Oahu contractors already have seen an increase in interest from homeowners who plan to add rental units on their properties following last month’s easing of city rules.

Mayor Kirk Caldwell enacted a new city ordinance Sept. 14 allowing residential property owners on Oahu to create small rental units, known as accessory dwelling units, or ADUs, within or adjacent to their homes. The change, which could affect more than 100,000 residential-zoned lots, was seen as a way to ease Oahu’s tight rental market, typically one of the costliest in the nation.

As of last week 80 people interested in building ADUs had contacted the city Department of Planning and Permitting.

Atlas Construction has six customers moving forward with building ADUs and has fielded phone calls from many more. S. Tanaka Construction LLC soon will be offering plans for three types of ADUs on its website with a fixed price for each.

"It’s going to be very popular," said Jeff Kai Cantrell, owner of Kai Builders.

While adding to the inventory of rental units, the new law also will also give homeowners a way to earn income.

"The main benefit is to let regular homeowners participate in the (real estate) boom," said Rodney Kim, vice president at Atlas Construction, a four-generation Oahu company.

The size of a homeowner’s lot determines whether an ADU can be up to 400 square feet (for lots between 3,500 and 4,999 square feet) or up to 800 square feet (for lots over 5,000 square feet).

Atlas is offering "turnkey" packages for ADUs that include all design, permitting, fees and construction, starting at $160,000 for a 400-square-foot detached or attached unit. The price for a 600-square-foot unit is $195,000, and the cost for an 800-square-foot unit is $230,000, or $287.50 per square foot.

Kai Builders expects its construction cost to be around $120 to $150 per square foot.

S. Tanaka’s owner, Ryan Tanaka, said his company typically charges $160 to $190 per square foot for new construction.

ADUs are designed to fill the need for long-term rentals, and owners will be required to rent them for a minimum of six months.

The possible uses for the unit could vary widely.

Kim said he has gotten a lot of inquiries from empty-nesters who want to build the ADU, move into it and rent out their main house. Another use he is anticipating is elderly homeowners building the ADU to house a caregiver to avoid the need to move to an assisted-living facility.

Tanaka said he expects the majority of ADUs will be built for multigenerational families. If a family member moves in from a rental unit elsewhere, it still would ease tightness in the Oahu rental market.

Opponents to the ADU law were concerned that the units would be turned into vacation rentals, changing the residential character of many neighborhoods while doing nothing to increase the availability of long-term rentals.

"As far as inquiries we are getting, no one is using it for transient" vacation rentals, Kim said.

The city DPP said it will be difficult to game the system because online advertising of an ADU as a vacation rental can be used as evidence of a violation. If a complaint is filed and determined to be valid, it could result in civil fines of up to $1,000 per day for the owner.

ADUs also come with many restrictions that could result in some homeowners not being allowed to build on their property. ADUs will "only be allowed in areas where wastewater, water and transportation facilities are adequate to support the additional dwelling units."

Tanaka said one of his customers interested in building an ADU was denied because the street wasn’t wide enough. The law requires a 20-foot-wide street, and the customer’s street was only 14 feet, he said.

Cantrell said getting a permit also could slow the process. It is currently taking from two to six months to get a permit, he said.

The new law will add demand in an already strong construction sector.

"The past few years have been very busy. Everyone is working," Cantrell said. "All small contractors are having trouble finding workers."

Kim added, "We are going like crazy."