Yesterday, the Portland City Council debated the Resolution leading to extend the System Development Charge (SDC) Waiver for ADUs. The resolution can be downloaded below. This SDC waiver has been in place since 2010 on all ADUs without any other qualification, saving ADU owners $12,000-$19,000 per ADU. The waiver was initially launched to help subsidize the new genre of infill called the Accessory Dwelling Unit. That it has. Over the past 10 years, permits have increased 10x, up to 500 ADUs a year within Portland. The current waiver is set to expire July 31st, 2018.
Commissioner Eudaly introduced this resolution to extend the waiver for ADUs indefinitely, but with biennial reports and review. The one caveat introduced this time around is that homeowners must agree not to use Short Term Rental (STR) platforms to rent out their ADUs. The idea behind this is that the City does not want to subsidize these commercial practices, but wish to subsidize creating density and affordable housing. The above agreement would be for a period of 10 years and, if caught in violation, the ADU owner would be charged 150% of the SDCs at the time.
During yesterday’s session, there was great discussion between the Mayor, Commissioners, experts, and the public through testimonials. I presented testimony to the council as well, which can be downloaded below. Many topics were discussed regarding financing, rental, loss of revenue, accessibility, among others. In the end the resolution passed 4-1 (Commissioner Fritz the Nay vote).
The resolution passing does not mean that the waiver has been extended yet. The resolution simply asks the 4 departments which collect the SDCs to develop language and strategy to extend the waivers and report back to City Council by July 1st. Those departments are Water, Parks, Bureau of Environmental Services, and Transportation.
So, what does this mean?
Nothing has changed yet, so if you are interested in building an ADU for any purpose, including STR, permits need to be submitted by July 31st, 2018 and projects completed by June 30th, 2019.
What if you cannot submit a permit by July 31st, 2018?
Assuming this waiver gets passed (which I believe is a safe assumption, but with some modification of terms), you have three options.
- Build an ADU that is not for STR, qualify for the waiver. This can be used for friends and family, personal use, or long-term rental.
- Build an ADU, but use it for STR, do not qualify for the waiver. You can still build an ADU for STR, but the SDCs will apply to the project. These fees, amortized over the STR period, can be recouped.
- Build a Home Studio for STR. SDCs do not apply to Home Studios*!!! With the limit of one sink, these structures are ideal for STRs and still add significant value and flexibility to your property.
*Note: occasionally with some projects, water meters need to be upgraded one size. When this is done with a Home Studio, a small SDC is applied to the fee to upgrade a water meter.
We’re still in flux when it comes to the SDC waiver. No matter which way it goes, SQFT Studios has you covered. We’ll get you the information you need and we can match the right structure (ADU or Home Studio) with your use, budget, and vision. These are complicated matters, but we’re here to help guide you through the decision making process.
Stay tuned! Final vote is in July!