Why these new cozy cottages are causing a stir in Lake Oswego’s real estate market

People looking to buy a place in pricey Lake Oswego have been touring a model home unlike any other in the city. It’s the first of eight standalone cottages built on a downtown lot once restricted to a single house.

The two-story Oswego Cottages with a fenced yard and dedicated parking in the Historic First Addition neighborhood share a 7,500-square-foot lot on Third Street and G Avenue.

The two-bedroom cottages “are in its own little neighborhood within a neighborhood,” broker Justin Harnish, who is selling the homes, told The Oregonian/OregonLive.

Each of the two-bedroom cottages has just under 1,000 square feet of living space, a front porch and second-story terrace. The asking price for 804 Third St. C1 is $899,000.

There are more than 100 Lake Oswego residential properties for sale priced over $1 million, including side-by-side townhomes, according to the online marketplace Redfin.

The new corner lot development is a cottage cluster, a type of smaller-sized “middle housing” meant to reduce the housing shortage and escalating costs, say advocates, including Gov. Tina Kotek.

Oregon’s 2019 law, House Bill 2001, permits varied home types in neighborhoods once zoned exclusively for single-family houses. Two more cottage clusters are being built in Lake Oswego.

New smaller homes in an established neighborhood tap into existing utilities and services like roads, sewers and schools. They also allow more people to live near employment, retail centers and transit corridors.

A cottage cluster in Northeast Portland was included in the 2025 Street of Dreams luxury home show as an example of builders embracing the idea that a compact footprint and lower costs doesn’t mean cheap construction and compromised finishes.

The Oswego Cottages by developer Portland Leeds Living have an electric fireplace and engineered hardwood floors. There are quartz kitchen counters, a convection gas oven and stovetop, built-in microwave, dishwasher and refrigerator.

The cottages appeal to first-time buyers to retirees who want a vacation home near Tryon Creek Park and to walk to “everything Lake Oswego has to offer,” Harnish said.

“This is for people who don’t want to take an elevator to their front door or live in a [multifamily] complex with shared walls,” said Harnish, who is selling the cottages with Errol Bradley, also of Harnish Properties.