What Is An ADU? Accessory Dwelling Units Explained

With over 1.4 million Accessory Dwelling Units (ADU) in the United States, homeowners love the options that these “granny flats” provide. But is an ADU right or lawful for your property? We explain what ADUs are, what qualifies as an ADU, and the costs of building an ADU.

This is for informational purposes - always check with your permitted authority or regulatory body first. 

An Accessory Dwelling Unit (ADU) is commonly defined as an independent residential living space on the same property as a detached, stand-alone single-family home. ADU is its formal name, but many know it by one of its nicknames:

• Mother-in-law suite

• Accessory apartment

• Secondary suite

• Basement apartment

• Granny flat

• Attic apartment

• Backyard cottage

The nicknames are endless because an ADU can be customized to fit the owner's needs. It can be a separate living space that is either detached or attached to the existing house, as long as it meets the state’s qualifications. 

Though they have been around since the 1980s, ADUs have been steadily growing in popularity since the 2010s thanks to new legislature that made building ADUs easier, particularly in California, Seattle and Portland. Their success is largely due to the fact they offer an affordable housing option to both homeowners and tenants, while increasing the number of available homes within neighborhoods. They are also a great option for seniors to stay close to their family as they age, without losing their independence. 

Regardless of what it would be used for by the owner, ADUs typically fit into one of these six types of ADUs:

1. Detached accessory dwelling unit: This is a separate, free-standing dwelling that isn’t connected to the primary residence.

2. Prefab accessory dwelling unit: Similar to a detached ADU, this is a separate structure that isn’t connected to the main house. The key difference is that the prefab is built in a factory and assembled onsite, rather than constructed on site like a stick-built home. 

3. Attached accessory dwelling unit: This is a separate dwelling that shares at least one wall with the main home but does have its own entrance from outside the main residence.

4. Interior conversion: This is a fully functioning second independent living space within the primary residence. Attics and basements are typical interior conversion ADUs. They may or may not have an entrance from outside the primary residence.

5. Garage conversion: These are garages that have been converted into independent dwellings. It can be attached or detached from the primary residence.

6. Above garage accessory dwelling unit: This is a new second-story structure that is built over an existing garage

ADU Qualifications can vary from state to state, so you’ll want to look up the requirements for your state before you begin your build. That said, most states require that the secondary dwelling have the following qualifications to be considered an ADU:

• Has a shared or independent foundation

• Has a separate utility and water hookup

• Has a complete, fully functioning living space with a kitchen, bedroom, main living space, and a bathroom.

Before you build, you often need to submit applications for building permits to the local government to ensure your ADU complies with all rules and qualifications. Often, this requires a site plan to be submitted with the application.

Before you build an ADU, you should understand the benefits of an ADU and, of course, the disadvantages too.

Accessory dwelling units offer many benefits to the homeowners, the tenants, and the wider community. Let’s explore some of these below.

• Creates separate living space for extended family: 61% of ADUs are built to create multigenerational housing. They can serve as a home for elderly parents, adult children, or other relatives, allowing families to live together while maintaining some level of independence and privacy.

• Becomes a rental property: Depending on local laws, homeowners can rent out the ADU to tenants. This not only allows tenants to live in an area they otherwise couldn’t afford, but it provides a steady stream of supplementary income for the homeowner too.

• Offers flexible living space: ADUs can also be used as a home extension, including a home office, a playspace for children, an entertainment room, a gym, or even an art studio. The flexible living space adds versatility to the property and can adapt to the changing needs of the homeowner.

• Increases the value of the property for resale: Assuming the ADU is lawful, ADUs can increase the overall value of a property. The additional living space and potential for rental income make the property more attractive to potential buyers, thereby increasing its market value.

Though there are many benefits, ADUs come with their cons too. These include:

• Local zoning ordinances, qualifications, and building codes: To be considered legal and lawful, you’ll need to navigate the requirements regarding size, setbacks, parking, and occupancy surrounding ADUs (which can vary significantly from one municipality to another). Obtaining the necessary permits can also be time-consuming and costly.

• Expensive building costs: The cost of building an ADU includes the materials needed, the construction labor, the utility connections, and the permits. Renovations on the existing property may also be required.

• Tax consequences: Depending on which state you live in, adding an ADU to your property could increase property taxes, as it could be considered an improvement that adds value to the property. 

• Tenant management: If you opt to rent out your ADU, you will need to be prepared to invest time and effort into tenant management, including screening applicants, addressing maintenance requests, and enforcing lease terms.

• Maintenance costs: There are ongoing maintenance costs to consider too, including repairs, utilities, landscaping, and other expenses associated with maintaining the ADU.

• Complicated resale or refinance: If the ADU is unlawful, you will struggle to sell your home. And even if the ADU is legal, some buyers may be hesitant to purchase a property with an ADU due to concerns about rental management, privacy issues, or compatibility with their lifestyle, thus reducing the pool of potential buyers.

Depending on your location and property, an ADU can increase your property value by as much as 30%. This assumes the ADU is legal and coded according to local laws. For many property owners, an ADU is worth the investment.

The cost of your ADU build depends on your budget, type of ADU, and location of the build, but the average price ranges between $50 and $500 per square foot. Considering the average size of an ADU is between 600 and 1,200 square feet, you’re looking at $30,000 to $600,00.

Building a detached new construction above the garage is generally the most expensive ADU, and a garage or basement conversion is your least costly ADU option. Here are the cost averages based on ADU type, according to HomeGuide:

If you’re considering building an ADU on your property, you have several options. You can build an ADU using one of the following methods:

• Do-It-Yourself: If you understand the ins and outs of building construction, you can take a crack at building the ADU on your own. But we don’t recommend this option because there are many technicalities you need to ensure are done properly to be considered legal.

• Prefab ADUs: These pre-manufactured detached units are relatively easy to install on your property, but you’ll need to ensure they meet all qualifications for the local area.

• Design and build contractors: These contractors specialize in ADU construction and know the ins and outs of local qualifications and laws. We recommend using this option.

Building and owning an ADU can significantly increase the value and desirability of your property. An ADU also allows you to earn passive income if you’re allowed to rent your ADU in your area. But be wary of the costs and qualifications that can complicate owning an ADU.