The surge in Accessory Dwelling Units (ADUs) across America is a trend that cannot be overlooked.
These small structures offer solutions to various rental housing challenges while providing financial benefits for homeowners.
I first learned about these structures at about 8 years old when we built a detached unit for my grandpa in the backyard. He lived in this 1 bedroom granny flat until he passed away. My older siblings had a chance to live in “the apartment,” as we called it.
I am pretty sure it was an unpermitted ADU. 😝
I remember it being built, and my parents had to save money on certain things, so my grandpa got a matching set of rose-pink bathroom fixtures. I thought a pink toilet and tub were just the coolest thing!
I visited with my grandpa daily while he sat on his patio with a flyswatter waiting for the next bug to come into his reach. He also loved to scare me right when it was really quiet, and of course, I jumped, and he laughed.
In reality, I had no idea of the blessing an ADU project could have for a homeowner. I was 8, and I didn’t care!
Back to today, think of being able to offset your mortgage with the potential rental income (maybe thousands!).
Discover the essentials of Accessory Dwelling Units and how ADUs are quickly becoming a popular Go-To alternative housing option.
- ADUs are increasingly popular in the U.S., offering solutions to rental challenges and financial benefits for homeowners.
- ADUs provide separate, affordable living spaces on the same lot as a primary house.
- They serve as rental units, multigenerational living spaces, home offices, and more as part of the attainable housing options.
- Popular for being resource-efficient, cost-effective, and environmentally friendly.
- States are promoting ADU construction through laws and supportive programs.
- ADUs offer versatility in design and can include accessibility features.
- Their smaller size leads to lower resource use, promoting sustainability in construction and maintenance.
Disclosure: This post may contain affiliate links, meaning I can earn commissions. If you decide to purchase through my links, it is at no cost to you.
What is an ADU, and What is ADU Housing?
ADU stands for accessory dwelling unit. An ADU is an accessory living space on the same lot as a primary property for affordable housing choices.
It’s typically smaller, separate from the primary house, and is a great choice for those seeking a rental space or just more space.
ADU homes are increasingly becoming popular for those seeking additional affordable housing options in the United States.
Find information on the ADU house requirements in your area on the Accessory Dwellings website.
Fannie Mae tells us the ADU must:
Be Subordinate in Size
ADU homes must be smaller in size compared to the primary house. You can’t just build a 2,000-square-foot ADU behind a 1,000-square-foot house!
Have Separate Features from the Primary Home
Means of ingress/egress
Kitchen
Sleeping area
Bathing area
Bathroom facilities
Meet Kitchen Requirements
Cabinets
A countertop
A sink with running water
A stove or stove hookup (Note: hotplates, microwaves, or toaster ovens are not acceptable)
Related Articles 📚
Requirements and Regulations for the Accessory Dwelling Units
ADU requirements and regulations across the US vary by state. For example, some states may require the property to be owner-occupied, while others do not.
Understanding local laws, ADU ordinances, and zoning regulations is important before building ADU units.
You can not just stick a stand-alone shed in the backyard and call it an ADU (not legally, at least).
Let’s look at some common requirements and regulations for these housing units.
Zoning Requirements 🛎️
Residential Zoning: Most ADUs must be located in residential zones. So you can’t stick an ADU behind your commercial building.
Lot Size: A minimum lot size may be required to build an ADU.
ADU Sizes and Dimensions 📏
Minimum and Maximum Size: You may be asking how big is an ADU. It depends! While minimum sizes will vary, states like California have set a 150 minimum square footage ADU requirement. The maximum size will vary and is related to the local law and the size of the primary dwelling.
Height Restrictions: There may be limits on how tall an ADU can be, especially for detached units.
Occupancy 👨👩👦
Owner-Occupancy: Some jurisdictions require that the owner live in either the primary dwelling or the ADU. Some states are starting to update this requirement.
Number of Occupants: There may be a limit on the number of people living in the ADU.
Parking 🚗
Parking Spaces: Additional parking spaces may be required when adding an ADU. This requirement is also being updated in many cities.
Setback Requirements: Parking must often be far from property lines.
Utilities 💡
Separate Utilities: Some jurisdictions require separate utility connections for the ADU.
Sewer and Water: The ADU must be connected to sewer and water services.
Design and Aesthetics 🏠
Architectural Consistency: The ADU often must be similar in appearance to the primary dwelling.
Entrance Location: The entrance to the ADU may need to be on a certain side of the building.
Permits and Fees 💰
Building Permits: You’ll need various permits to build, which may include planning, building, and electrical permits.
Impact Fees: Some jurisdictions charge impact fees to offset the additional public services required. These are also being changed to make it easier for homeowners.
Rental Restrictions 🚫
Short-Term Rentals: Some jurisdictions do not allow ADUs for short-term rentals. You can’t just create an ADU for AirB-n-B purposes – but you might double-check to find out!
Lease Terms: There may be minimum or maximum lease terms for renting out the ADU.
Safety Requirements 🧯
Fire Safety: Fire-resistant materials and smoke alarms are generally required.
Accessibility: Some jurisdictions require ADUs to be accessible to people with disabilities.
Does an ADU have to have a kitchen?
Usually. Some cities have ADU kitchen requirements. They could mandate that an ADU must have a kitchen with cabinets, a countertop, a functioning sink, and an eating area.
Other places may have more lenient regulations or might not require a kitchen at all.
If you will have the ADU as a rental, you will need a space for your tenant to cook so an efficiency kitchen would be ideal.
The California ADU kitchen requirements are:
- A cooking facility with appliances.
- A food preparation counter and storage cabinets that are of reasonable size to the size of the junior accessory dwelling unit.
ADU Uses and Benefits
There are many uses and benefits to having an ADU:
Rental unit – increasing the affordable housing options
Multigenerational housing – an adult child or disabled relative
Aging in place
Home office or additional living area
Guest house or hosting space
Option for downsizing – move into the ADU and rent out the main house
Man Cave or She Shed
Yoga Studio or Meditation Space
Study Space
Types of ADUs
There are two main types of ADUs:
Attached – The housing unit shares at least one wall with a single-family home.
Detached – This is an additional structure on a property that shares no walls with the main house. There are two units on the property.
- JADU – The ADU structure is inside the main home. Such as a garage conversion.
- Tiny House on Wheels – some areas are allowing a NOAH-certified Tiny House on Wheels (THOW) to be an ADU.
ADUs can also be prefabricated, also known as a prefab ADU or a stick-built ADU.
Attached ADU vs. Detached ADU
Attached ADUs (JADUs)
- The attached ADUs are called Junior ADUs (JADUs). These are connected to the main property, with a separate entrance.
- Think basement apartments, garage conversions, or attic conversions.
Detached ADUs (DADUs)
- A DADU is located separate from the primary home as a stand-alone unit.
- Think Accessory apartments, Granny Flats, Boxabl, a Shed conversion, or a Shipping Container home could be examples.
Prefab ADU vs. Site-Built ADU
Prefab ADU
- A prefab ADU is a structure that can be delivered and dropped off in your backyard, ready to be lived in a few hours or days.
In many cases, the structure is entirely built off-site and delivered, or a kit is assembled at your property.
Site-Built ADU
- A stick-built or Site-built adu is just that, built from the ground up at the site.
- This option is constructed in a matter of months, depending on the weather delays or supply issues.
Can an RV be used as an ADU?
Not formally, but some use an RV as an extra living space for guests or adult children.
I have also seen RV’s listed as AirBnB rental online though that may be considered an informal use.
What is the difference between an ADU and a Guest House?
These can easily be interchangeable to mean the same thing.
There is no difference in the purpose they serve, but for financing purposes, you may want to use the word ADU.
The Soaring Popularity of ADUs
We know ADUs are not a new concept.
In fact, the ADU’s history goes back to the early 20th century when the structures served as spaces for extended family or domestic help.
They have been called a guest house, tiny house, Ohana, carriage house, or backyard cottages and have been around for centuries.
There is a more recent surge in popularity across the country as legislation and zoning regulations continue to be changed to encourage the addition of ADUs to positively impact the shortage of about 7.3 million affordable and available rental homes, according to Housing Matters.
These tiny homes offer a budget-friendly solution for homeowners grappling with sky-high property prices and help tackle the pressing issue of affordable rental housing.
Can you sell an ADU separately from the main property?
Some can. New legislation like AB 1033 is changing the ADU landscape.
ADU Demand Leads to New Lending Products
It is no surprise that ADUs aren’t free, and the money has to come from somewhere. The increased demand has created some new and interested ways to finance your ADU.
Read more about financing an ADU, here.
ADU Housing Growth
In some cities where ADU’s are not popular, you may have one person ask, “What is an ADU rental?”.
It has not caught on everywhere.
That is not the case in places like Los Angeles, CA or Portland, OR.
What’s Driving the ADU Craze?
Several factors are fueling this trend. Ascending housing costs have caused many to seek alternative, more affordable solutions to secure their living space.
With home prices reaching new heights, people are searching for alternative ways to secure their own space without going broke or raising monthly expenses.
Secondly, changing family dynamics have created a demand for flexible living arrangements to accommodate multiple generations under one roof in residential areas.
ADUs: The Affordable Housing Option
Accessory Dwelling Units provide an affordable solution by utilizing unused land on homeowners’ properties.
They aren’t making any more land, so we have to do more with our land.
By constructing small structures on these plots, they can earn extra income through rent while simultaneously offering much-needed housing options in areas where traditional homes may be financially out of reach for many.
This double whammy has positioned ADUs as a potential solution in the battle against housing affordability woes across the country.
aDUs in Real Estate
I like to let data speak for itself because it is hard to argue with.
Do ADUs increase property value?
More than likely, yes. Especially in areas like California where some homeowners are seeing 10-35% increase in value according to an article on Realtor.com.
What is interesting is some areas see a decrease in value. I personally think it is a stretch to say an ADU would cause the value of a home to decrease. I have never seen a property with an extra living quarters lose value.
Even if one only used the space for storage, it should cause no less than a Zero change in value.
I can say, ADUs are not appreciated in some places and therefore not seen as valuable.
Supportive Programs for Developing ADUs
Programs are being developed to encourage the construction of ADUs.
These initiatives provide cost-effective housing options and help build sustainable communities.
Recent Legislative Changes for Accessory Dwelling Unit Adoption
States are passing laws to promote Accessory Dwelling Units use for affordable housing. California’s Senate Bill 13 reduces barriers by eliminating fees and easing parking requirements.
These changes reflect the recognition of ADUs’ benefits, from affordable housing to increased property values and extra income for homeowners. Some even address changes with property taxes.
State Initiatives Promoting ADU Construction
Many states have launched supportive programs to tackle the housing crisis. For example, California has passed new laws that make building structures easier.
Meanwhile, Oregon has introduced the Reach program, which offers financial incentives to homeowners who build these units on their property.
The Role of Pre-Approved Design Plans
Some cities are taking it further by offering over 70 pre-approved ADU design plans. Los Angeles is leading the way with its ADU Standard Plan Program.
This genius idea allows homeowners to choose from various city-vetted designs, making construction more straightforward and affordable.
These support programs can help homeowners realize their dreams of Accessory Dwelling Units.
Just remember to research local regulations, as they can vary.
Design Flexibility & Accessibility Features
ADUs: the chameleons of housing. They can be customized to fit your style, whether you’re a modern minimalist or a traditionalist.
400 square feet may not seem like a lot of space, but it can produce a highly functional ADU.
Creative space must often be utilized to live in these spaces efficiently.
Some creative ways to use small spaces are:
Storage in Stairs
Folding or Murphy Beds
Vertical shelving
A couch that converts to a bed
The desk area is also used for dining
Storage nooks
Universal Design Elements: Making ADUs Accessible
ADUs can incorporate universal design elements like zero-step entrances and wider doorways. heck out this summary of accessibility standards.
Remember: good design is about functionality.
House Hacking with an ADU: Turn Your Home Into an Income Stream
What if your home could help pay the bills — or even make you money every month?
That’s the idea behind house hacking. And one of the smartest ways to do it is with an Accessory Dwelling Unit (ADU).
Here is a brief overview of House Hacking with an ADU.
What Is House Hacking?
House hacking is a real estate strategy where you live in one part of your property and rent out another.
It allows you to offset your mortgage, lower your cost of living, and build wealth over time.
House Hacking Definition
House hacking means using your home to earn income.
It’s most common with duplexes, triplexes, or homes with ADUs, where you can rent out a separate unit while living in the other.
Benefits of House Hacking
- Lower or eliminate your monthly housing costs
- Generate passive income
- Build equity and long-term wealth
- Take advantage of real estate tax benefits
- Live where you invest
House Hacking Ideas
- Rent out a detached ADU in your backyard
- Convert your garage into a studio apartment
- Finish a basement and rent it as a 1-bedroom unit
- List a portion of your home on Airbnb – a Master Suite works well
- Rent a spare bedroom to a travel nurse or student
House Hacking Loans
- FHA Loans: 3.5% down, up to 4 units
- VA Loans: 0% down for eligible veterans
- Conventional Loans: 5%–20% down for owner-occupied properties with ADUs
House Hacking with an FHA Loan
Yes — you can house hack with an FHA loan.
These government-backed loans let you buy a home with as little as 3.5% down, even if it has up to four units — as long as you live in one. This is perfect for ADUs, duplexes, or triplexes.
VA Loan House Hacking
If you’re a veteran or active-duty service member, you can also house hack with a VA loan.
VA loans require no down payment and can be used to purchase multi-unit properties (up to 4 units) if one unit is owner-occupied.
Is House Hacking Legal?
Yes — but always check your local zoning and ADU regulations.
House hacking is legal in most places, but some cities or HOAs have restrictions on short-term rentals or separate dwelling units.
Do your homework first.
Environmental Sustainability Aspects of ADUs
An ADU smaller size means it uses fewer resources during construction and maintenance.
Let’s not forget about less upkeep in general.
Sustainability factors when designing new residential structures
Sustainability should be the cool kid on the block when designing new tiny homes.
From choosing materials with low environmental impact to adding solar panels, you can make your Accessory Dwelling Units an eco-friendly paradise.
And guess what? Going green is beneficial for the environment, but it can also help save you money, as an ADU requires less energy.
By reducing utility costs and increasing property value, your sustainable ADU will have everyone green with envy.
To dive deeper into sustainable Accessory Dwelling Units, consult a pro about green building practices.
Steven Dietz on Solving the Housing Affordable Crisis
This video is compelling, and Steven Dietz, the Founder and CEO of United Dwelling, is a wonderful and well-versed advocate for this mission.
This was at an Upfront Summit.
final thoughts
In conclusion, the increasing popularity of Accessory Dwelling Units in the United States can be attributed to many factors, including the pressing need for affordable housing solutions and the implementation of supportive programs that encourage their development.
The Accessory Dwelling Units offer many enticing benefits, from financial advantages and design flexibility to environmental sustainability and positive societal impacts.
Beyond their practical advantages, these small spaces play a crucial role in preserving the character and integrity of neighborhoods, allowing communities to make the most out of limited living space.
What can an ADU do for you?
How can an ADU impact your life?
Frequently Asked Questions
Is an ADU a good investment?
ADUs can be a good investment for several reasons. They can provide additional rental income, increase property value, and offer flexible living arrangements.
Do you need a permit for ADU in California?
You do need a permit for an ADU in California.
What is the new ADU law in California?
The new laws also allow for 2-story ADUs in some instances and provide more flexibility in where ADUs can be built.
Is it true that some people use an ADU as alternate housing to house family members?
Yes, some property owners will utilize the addition of an ADU to care for family members and keep them near the main house.
How do I finance my ADU build?
You can utilize finance products such as construction loans, HELOCs, Home Equity Investments, Renovation loans, or hard money.
What’s the deal with ADUs? Is it just a fad?
An Accessory Dwelling Unit is a clever solution to housing shortages in crowded areas, allowing homeowners to make some extra cash.
What are the pros and cons of an ADU for rental housing?
An Accessory Dwelling Unit can bring in extra income through rent and boost your property value, but it also comes with initial investment costs and possible regulatory hurdles.
Can an ADU be sold separately from the primary property?
It’s possible. Learn more about a new law to allow ADUs to be sold separately from the main residence.
Can an ADU have a separate address?
This is up to local laws, as a separate address may change the parcel’s zoning.
What are the rules with ADUs and HOAs?
The rules regarding ADUs and HOAs may vary, but many HOAS have covenants that do not permit ADUs.
Image Source: Canva, Pexels, Pixabay, Open Verse, Unsplash