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COURTESY KOL PETERSON  - Randal Groves and his wife thought they could live more simply by moving into  this stylish but small accessory dwelling unit on their lot. This week they found it is causing their property taxes to go up nearly 500 percent a year. When Portland homeowners open up property tax bills in the mail this week, most will notice 2015-16 taxes are going up about 3 percent or a tad more.


In contrast, Randal Groves’ taxes are shooting up almost 500 percent.

“It was a gut punch,” said Groves, whose annual property tax bill jumped from $1,225 to $7,286.

Groves and his wife are being dinged by Multnomah County after they took advantage of a city fee waiver to build a “granny flat” or accessory dwelling unit on the lot of their fixer-upper in Northeast Portland’s Sabin neighborhood. They spent about $135,000 on the 800-square-foot cottage and moved into it in March, hoping to simplify their lifestyle.

The city’s encouragement of ADUs led to a construction boom — about one a day this year. But the county assessment division is now reappraising those peoples’ main homes as if they were new construction, which can mean substantially higher property taxes on top of new taxes for the ADUs.

“We are completely blindsided,” Groves said. “There’s no way I can absorb an extra $500 a month.”

The policy could derail the construction of new ADUs, which the city promotes for environmental, affordability and lifestyle benefits.

“The county’s new ADU assessment method undermines the economic rationale and motivation for homeowners to develop accessory dwelling units on their property,” said Kol Peterson, an ADU consultant.

It appears the county change only applies to detached ADUs, not basement or attic apartments inside the main home.

County denies policy change

Sally Brown, Multnomah County’s chief appraiser, insisted to the Portland Tribune last month that the county hasn’t treated ADUs any differently since voters approved two property tax-limitation measures in 1996 and 1997. Since then, Brown said, the county has been obliged under state law and administrative rules to revise a property’s tax assessment when there is a new use made possible, such as via a zone change.

“What’s new,” she said, “is the push by the city and the developers to promote the construction of ADUs.”

Peterson said that’s an outright lie, and he’s heard as such from three different employees who work in the county Division of Assessment, Recording and Taxation.

“It is crystal clear that this is a new policy,” Peterson said.

When the new property tax bills started going out late last week, Peterson found that the owners of each of the eight properties on his Spring 2015 tour of new ADUs got a bill reassessing the main home as if it was new construction, which meant much-higher property taxes. That’s on top of higher assessed values for the ADUs.

Groves’ taxes went up the most, but the average tax increase for the eight homeowners was $3,379, more than doubling their annual bills.

When Peterson looked at new tax statements for homes where he knew ADUs were created in prior years, he found the tax increases reflected the value of the new ADUs, but the main home values were largely unchanged.

Walt Quade, who built an ADU at his home in the Cully neighborhood of Northeast Portland in 2008, said the county subsequently added about $40,000 to the assessed value, the cost of his new cottage, but didn’t jack up the assessed value of his main home.

Employee sets record straight

An employee at the Division of Recording, Assessment and Taxation, who asked not to have his name published, said discussions of a new policy began in May, at the instigation of “higher-ups.”

“We’re seeing taxes that are tripling and quadrupling,” he said, explaining why he wanted to set the record straight. “It’s tough to swallow because there’s no warning. You’re going to take grandma’s entire retirement or her Social Security check to pay the tax bill.”

Though many ADUs are used by family members or rented for below-market, there’s also been an upsurge in people adding quaint cottages and using them as Airbnb rentals. Under the city’s increasingly lenient rules, practically anyone can add an ADU onto their single-family lot, and, at least until next July, get their systems development charges waived, saving several thousand dollars.

“The talk has been that we’ve been undervaluing ADUs because of their potential income,” the employee said. “So we’ve been trying to get a more accurate valuation on them.”

State rules, sort of

In response to Brown’s insistence that the policy is not new, and that her department must meet state laws and regulations under the oversight of the Oregon Department of Revenue, the Tribune queried the department about what state law requires.

After consulting with Oregon Department of Justice attorneys, the department issued its own position on the dispute last week, depicting it as guidance to counties.

Because Portland now is allowing residents to put a second dwelling unit on their lot, the underlying use of the land is changing, said Gregg Thummell, a team lead in the state agency’s Property Tax Division. On that basis, the Department of Revenue concluded the best policy is to reappraise the value of the land for property taxes, but not the main house, he said.

Under that method, property taxes on the land would rise, but not on the existing home’s value.

The state department won’t enforce its new determination on Multnomah County, at least for now.

“The Multnomah County assessor may come to their own conclusions as to their interpretations of the law,” Thummell said.

If a conflict arises and different Oregon counties are treating ADUs differently, “We would step in,” he said, and likely form a work group to propose new, definitive state regulations. Changes also could come after property tax appeals to the Oregon Tax Court.

County not budging

Multnomah County Assessor Randy Walruff said the state agency’s determination won’t force the county to change how it’s treating ADUs.

“They have decided not to take action with Multnomah County and telling us we’re doing it wrong,” Walruff said.

Walruff wouldn’t concede the county is adopting a new policy in the 2015-16 year, but did depict the county’s approach as evolving. After a meeting with a city planner two and a half months ago, Walruff said, county assessors learned the city is being more liberal about allowing ADUs than previously thought. Part of the problem, he said, is the city is not technically making a zone change to allow ADUs, but is changing allowable uses of single-family lots.

“It gets quite complex when the city keeps changing what’s allowed in these zones, and it’s buried deep in administration regulations,” Walruff said.

“We’re talking about taking properties that used to be single-family and now they’re multifamily lots.”

Oregonians were never promised that property tax limitations would remain in force if their property was rezoned or put to new uses, he said.

If Portlanders think their property tax assessments are unfair, they can appeal, he said.

Groves says he intends to do just that. And if that doesn’t bring relief, he and his wife will sell their house, he said.


Steve Law can be reached at 503-546-5139 or This email address is being protected from spambots. You need JavaScript enabled to view it., or Twitter at twitter.com/SteveLawTrib

To read Kol Peterson's blog post on this dispute in Accessory Dwellings: accessorydwellings.org/2015/10/22/the-death-of-detached-adus-in-portland-and-what-to-do-about-it

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