Laure Joliet / The New York TimesA Portland couple living in the Sunnyside neighborhood built this 660-square-foot backyard granny flat for one set of parents to live in. Thanks to a coding change encouraging such homes, granny flats are a booming business in Portland.

In most cities, adding a second house to a single-family lot would be illegal or would set off an epic battle with the neighbors that could drag on for years. But not in Portland.

There, this kind of housing — referred to officially as “accessory dwelling units” but better known as granny flats, garage apartments or alley houses — is being welcomed and even encouraged, thanks to friendly zoning laws. And additional living spaces are springing up everywhere, providing affordable housing without changing the feeling or texture of established neighborhoods the way high-rise developments can.

In the southeastern part of town, Jen Wetland, 40, and Bryan Scott, 37, converted their two-car garage into a 480-square-foot home using mostly salvaged materials, for about $60,000. Then they moved in and rented out their four-bedroom house, which more than covers their living expenses. They’re delighted to talk about how fabulous downsizing feels and how it allows them to work less and play more.

Stephanie and Sam Dyer, who are both 34 and live in the coveted Boise neighborhood, built a 342-square-foot version of their bungalow so their parents could have somewhere to stay when they visit. The rest of the time, the couple have been steadily recouping their $110,000 investment by renting out the little house through sites like Airbnb and VRBO.

Lenore Prato, 45, worried that she would be the first member of her large Italian family unable to provide a home for her parents as they got older. So Prato and her husband, Ken Finney, 44, built a 660-square-foot cottage that sits behind their own house on a corner lot in the Sunnyside neighborhood.

“I like that we’re setting an example for our kids,” Prato said. “This is how you treat your parents.”

They are also setting a good fiscal example. Eric Engstrom, a principal city planner, has seen these small structures become increasingly popular during his 16 years working for the city. And as he put it, “Given the low vacancy rate, when they’re done, you can rent them out in about an hour.” Which means that adding an accessory dwelling unit, or ADU, increases the value of a piece of property.

Aggressive advocacy

Since the 1990s, Engstrom said, zoning laws in Portland have been slowly changing to accommodate the buildings. “There’s been a lot of pressure on us to allow them,” he said.

But it was in 2010 when the biggest changes took place. That was when the city relaxed the limitations on size and began offering the equivalent of a cash incentive by waiving the hefty fees usually levied on new development. Other cities in the Northwest have been moving in this direction, but Portland is the first to offer a significant financial benefit and one of the few that does not require owners to live on the site, provide additional off-street parking or secure the approval of their neighbors — all of which have proved to be obstacles elsewhere. Apart from Santa Cruz, Calif., and Austin, Texas, where secondary dwellings have long been allowed, Portland is alone in this country in its aggressive advocacy of the units.

Eli Spevak, a local alternative-housing developer who is among those who lobbied for ADU-friendly policies, said, “The city changed two rules, and all of a sudden it went from 30 a year being built to 200 last year” — an impressive figure, considering the total number of applications approved for single-family houses in 2013 was 800.

“That’s amazing,” he said. “The environmental benefit of building small is huge, and this is such a wonderfully flexible housing type.”

Making it all fit

Of course, the challenge with houses this small, said Jack Barnes, a local architect with ADU experience, is “figuring out how to fit everything.” It’s a little like designing the inside of a boat, he said.

The maximum allowable size is 800 square feet, or 75 percent of the overall square footage of a lot’s primary house, whichever is smaller.

Despite the size limitation, costs can easily run to as much as $250,000, depending on the design and the finishes, although the average accessory unit, according to a survey sponsored by the state Department of Environmental Quality of 860 built in Portland, Ashland and Eugene, is about 668 square feet and costs a little over $80,000.

A library of case studies detailing design choices and the attendant costs can be found on accessorydwellings.org, a site developed by three passionate advocates: Spevak, the developer, who is spending this year as a Harvard Loeb fellow, working on new ways to finance the units; Martin Brown, an environmental researcher who built a purple ADU that now houses his mother-in-law; and Kol Peterson, a Web manager for the Forest Service, who shares an 800-square-foot unit with his wife and teaches an ADU course called “This Is the Little Life.” (The $125 class, which is held every month or so, is nearly always sold out, he said.)

The site offers a calculator for estimating how long it will take to break even on your investment. In his case, Peterson said, it was about 21⁄2 years.

But affordability is only part of the appeal of accessory dwelling units.

Jordan Palmeri, an engineer with the Oregon Department of Environmental Quality, said he had analyzed a lot of data related to their sustainability. And “the relative benefits of reducing home size were so much greater than other programs being incentivized,” he said.

“In Oregon, the average new homes are 2,200 square feet,” he continued. Some 20 to 30 percent of the state’s landfill waste comes from the associated construction debris and from that of teardowns and renovations.

“There are very few people who don’t like this approach,” he added. “This is such a wonderful little package.”