Basement ADUs in Portland, 10 Things to Know

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How many unfinished basements are there in Portland? As a top local Portland real estate agent, I can say with confidence – thousands! Many of those are perfect candidates for a basement ADU.

Accessory Dwelling Units are of interest to Portland home buyers and home owners alike because of their potential to offset the high costs of owning a home in Portland. With the trend toward rezoning vast areas of the city to allow for higher density housing, the ADU option is looking better than ever before. 

Those without big backyards in which to build the traditional stand alone ADU can still participate. ADUs inside the home, built in an attic over a garage, or down in the basement are all possible while complying with Portland city code. Here are the top ten things you should know about taking the “basement option” when planning your Portland ADU. 

1. Basement ADUs are big in Portland. In 2017 and 2018, Portland homeowners requested and received permits for 1,248 accessory dwelling unit projects. Of these, the majority (529 units) were detached ADUs, aka backyard cottages. The next-biggest category (264 units) were conversions of basements and other attached spaces into ADUs. Do all these renters really want to live below ground? Yes, and why not? Basement units are cooler in the summer, offer more privacy than street-level housing, and are more accessible than a fifth-floor apartment. 

2. Rentals overall are in demand in Portland. According to RentCafe, the average rent for a Portland apartment is close to $1500/month (as of July 2019). That’s up 2% over last year. (FYI the rental market has stabalized recently after skyrocketing for years it went down (yes it went down) in 2018 and now is seeing a normal increase.) The average rental size is around 760 square feet, so Portlanders are used to living small anyway.

3. Basement ADUs are generally a good resale value. As a real estate agent, I often get asked by home owners if an ADU addition is going to bring up the value of the home when they go to sell it in a few years. The simply answer is, of course it will! The homeowners should also know that in the meanwhile it will increase their property taxes and there are substantial permit costs involved to get the ADU legal. Also make sure it is done right and that the basement won’t flood later, wiping out your investment dollars. Keep good access to important plumbing and electrical junctions with panels so you can make home repairs later as necessary.

4. An ADU and a finished basement are not the same thing. Portland, like most cities, has very specific rules about what constitutes an ADU. If the basement has potential to be a livable space (it has adequate ceiling height, ventilation, etc.) — that’s great and finishing it could add to your home value. See our blog post on finishing the basement here. However, if the basement isn’t able to accommodate certain ADU requirements (plumbing and ventilation for separate kitchen and bath, for instance), it’s not going to provide the same return on investment as a completed, city-permitted ADU. For more on Portland’s requirements, check out this article.

5. Basements can be expanded, lowered (dug out) and even created from scratch. Many Portland homes were built with crawl spaces, not basements. If creating a basement ADU is highly important to you, and you don’t mind investing a little more up front, check out your options. It will be pricey though.

6. Some Portland homes are prohibited from having basement apartments. Yes, Portland wants to encourage as much infill as possible, but we also want to keep people safe. Basement owners must consider flood risk because — how could we forget — the city is situated between three rivers! A small portion of Portland’s riverfront properties are considered to be in a Flood Hazard Area, and living in a basement is prohibited in this area for obvious reasons. Before you start planning your basement ADU project, check Portland Maps or call the Planning department to learn more. 

7. A basement conversion is a great opportunity to do a Portland seismic retrofit. The entire west coast is due for a big earthquake along the Cascadia Subduction Zone. That’s why many homeowners are choosing to do a seismic retrofit to improve their home’s chances of surviving a large quake. For most homes, this means bolting the house to its foundation. In basement remodels such as ADU conversion, the studs and rim joists are often exposed, making it cost-effective to do seismic enhancements at this time. 

8. Radon might be an issue. Changing the structure of the basement by building an ADU could change the radon exposure for everyone in the house. Before beginning construction, test for radon, and discuss appropriate mitigation procedures with your contractor. Then be sure to test again when the ADU is completed to be sure everything is working as expected. A radon-exposed basement doesn’t mean you can’t build an ADU, it just means you have to take appropriate steps to keep exposure levels down into safe levels. For more about radon, check out our Portland radon map. 

9. Financing may be in reach. Portland ADU consultant Kol Peterson calls 2019 “The Year of ADU Financing Innovation” and has compiled a list of potential financing options for homeowners looking to build an ADU. It’s not all the same old Home Equity loans! For example, home buyers can get a “renovation loan” that allows the borrower to save money by bundling the home loan with money to construct the ADU. Or, get creative with shared equity financing.

10. Local experts are available to help. The great thing about Portland’s high volume of ADU construction in the last few years is that smart home owners can learn from others who have already been there. We also have a huge number of architects and designers who focus exclusively on Accessory Dwelling Units. PDXADU is one; they’re offering an affordable ADU class this fall for homeowners who want to learn more. 

Ready to start looking for your perfect basement ADU-ready home? Curious what rental income could do to your mortgage payment? Talk with a real estate expert today. Our Top 1% Buyers Agent is now accepting new clients. 

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