I have many clients who have built, or are interested in building, an ADU (also known as Accessory Dwelling Units or “Granny Flats”). And up until tax bills were delivered this year, they seemed like a relatively cost effective way to add some separate living space to homes in the Portland area with our focus on urban density.
Unfortunately, there were several unhappy new ADU owners who received tax bills with enormous increases. Multnomah County had arbitrarily decided to revamp how they assessed those properties that had added an external ADU. Instead of just assessing the value of the new structure added, they re-assessed the whole property as new construction. By doing that, some properties went from a $3000 tax bill to well over $7000 or more. As you might expect, this did not go over well.
Luckily, there is a relatively happy ending it appears, at least for now. The state Department of Revenue has intervened and requested that Multnomah County assess the new ADU properties differently than they did this year. The state has recommended that the “county should only re-calculate the value of the land and the new construction of the granny flat but keep the value of the primary home untouched.”
The county should also be “correcting” those tax bills sent out this year following the receipt of the State’s guidance.
One thing to note, this tax issue was only applied to ADU’s that were separate buildings from the original home. Any ADU that was created in a basement or attic space was not affected.
I will continue to be a strong advocate for ADU’s and small space living, and I’m happy to see that my clients will not incur a huge and unexpected expense for wanting to do more with their property!