WHAT ARE ACCESSORY DWELLING UNITS?

Accessory Dwelling Units (ADUs) are separate housing units built on existing single family residential properties. ADUs are also known as second dwelling units, guest houses, backyard cottages, mother-in-law units and granny flats. 

There are many different types of ADUs, including both separate structures located in a back or side yard (detached) and conversions of existing spaces such as basements, attics and garages (attached).

 
 

If you would like to learn more about ADUs, the website accessorydwellings.org is a valuable resource.

Why are adus becoming more popular?

Thousands of new ADUs are being built in communities across the U.S. because they are a manageable and minimally-disruptive option for adding desperately needed housing to existing neighborhoods. Moreover, ADUs typically cost less than other forms of housing and make efficient use of existing land.

The other factor driving ADU adoption is that they serve so many varying needs that mirror socioeconomic trends in the U.S. ADUs allow for people to age in place or form multigenerational households to ease caregiving responsibilities and cost. Homeowners, given the high cost to buy a house, are frequently turning to ADUs to provide additional income to make ends meet. Lastly, the appeal of downsizing and minimalist living seems to be growing and ADUs allow people to simplify their lives and still live in a neighborhood setting.

ARE ADUs ALLOWED IN MY NEIGHBORHOOD?

Zoning, regulations and fees vary by municipality but most city zoning codes allow for ADUs. In addition, most municipalities view ADUs as critical to providing affordable housing in rapidly growing neighborhoods and have modified local codes to allow for ADUs.

The largest cities on the West Coast, including Portland and Seattle, all allow ADUs and continue to update codes and fees to encourage the development of ADUs. In addition, the States of California and Oregon have passed state laws which preempt local prohibitions on ADUs.

WHAT AMENITIES DOES A DWELLER ADU HAVE?

A Dweller ADU is a self-contained living space with the look and feel of a house brought down to small scale. Each Dweller ADU is approximately 450 sq ft. and has a living space, a kitchen with full size appliances, a bathroom and a bedroom. High quality materials with full sized windows and doors are used during the construction of each unit. For the exterior, landscaping to provide privacy between the primary unit and the Dweller ADU is employed.

WHAT IS THE COST of a dweller adu to a homeOWNER?

Dweller offers property owners two ways to acquire an ADU: direct sale or ground lease. Through a direct sale, the property owner pays one price, based on the market, for an installed, permitted ADU. While the price varies by market, a Dweller ADU is typically one of the most affordable options for a detached ADU.

For property owners who either don’t have the funds or home equity to purchase an ADU, Dweller will build and install the ADU at no cost to the homeowner. Through this structure, Dweller retains ownership of the ADU and enters into a ground lease with the property owner and shares a percentage of the monthly rent with the property owner above a minimum monthly rent level. Dweller covers its costs of owning and managing the ADU with its share of the month rent.

NO HASSLE? WHAT DOES DWELLER TAKE CARE OF?

Typically, homeowners must hire an architect, a contractor, and someone to manage and maintain their ADU and find the best renters. Some homeowners choose to perform one or more of these tasks themselves. Dweller operates as both the developer and property manager for the property owner. In these roles, Dweller is responsible for design, permitting, construction and installation of the ADU and, after installation, the maintenance and management of the unit. As part of this model, Dweller absorbs not only the cost of construction and installation, but also the cost of permitting, utility connections and landscaping. Dweller also manages and maintains the ADU and collects rent from tenants. 

Because of the variability of site characteristics, Dweller will not cover the cost of removing existing structures, large trees, underground storage tanks and cesspools, and other impediments to installing an ADU. In addition, Dweller will not cover the cost of upgrading utility service to a property to serve the ADU (see below).  

DOES DWELLER OWN THE LAND?

Under the lease option, the property owner continues to own the land and Dweller simply pays rent each month under a standard lease agreement. In addition, while Dweller’s ground lease is recorded on the title, Dweller does not have an interest in the real estate. By leasing surplus land to Dweller, property owners gain additional monthly income and increase the overall value of their property.

WHO OWNS THE ADU?

Dweller owns the ADU, however, the property owner can purchase the ADU at any time based on a declining buyout payment established in the lease agreement. At the end of the 25 year lease term, the property owner will own the unit outright.

WHO SELECTS THE TENANTS IN A DWELLER ADU?

The property owner has the choice of identifying qualified tenants for the ADU or leaving that to Dweller. In all cases, prospective tenants will be qualified by a professional property manager and will pay market rent for the unit. If a property owner allows Dweller to select qualified tenants for the ADU, Dweller guarantees a minimum monthly payment to the property owner.

HOW ARE RENTERS CHOSEN?

If Dweller is responsible for renting the ADU, we use an experienced property management firm to identify and select a qualified tenant. Most available ADUs will be publicly marketed and tenants will be selected to create the best fit between homeowner and tenant. Dweller property managers will also be available for renters and property owners to address any issues that may arise. Dweller works hard to address concerns of clients and to ensure we foster mutually beneficial ongoing relationships. 

HOW DO I KNOW IF MY PROPERTY IS SUITED FOR A dweller ADU?

Many different types of properties will accommodate an ADU. In most cases, properties with a flat backyard with few obstructions, and where an open space with minimum dimensions of 45’ x 25’ can be created, will work. If you aren’t sure, contact us and we’ll review property information online and even perform a site visit to determine if your property is suitable for a Dweller ADU.

HOW AFFORDABLE IS AN ADU TO RENT?

The monthly rents for an ADU typically reflect neighborhood market rents. In Portland, rents for a single family ADU are roughly $1,200 to $1,500 per month.

I'M SELLING MY HOUSE, WHAT HAPPENS TO THE ADU?

The homeowner can sell their property at any time as long as the owner’s obligations under the ground lease are met. In the case of a sale, the seller can exercise the buyout provision in the lease or pay Dweller to remove the ADU if the buyer doesn’t want the ADU. The presence of an ADU can often increase the value and attractiveness of a house on the market, and provide the necessary funds to exercise the buyout. Alternatively, the buyer can assume the lease with Dweller.

Do property taxes increase? If so, who pays the increase in property taxes?

The installation of a Dweller ADU should result in an increase in property taxes equal to the assessment of the ADU as an improvement to the property. The addition of an ADU should not result in a new assessment of the rest of the property. The homeowner’s property tax bill can still increase as a result of standard annual increase in taxes and new levies that are added to property taxes each year unrelated to the ADU.

In Portland, Dweller has a working arrangement with the Multnomah County Assessor’s Office to separately assess the ADU as an improvement, and send the tax bill for that improvement to Dweller. Therefore, the homeowner should not see an increase in property taxes as a result of having a lease agreement with Dweller.  Dweller will seek a similar arrangement in other markets we serve.

How does a Dweller ADU access sewer, water, electric and gas service?

Dweller ADUs access sanitary sewer and water service by connecting to the main sewer and water service to the primary residence. In most cases, a connection to the sewer is established outside the primary residence, and a connection to water service is accessed through the foundation into the basement of the primary residence. Dweller ADUs connect to existing electrical service through either the main panel or a separate panel on the outside of the house. Dweller ADUs do not use natural gas so a connection is unnecessary.

If Dweller owns the ADU but shares utilities, who pays for the ADU’s utility use?

Because the ADU will share water and sewer service with the primary residence, that usage will appear on the homeowner’s bills. Dweller will reimburse the homeowner each month for the part of the combined water/sewer bill associated with the ADU. This reimbursement will be in addition to the homeowner’s monthly share of rent from the ADU. With regard to electricity, Dweller’s service will be separately metered and, as a result, the ADU will have its own account with the electric utility.

What if existing water, sewer or electric service is insufficient to support an ADU?

The existing service to typical single family residences is usually sufficient to support a Dweller ADU. In the event that it isn’t, Dweller will work with the property owner to upgrade the necessary service to support the ADU. The cost of upgrading water or sewer service or establishing upgraded electrical service is not included in Dweller’s standard model and would be borne by the homeowner. 

What about cable, phone service, garbage and recycling?

Dweller will establish separate cable and, if desired, phone service to the ADU. If the ADU is owned by Dweller, these bills will go to Dweller and be paid by the tenant.

In most cases, the homeowner will add another garbage receptacle to their monthly bill and Dweller will reimburse the homeowner each month for that cost. Existing recycling receptacles should be sufficient for the ADU’s recycling needs.

The tenant or Dweller’s property manager will be responsible for ensuring that the ADU’s garbage receptacle is brought to the curb for each scheduled pickup.

What about mail service?

 All permitted ADUs are assigned a separate mailing address usually by adding A to the primary residence and B to the ADU. When requested, Dweller will install a separate mailbox in a location compatible with existing mail service.