings from $7,000 to $14,000. But construction of an ADU can cost between $80,000 and $100,000, and financing often is challenging for property owners.

One problem, according to local appraiser Mark Hepner, a principal with Portland Residential Appraisals, is that classifying ADUs is difficult. A small housing unit being installed over a garage can be labeled a home addition; however, an 800-square-foot property addition can appear more like a duplex, which often rules out traditional financing options.

“If the new unit is big, has its own utility meters, has its own address and is detached, it is going to be really hard to get the same type of financing as you would get for a remodel,” Hepner said. “So if you want to get the financing it needs to look like it’s part of the same house.”

Greg Olson, president of Olson & Jones Construction, added that a lack of existing ADUs for comparison means that appraisal accuracy can be challenging. But this should change, he pointed out, as neighborhoods continue to add ADUs.

Builders also found that some lenders simply prefer to issue loans for traditional assets – such as homes and office buildings – rather than ADUs.

“We perceived this as a major hurdle, and it was when we were dealing with the national banks that tend to sell their mortgages and loans on the secondary market,” said Zachary Semke, a spokesman for Hammer & Hand, the Portland construction firm that first pushed for the fee holiday. “But when we brought (the financing issue) to the city, they put us in contact with three local, portfolio-based lenders that are more concerned with economic development than packaging and selling their mortgages.”

Semke said the city set up a meeting between several local builders and three local financial institutions: Washington Federal, Unitus Community Credit Union and Umpqua Bank. All three institutions said they could help, he said.

The lenders didn’t know about the problem previously, in part because of new federal rules limiting communication between lenders and appraisers.

“There’s no defined set of rules with how to appraise these, but when we have a question that could affect the appraisal, we can’t go talk to the lender to find out more details,” Hepner said. “It can be frustrating.”

But now that builders have talked to some willing lenders, they’ve worked out some potential financing solutions.

Washington Federal, for example, has helped Hammer & Hand line up financing by issuing remodel construction loans to borrowers. These loans are used to pay for a property owner’s remaining original mortgage and the new construction. A homeowner then can hold one, traditional 30-year mortgage and not need to seek duplex financing or multiple loans for one property.

Semke said the partnership with local lenders is working.

“Before, people would inquire about ADUs, but it was hard to translate into them actually building because of this hurdle,” Semke said. “Now that we’ve found some lending partners, the whole process has gotten easier.”

The post Portland ADUs booming, but financing stinks appeared first on Daily Journal of Commerce.

Despite the slow moving home building and remodeling industry, some Portland area contractors are keeping the lights on – and even making some money – building accessory dwelling units.

Portland city commissioners in April voted to put a three-year moratorium on one-time city fees known as system development charges for Portlanders building additional residence on their properties. The city saw the move as a way to promote more-condensed, sustainable living while providing property owners with an opportunity for rental revenue from the units.

What no one expected was that it also would create a new business niche for several local construction companies.

“It’s playing a very important role in the business here,” said Zachary Semke of Hammer & Hand, the Portland construction and remodeling firm that first pushed for the fee holiday. “We thought these things would catch on in Portland because of the nature of them, and that’s been validated with the response we’ve gotten.”

The team at Hammer & Hand, along with several other green builders who were part of the Northwest Eco Building Guild, started talking with the city in 2009 about possibilities associated with accessory dwelling units. They saw it as an opportunity to pitch the sustainable building practice of increasing density to a city that preached sustainability.

“We put some low-hanging fruit out there with the city of small things they could do to approach accessory dwelling units, with the ultimate goal of getting the fees dropped,” said Stephen Aiguier, president of Green Hammer, a home-efficiency company that is building accessory dwelling units. “Within a few weeks, the city had bypassed the low-hanging stuff and went straight to the fees.

“Much to our surprise, a process we thought would take years only took a few months.”

The city fees range from $7,000 to $14,000 for the units that can be either 800 square feet or up to 75 percent the size of the main housing unit on the property.  With new construction usually costing around $80,000, the moratorium means homeowners are netting a savings of about 18 percent.

Some construction companies say they’re also benefiting from the moratorium.

Three months after the fee holiday started, 36 building permits had been submitted for accessory dwelling units, according to Ross Caron, spokesman for the Portland Bureau of Development Services. That’s more than the yearly totals for any of the three previous years, he said.

“There’s been an enormous uptick over these last several months,” Aiguier said. “This year we’ve looked at 30 potential projects and started four.

“I’ve done three of these in my nine years previous.”

Hammer & Hand has had similar results since the fee holiday went into effect. The company gets five calls a week from people either wanting more information or people with plans actually looking to build, said Sam Hagerman, president of the company.

“It’s not our main business but we will have a six figure increase in revenues a year because of (accessory dwelling units),” Hagerman said. “In a time like this it has helped me retain my employees and even grow the business.

“And keeping jobs is what this is all about.”

Greg Olson, of Olson & Jones Construction in Portland, hasn’t done many accessory dwelling units this year, but he has been positioning the company to dive headfirst into the business next year.

“The first thing we’ve tried to do is inform people by handing out information on them at various tradeshows,” Olson said. “Here is a great opportunity and people don’t really know about it. So, we’re pushing it.”

While all three companies are poised for accessory dwelling unit construction to pick up even more next year, they all agree that financing the projects has been a bit of a roadblock.

“Financing these are tough because they don’t really fit into a mortgage category,” Olson said. “Banks like mortgages to look neat so that they can sell them on secondary markets, and it’s hard to do that with these.”

Olson, Hagerman and other local contractors recently met with local banks and city leaders to address the issue, but they say it’s still too early to tell if anything will come of the discussions. In the meantime, they are working on informing Portlanders about the financial and environmental benefits of accessory dwelling units.

“It’s great to hear 36 in a quarter, but we need to get a zero behind it,” Hagerman said. “If may be lofty, but I think Portland could get closer to 360 in a quarter.”

The post Small jobs become big business in Portland appeared first on Daily Journal of Commerce.

After waiving system development charges and changing size limits on accessory dwelling units earlier this year, the city of Portland has seen a jump in permits for the units, including additions and second housing units.

Since the measures went into effect in mid April, 36 building permits for accessory dwelling units have been issued or requested. That number is higher than the total number of permits issued in all of 2009 and any of the previous four years, said Bureau of Development Services spokesperson Ross Caron.

The decision to waive SDCs on these projects – which saves a homeowner between $7,000 and $15,000 – was an attempt by the city to help stimulate business while also increasing density, said Riley Whitcomb, manager of the SDC for Portland Parks and Recreation.

“From my viewpoint it’s lost revenue, but considering the times, that isn’t the most important thing right now,” he said. “So far waiving the fees has done its job.”

The city estimated that Parks and Recreation could lose as much as $400,000 in revenues over the three-year period that the fees are waived.

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