After failing to advance a rent control bill into law in 2017, Oregon Democrats are optimistic a favorable political landscape will change the result in Salem this session.

With strong majorities in both chambers, House and Senate leaders are moving aggressively on a host of policy priorities.

“I think it will be an activist session,” said John DiLorenzo, a lobbyist for More Housing Now, a trade group of large-scale apartment owners.

A bill co-sponsored by Senate Majority Leader Ginny Burdick, Sen. Laurie Monnes Anderson and House Speaker Tina Kotek would cap annual rent increases at 7 percent plus inflation, tied to the Consumer Price Index‘s West region. At current rates, that would limit rent hikes to about 10 percent annually.

“We want to prevent the kind of extreme rent increases we’ve seen throughout the state that lead to displacement and frequently, unfortunately, homelessness,” said Danny Moran, a spokesman for Kotek.

Senate Bill 608 would also protect tenants from eviction without cause, with some exceptions.

The stage was set for rent control by Shemia Fagan’s 2018 primary win over longtime incumbent Sen. Rod Monroe, a landlord who was widely viewed as a roadblock for tenant-protection measures. Fagan now serves as chairwoman of the Senate Housing Committee. She has indicated she intends to move quickly on SB 608.

Political groups are still studying the 2,000-plus bills that were posted to the Legislature’s website ahead of the session’s start on Tuesday. 1000 Friends of Oregon, a Portland nonprofit that runs the pro-housing group Portland For Everyone, has not taken a position on SB 608, Deputy Director Mary Kyle McCurdy said.

The bill would likely have little effect on large, institutional apartment owners, DiLorenzo said.

“If you’re a landlord who’s attentive to the market, you’re probably not going to be raising rents 10 percent,” he said.

Rents in Portland have stabilized after sharp increases in recent years. Average rents slipped 0.2 percent in January compared to a year earlier, according to Apartment List. Median rents for January were $1,120 for a one-bedroom apartment, and $1,320 for a two-bedroom. Statewide, rents fell 1.9 percent during the past year, according to Apartment List.

The rent control bill would most affect landlords who have been leasing their properties at well below market rates, DiLorenzo said, a situation he characterized as “no good deed goes unpunished.”

While some municipalities across the nation have some form of rent control, Oregon could be the first state to implement it. While setting a statewide cap, the bill would leave in place a statewide pre-emption on local rent control programs.

Economists have been broadly critical of rent control, saying such measures tend to depress housing production. Democrats said the bill would provide a level of stability, preventing only major rent spikes.

Other provisions of SB 608 include:

• extending protection from eviction to tenants who have been in place for 12 months or longer,
• limiting rent increases to one per year,
• allowing evictions after three documented violations of the rental agreement in a 12-month period, and
• allowing evictions with 90 days’ notice and payment of one month’s rent if the landlord has agreed to sell the property, if the landlord intends to demolish or convert the rental from residential use, if the landlord intends to undertake major repairs or renovations, if the landlord or a family member intends to occupy the property as a primary residence, or if the unit is unsafe or unfit for occupancy. Landlords with four or fewer units would be exempt from the requirement to pay one month’s rent.

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Accessory dwelling units are going mainstream.

Once a curiosity, ADUs are being constructed in Portland at a rate that is rapidly nearing two per day. In many East Portland neighborhoods, the sight of an ADU going up next to a house is becoming commonplace.

As demand for ADUs has increased, general contractors and architects have jumped into the business. Some small builders are tackling ADUs along with single-family homes and renovations. Meanwhile, entrepreneurs are competing to find ways to cut costs and scale up ADU business with modular construction.

In 2016, the city of Portland issued 615 building permits for ADUs, a 27 percent jump from the previous year. The increased pace of ADU construction has coincided with the city’s decision to continue waiving system development charges (SDCs) for such projects and maintain relatively friendly zoning rules.

The city has repeatedly waived SDCs for ADUs. The waiver is currently scheduled to expire on July 31, 2018, unless the City Council again extends it.

ADUs are providing close-in neighborhoods the density that city officials say they want. City officials are backing increased density through initiatives including the Residential Infill Project.

Amanda Petretti, founder of Studio Petretti, a Portland architecture firm, said it makes sense for the city to extend the SDC waiver on ADUs.

“From a sustainability perspective, it’s low-hanging fruit for the city to incentivize, and they should,” she said.

Some local residents have gotten involved with pro-density groups such as Portland for Everyone, which seeks to serve as a counterweight to neighborhood associations and historic preservation advocates who often oppose ADU infill.

Joe Robertson, owner of Shelter Solutions, is a senior figure among Portland’s ADU builders. He started building ADUs in 1998, when almost no one was building the auxiliary buildings in Portland. Now, he has a lot more competition.

“Ever since the recession, when builders had to branch out and do remodeling, it’s grown and grown and grown,” he said. “With the lack of building lots, it’s just another opportunity to build a product. It’s grown exponentially the last couple of years.”

Robertson built one to two ADUs per year until 2010, when he founded Shelter Solutions to focus on ADUs. Now, Shelter Solutions builds about 25 ADUs per year. He has three employees and a network of longtime subcontractors.

Also known as mother-in-law apartments or “granny flats,” ADUs are small dwellings built alongside an existing single-family home. Under Portland’s zoning code, they must be smaller than the original home, limited to 75 percent of the existing home or 800 square feet, whichever is smaller.

Costs vary widely. A simple garage conversion can be done for $80,000 to $90,000, Robertson said. Building an 800-square-foot detached ADU would cost $160,000 to $190,000. Some units with high-end finishes can cost more than $200,000.

Alan Armstrong of Strongwork Architecture is among Portland’s ADU designers. He tells customers – who often come in expecting to pay less – that $150,000 is a standard figure.

“That’s what you should expect,” he said.

Financing remains largely a missing piece for ADUs. Most property owners who build ADUs either pay cash or use home-equity loans, builders and architects said.

Property owners build ADUs for a number of reasons. The most lucrative investment is to rent them out as short-term rentals via websites such as Airbnb.

Robertson said one customer told him he expects to have earned back his investment on an ADU in five years.

“They typically do pay for themselves pretty well for the customers,” Robertson said.

Other ADU owners use them as traditional long-term rentals. Some build ADUs to house family members, typically aging parents or so-called “boomerang” kids. In some cases, an aging parent has paid to build an ADU on their adult child’s property to move into, Robertson said.

In Portland, ADU construction is concentrated in North, Northeast and Southeast neighborhoods.

Robertson said he hadn’t encountered outright opposition from any neighborhood association. Even historic neighborhoods have bowed to the trend.

“Eastmoreland might be the most stringent, but as long as you comply with what the code requires, you’re OK,” Robertson said.

As ADUs become more popular, builders and entrepreneurs are seeking to drive down costs and make the process more easily replicable. Builders clear only a modest profit on each unit, making a larger scale appealing.

“The next nut to crack is to figure out how to get more efficiency of scale for ADUs,” said Eli Spevak, owner of Orange Splot, a general contractor that has built ADUs. “There are a lot of people working on modular prototypes. I think that’s the next frontier locally.”

Shelter Solutions has four models designed in-house that range up to 500 square feet.

Studio Petretti in early November rolled out a line of prefabricated ADUs called “Stuga” – the Swedish word for “cottage.” Studio Petretti is working with builders Mods PDX, TaylorSmith Sustainable Construction and Akos Construction on the units.

The prefabricated models cut construction time, costs and the myriad of decisions ADU buyers are confronted with, Petretti said.

“We’re trying to balance high design with budget consciousness,” she said.

Patrick Quinton, former executive director of the Portland Development Commission (now Prosper Portland), has founded a startup, Dweller, that is aimed at reducing ADU building costs with modular units.

“Our goal is to be able to build and install ADUs for under $100,000,” he said.

Quinton is working with Champion Homes to manufacture modular units, and hopes to soon install Dweller’s first two projects – one in northeast Portland and one in Southeast Portland.

“It’s a good time to be in the market,” he said. “That means more competition, but hopefully that’s a good thing for the market.”

Quinton also is working to get state approval on a standard design. That way, Dweller would not have to go through design review for each project.

“We think it’s a more efficient process for us as we grow,” he said.

Other firms are at work on “tiny homes” and other modular designs. SQFT Studios advertises a compact ADU, 16 feet by 24 feet, for an average of $120,000 to $150,000. The company also does custom designs.

As demand for ADUs continues to gain steam, more designers are doing the work. Propel Studio, Environs and Polyphon Architecture & Design and Mitchell Snyder Architecture all design ADUs.

Some of these architects hold competitive bidding to solicit ADU builders.

Portland State University recently hosted a conference for the ADU industry, and the school’s Institute for Sustainable Solutions has spearheaded the Backyard Initiative to examine ADU-related issues.

Multnomah County is also pushing ADUs with a $350,000 pilot project. The program, , is paying for the design and installation of ADUs with contractor Enhabit on four homeowners’ properties in exchange for hosting residents rent-free for five years.

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