What is an ADU?
You probably have heard the word “ADU” thrown around but not entirely sure what the heck it is. Let’s start by clarifying what this arbitrary acronym is first.
An Accessory Dwelling Unit, or ADU, is a secondary housing unit located on the same property as a primary residence. These units can take various forms—a converted basement, a detached structure in the backyard, or even an above-garage apartment. To qualify as a true ADU, the unit must meet specific criteria: it should have its own separate entrance, kitchen, and bathroom, making it a fully functional living space.
However, not every additional living space qualifies as an ADU. For example, a finished basement with a couch and a TV isn’t enough to meet the definition unless it also includes a kitchen and bathroom. Similarly, unpermitted structures or makeshift conversions, such as a garage half bath and a portable heater, do not meet the requirements and can actually harm a property’s value.
The Growing Popularity of ADUs
In recent years, ADUs have gained significant traction in the housing market. Portland is no exception to this! I truly believe that ADUs are a key representation of Portlanders and our ability to get creative, problem-solve, and combat challenges in our community. This lady in the Boise-Eliot neighborhood even converted a Tuff Shed into an ADU (when I saw the headline I was very skeptical, but it’s actually pretty rad). This rise in popularity can largely be attributed to affordability challenges in the housing market. As home prices continue to climb, buyers and homeowners alike are seeking creative solutions to offset their mortgage costs. ADUs provide a fantastic opportunity to do just that by renting out the secondary unit, either to long-term tenants or as a short-term rental.
For buyers, the idea of purchasing a property with an existing ADU or ADU potential is incredibly appealing. Not only can it generate extra income, but it also offers flexibility for multi-generational living or even a private workspace. I’ve personally worked with many buyers who prioritize finding properties with ADUs or room to add one, and I’ve seen firsthand how competitive these properties can be. In many cases, homes with ADUs come on the market and disappear just as quickly due to high demand (and often sell for a premium.)
The growing demand for ADUs has also created a niche market for contractors who specialize in ADU plans and construction. Many credible contractors in the Portland and Vancouver areas now offer streamlined processes to help homeowners bring their ADU vision to life. From pre-designed plans to full customization, these professionals simplify the process, making it more accessible for homeowners. This specialized market ensures that homeowners can navigate zoning regulations, permitting, and design with greater ease, ultimately resulting in higher-quality ADUs that add substantial value to their properties.
The Pitfalls of Poorly Executed ADUs
While ADUs can significantly enhance a property’s value, this only holds true when they are executed correctly. Poorly constructed or unpermitted ADUs often create more problems than benefits. Adding a heater and sheetrock to a garage may look like a cheap way to create additional living space, but without following the necessary steps this setup becomes a liability rather than an asset.
Portland, like most cities, requires permitting for ADUs. This process ensures that the unit meets safety and building codes, as well as zoning regulations. Permits are mandatory not only for the construction of an ADU but also for many home renovations, additions, or structural changes. If you’re curious, here is Portland’s full explanation of their requirements in regards to permitting and ADU’s. Skipping the permitting process can lead to fines, legal issues, and expensive retrofitting down the road. Furthermore, significant unpermitted work for an ADU may impact the marketability of your home in the future when you go to sell. Homeowners who try to cut corners often find that their efforts backfire, as this work diminishes the property’s value and deters future buyers.
Nonconforming ADUs can deter potential buyers who recognize the time and cost involved in bringing the space up to code. Most buyers would rather avoid the headache of removing and redoing work to meet legal and safety standards. As a result, these subpar ADUs can actually harm the marketability of a property, making it less appealing to prospective buyers.
At the end of the day, when ADUs are thoughtfully designed and fully permitted, they can be a major selling point. Buyers appreciate knowing that an ADU was built to code and with long-term functionality in mind. Properly executed ADUs not only increase the property’s value but also provide peace of mind to both the current homeowner and future buyers.
Why Does This Excite Me?
Helping my clients explore creative ways to offset their housing costs is one of the most rewarding aspects of my job. ADUs are a fantastic opportunity for homeowners interested in becoming landlords and dipping their toes into real estate investing. I’ve seen how a well-designed and permitted ADU can transform a property, providing not only financial relief but also a sense of empowerment for homeowners.
I’m passionate about ADU’s because they align with my belief in making real estate work smarter, not harder. Exploring the possibilities these spaces can open doors to increased financial freedom, creative property use, and even stronger connections with the community through thoughtful rentals.
So What Do You Think?
If you have any questions about this topic or the nuances of Portland’s housing market in general, I’m your gal (and always down to talk real estate).
Your friend & realtor,
Sofi
As an Earth Advantage Principal Broker, David serves buyers and sellers alike with his 20+ years of experience as a broker and investor.
