Your Guide to Accessory Dwelling Units

Building an accessory dwelling unit (ADU) on your property is a great way to bring in extra money or to create space for your extended family. There are numerous advantages to having this additional space, but what do you need to know before you hire a contractor?

This guide addresses the most pressing questions you may have about ADUs: What is an accessory dwelling unit? Where on your property can you build ADU housing? How much does it cost to build accessory dwelling units?

What Is an Accessory Dwelling Unit?

An accessory dwelling unit (ADU) is a secondary residential unit located on the same lot as a primary home. It can be attached to the main house, built over a garage, converted from a basement, or it can be a stand-alone unit in the backyard or opening onto a laneway.

To qualify as an ADU, the dwelling has to be:

• Fully self-contained, with its own kitchen, bathroom, and entrance.
• Legally allowed and compliant with local zoning laws and building codes.
• Smaller in square footage than the main house on the property.

Common Types of ADUs

“Accessory dwelling unit” meaning can differ from one jurisdiction to the next, but these are the types that are most common across the country:

Detached ADU (DADU)

A DADU is a stand-alone unit in the backyard or elsewhere on the lot. There are many names for these units, including backyard cottage, coach house, guest house, laneway house, garden suite, carriage house, and casita.

Attached ADU

An attached ADU is physically connected to the main home. These accessory dwelling units are often built as home additions to the side or rear of a house. A related type of attached ADU is an above-garage unit, which could be added onto an existing garage or part of a new garage build.

Garage, Basement, or Attic ADU

Converting an existing space to serve as an accessory dwelling unit is a very common way of adding a secondary living unit to your property. Careful attention to building codes is crucial when undertaking these conversions, especially where safety is concerned.

Reasons to Build an ADU

You may be thinking of an accessory dwelling unit as a way of earning rental income, but there are numerous other reasons to build one:

• Short-term rental unit, vacation property, or executive housing: Think beyond long-term tenants to other sources of rental income.
• Multigenerational living: People are living longer lives, and adults are moving back in with their parents after finishing college. An accessory dwelling unit is a great way to offer aging parents or adult children their own space while keeping the family unit together.
• Increased property value: A well-designed, legally compliant ADU can increase your home’s value, your equity in your property, and its resale price.
• Added flexibility: Even if you do not rent out your accessory dwelling unit, you can use it as office space or a separate space for hobbies.
• Affordable housing: Housing is always in short supply, particularly in large cities. You may even find incentive programs for building affordable housing on your property.

Things to Know Before Building an Accessory Dwelling Unit

Before you start making plans for what to do with your ADU, research the following:

Zoning and Permits

These regulations are local and can vary widely from one jurisdiction to the next. Work closely with your local planning department or building office to determine if your plans are compliant. Choose an experienced local contractor or builder who understands ADU’s. Issues such as maximum size limits, setbacks, lot coverage restrictions, and utility hookup regulations can happen.

Cost

The expense of building an accessory dwelling unit depends on the type and size of the unit. For a garage conversion, expect to roughly spend up to $60,000. This again depends on the cost of living where you are located. Basement or attic units can be up to $100,000, and detached new builds can be as high as $250,000.

Keep in mind that material costs also fluctuate, and that supply chain issues can cause unexpected price increases. Check local programs for things like energy efficiency rebates and incentives for building affordable housing.

Financing

Building an ADU can be expensive, so you will need to figure out your renovation financing before you get started. Consider a home equity or building loan, or taking out a second mortgage.

Rental Regulations

If you plan to rent out the ADU, check on local short-term rental laws, landlord requirements, and tenant protections. You may also need to register the accessory dwelling unit with your city or county. Since regulations change frequently, especially for vacation rentals, be sure that you have the most current information.

Should You Build an Accessory Dwelling Unit?

Building an accessory dwelling unit can be a great investment and a way to accommodate guests and relatives. Here are some questions you can use to help you decide whether building an accessory dwelling unit is for you:

• What will you use the ADU for? If you want to rent it out, is there a market for that? How much can you expect to bring in in rental income?
• Do you have enough space on your lot? Will local permitting regulations allow an ADU on a lot of your size? Will there be enough space between the main house and the ADU for privacy and safety?
• Is there a space in your home that you do not need for another purpose?
• Are ADUs allowed in your jurisdiction? If so, what are the restrictions?
• Can you afford the upfront costs or get financing to cover them?
• Are you prepared to become a landlord? What are the skills and knowledge you need to have?

Overall, ask yourself, “What is an ADU going to do for my finances, lifestyle, and long-term planning”? If you are satisfied with your answer, figure out how to work out any kinks, and get planning for an exciting future as an ADU owner and landlord!