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Investing in Infill

One tool in the toolbox for solving Bend's housing crisis? The ADU. Here's how to build one



Like many homeowners, Bendites Tim and Natalie Page were looking for a way to increase their income. Tim is a development associate for the Environmental Center, while Natalie works as an educational assistant for Juniper Elementary School. Their solution: Adding onto their home to make room for a vacation rental.

"We are in fact low to moderate income ourselves," the pair said. "We really need the income a vacation rental could generate."

With a tight rental market and the onset of widely used apps such as Airbnb, the possibility of generating passive income through long- or short-term renting can entice locals to consider building an accessory dwelling unit on their property. And if the build can be eco-friendly and energy efficient, all the better.

"While we are concerned with the city's housing crisis, that has not been our motivation to build an ADU," the Pages said. "Originally we wanted to build a tiny house-style shed improvement. An eco-friendly vacation rental. However, city code doesn't allow things like composting toilets; everything has to be connected to the city grid. So, to be on the books and have a legitimate city approved (permitted) vacation rental we are working with Hank Hill [of Bend Craftsmen Company] to meet current city code."

ADUs Defined

According to the definition offered by the City of Bend's Planning Division, an ADU is a small dwelling unit on a property that contains a single-family dwelling unit as the primary use. An ADU may be attached to or detached from the single-family dwelling. ADUs are often called mother-in-law apartments, granny flats or garage apartments. In the case of Bendite Jonathan Schrank's home, an unused area above the garage was transformed into living space.

Many believe ADUs are a solution for Bend's housing crisis and a win for homeowners. Hank Hill, owner and founder of Bend Craftsmen Company, explains, "As Bend continues to grow, it's a great way to provide additional housing and creatively maximize property investment for homeowners, while creating more livable space in the city without increased pressure on the Urban Growth Boundary. Multi-generational housing has also become popular." Hence, the terms mother-in-law suites and granny flats.

Associate City Planner Elizabeth LaFleur offers a history of ADUs in Bend: "Prior to 2006, the Bend Development Code allowed guest quarters without a kitchen and with a valid building permit. Between 2006 and 2016, they allowed ADUs only with a conditional use permit approval... Interestingly, ADUs were not taken into account in our housing needs analysis which was part of the Urban Growth Boundary expansion project... approved December 2016."

In terms of the current housing crisis, ADUs do bring more inventory on the market—but what type of inventory those ADUs become is constantly in flux. LaFleur says recently there's been an uptick in the number of homeowners who receive approval to build long-term rental ADUs, and then, a few weeks later, apply for a short-term rental permit for the ADU—presumably because a homeowner can make more money with short-term rental.

Adding an ADU

To get started on an ADU, Hill suggests, "It's important to first talk with a builder and a city planner to determine feasibility of your property and examine local municipal zoning ADU code. (The city requires a preliminary application and review process before any plans will be accepted). Next steps are to secure funding and start talking design ideas with an architect and builder. Then start working toward a set of plans from which you can get a final projected construction cost and submit those to the city for approval and permits."

Often, homeowners with enough equity can refinance and use those funds to build. "We will go up 89.9 percent total financing for a Home Equity Line," says Jennifer Forsey, senior mortgage consultant for Homestreet Bank. "We would not say no to an ADU being part of a single-family home as long as it's done legally with permits, etc."   

To offset costs on ADU building projects, the City of Bend offers payment plans for system development fees, as well as financial incentives to build rentals intended for low-income renters.

For the Pages, those incentives weren't enough to opt for renting long term to a low-income renter. "This has not been an option we've considered despite the potential reduction in city fees," Tim Page said. "We don't think that reduced fees would offset the difference in income from lower monthly rental pricing versus vacation rental pricing."

He points out that on their 180-square foot project, the price per square foot, including city fees and system development charges, was far higher than for larger structures. It's an inadvertent incentive that bolsters larger building projects. "I personally feel it's unfortunate that the city's permitting and fee structure is so limiting both in what you can build and in percentage of the cost to build. I understand now why all the new houses are upwards of 2,500 square feet with tiny yards, because of the cost per square foot due to fees and sales margins. There's got to be a smarter way to promote infill and smart design that doesn't encourage massive foot prints that gobble up energy, create waste and destroy green space," Tim Page said.

The Environmental Incentive

Outside of passive income incentives for property owners, in his 18 years as a finish carpenter, project manager and general contractor, Hill says he's seen the ADU concept become attractive to environmentally concerned Bendites. ADUs are typically built above code and have a lower environmental impact in general, Hill notes. "There is a positive trend of people opting to make their current homes and ADU projects more comfortable and energy efficient instead of buying bigger and newer. There is also more education and awareness now and people are understanding the benefits, both environmentally and financially, to building smaller and more energy efficient—whether it be an ADU, a new house or remodeling an existing home."

Hill adds, "I think we all should reconsider how we live and the amount of space we think we need. There's nothing greener about green building than building small. One of Bend Craftsmen Company's core beliefs is that the earth does not belong to us, we belong to the earth and how we live and how we build should incorporate this concept."

Whether for practicality, financial gain, for eco-inclination or to accommodate what might be the most culturally influential migration the West has seen since colonialism, ADUs are popping up all over Bend because they're making sense for homeowners.

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