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ADU Development Costs Keep Going Up

I’ve updated an extensive post about ADU development costs here. These updates are based new cost numbers that just came in from the upcoming 2019 ADU Tour in Portland, which serves as a repository of current and active primary source data for my ADU cost estimates.

It turns out that current primary source data is critical when it comes to talking about the costs of ADUs, because the development cost numbers here keep escalating rapidly.

The average costs have escalated by $20K for detached new construction ADUs in the last 2 years.

I actually feel bad every time I do a refreshed cost analysis, as the numbers are so shocking. But, it is what it is. The numbers do not lie.

While these averages are derived from a relatively small sample size, what these data points lack in volume, are made up for in quality and transparency. These numbers are not only fairly accurate, the ADUs and some of their actual detailed budgets will be available for all attendees to see on the upcoming ADU Tour. These costs here include all development costs, from design, permitting to construction, and notably the total costs also include sweat equity.

Here’s a couple key cost charts:

 

For additional analysis on how to interpret and understand these overall costs based on first-hand experience with these ADUs, check out the full post.

About Kol Peterson

Kol is an ADU consultant, advocate and author of Backdoor Revolution: The Definitive Guide to ADU Development. Read more here: AccessoryDwellingStrategies.com and learn about building your own at BuildingAnADU.com

8 comments on “ADU Development Costs Keep Going Up

  1. Andy P
    May 28, 2019

    WOW! I am glad I’m not in Portland! Those prices are CRAZY!!!!! I have built two ADU’s in Charlotte, NC. The first is an attached two bed one bath which cost me $76,000 in 2014. I just finished my second one, also in Charlotte, NC – This time it’s a detached 3 bed 2 bath that is 800 square feet. That one ran me about $83,000. Admittedly my contractor had not heard of an ADU when I introduced him and my architect to the mix. AirBNB has been knocking it out of the park and I’m VERY happy to have embarked on this journey way ahead of everyone else in this city!!!

    • Kol Peterson
      May 28, 2019

      Andy,

      My theory is that construction costs are essentially proportionally tied to regional land values.

      See: https://www.zillow.com/charlotte-nc/home-values/ ($224K) vs https://www.zillow.com/portland-or/home-values/ ($422K)

      So, it makes sense that construction labor costs would be much less (half?) that in Portland. That said, material prices are still roughly the same anywhere in the US, I would imagine.

      I would think that the material prices for an 800 sq ft 3BR 2BA structure would be $60K or more in Portland. But, I could be totally wrong about that. I haven’t done that type of material cost analysis.

      In the end, even with lower rental income potential than in Portland, you’ll have an even greater ROI than we do here. So, good on you!

      I should also mention that there are less expensive detached ADU options in Portland. Here’s a couple turn-key option for $127K, for example https://www.shelter-solutions.net/accessory-dwelling-units-adus/pre-designed-models/

    • Marlana Francis
      June 9, 2019

      Point being afforable houseing, right?

      • Marlana Francis
        June 9, 2019

        Point being affordable housing, right?

      • Andy
        June 11, 2019

        Meh – I say get what the market will bear. I rent my 2 bed 1 bath for $2100 a month and the 3 bed 2 bath for $2200 a month. They are fully furnished and the price includes water, power, cable, wifi internet, beds, linens, TVs, etc. It’s a better deal than a Suburban lodge and our prices must be on point as our units stay rented constantly. So in a sense it’s affordable housing. It’s better than the opportunity cost anyway.

  2. Martin John Brown
    May 28, 2019

    Hey Kol, thanks for sharing this. Real data is always appreciated. Do you think it’s possible your particular source (the ADUs on the tour) is influencing the results much? After all, the ADUs on the tour are typically ADUs people are proud of… some of them are real showpieces. I’m wondering if a class of less expensive ADUs around might be missed?

    For example I have a co-worker who’s developing an internal carveout ADU and it’s gonna be like $60K. No idea if that’s representative of a trend.

    All that being said, construction in Portland isn’t cheap right now, and creating an ADU is not a small project (from a homeowner’s POV anyway). With nearly all ADU projects >$100K, the prices have implications for industry and policymakers. Those prices mean that (unless there are new ways to finance construction), ADU development will continue to be most common among homeowners who are relatively well off, or move increasingly to professional developers. Some of the people who could really get some economic empowerment out of ADUs might be left behind. :/

    • Martin John Brown
      May 28, 2019

      Just read that construction prices are up countrywide: “Across the country, the price of new construction is at its highest it’s been in 70 years, a BuildZoom analysis of R.S. Means’ construction price index found,” writes the Minneapolis Post.

    • Kol Peterson
      May 28, 2019

      The costs in the chart in this post are only for detached new construction, as those data points are easier to compare apples-to-apples.

      As far as the ADUs on the tour, maybe there’s some selective bias based on who is interested and proud to showcase their ADUs.

      But, I think these numbers for detached ADUs are actually pretty solid, and representative of general custom built construction for ADUs. As far as my selection of the ADUs, I attempt to get a diverse array of types within a clustered geography. I often don’t have any clue how much they cost until months after the ADUs have been identified. And, I typically don’t even know what types of finishes the ADU will have until the ADUs are complete. Several are still under construction as we speak, even though the tour is only a month away. So, there’s no bias towards certain finishes (ie. costs) on my part.

      I’m curious to hone in on conversions more though–as this where there is ample opportunity to do cheaper ADUs. Internal conversions are indeed much less expensive, in general. For example, there’s an ADU on this year’s tour that is $75K. In 2015, one basement conversion on the tour was only $25K (https://accessorydwellings.org/2015/05/22/john-stephani-hayden-an-expertly-executed-basement-conversion/). But, there’s an internal conversion on this year’s tour that is $380K.

      Inexpensive conversion potential requires knowing what to look for in a property and structure. With 8 hours on MLS, and I could identify potential properties where an ADU could be built for under $20K. But, these are cases in which the space is already finished, and the utilities are located in good spots, and where there’s already egress windows and entries built. In such cases, formal ADU development may not be of interest as the space is perfectly rentable as is! In other words, even though the ADU would be relatively cheap, it’s still not a rational thing to do.

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This entry was posted on May 28, 2019 by in Financing and tagged .
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