What is an ADU? An Accessory Dwelling Unit Comprehensive Overview

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.

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.

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

Prefab ADU vs. Site-Built ADU

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.

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.

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.