Your guide to accessory dwelling units

Key takeaways

• Accessory dwelling units, or ADUs, are fully equipped secondary homes on the same property as a primary residence, with types including attached, detached, interior units and tiny homes.
• Building an ADU typically costs from $60,000 to $285,000 depending on the type, or about $150 to $300 per square foot, and projects must comply with local building codes and zoning rules, which vary by location and have recently been loosened in some states and cities to address housing shortages.
• ADUs can provide rental income, increase property value and house family members, but they also bring added maintenance costs, higher property taxes and reduced privacy, and successful projects follow clear steps from checking local laws and setting a budget to hiring contractors, designing the space and testing it before use.

An accessory dwelling unit, or ADU, is a secondary home sharing the same grounds as a primary residence. Homeowners use ADUs to generate a stream of income. They can also exist as a guest house or permanent housing for a family member.

ADUs feature separate entrances from primary residences and are fully equipped with living, kitchen and sleeping areas.

There are several kinds of ADUs:

These share a wall with a primary home but function separately, with a private entrance and amenities. Attached ADUs usually have utility, sanitation and electrical access to a primary residence. This can simplify renovations and upgrades and make them more cost-effective.

These structures stand apart from a primary residence. Examples include garages located away from the main house, sheds and former carriage houses. Detached ADUs typically require more extensive renovations. The cost of building can include running power, plumbing and sanitation lines from the main house. These spaces may have more structural needs, such as roofing concerns.

ADUs within the main property are also a common type of smaller secondary housing. These types of dwellings are within the home's existing space, like a basement or attic. They can have private entrances and may be less costly since they are inside the main home.

While used interchangeably, a tiny home and an ADU are not always the same. Tiny homes tend to be below 400 square feet, while ADUs can range up to 1,200 square feet. Tiny homes are often on wheels and qualify as an RV. ADUs are permanently fixed to a foundation. Tiny homes have a lower entry cost.

ADUs must comply with local building codes and zoning ordinances.

Building codes set the standard for the construction and safety of ADUs. They address structural concerns, such as smoke alarms, HVAC systems, exits and the required number of windows.

Zoning ordinances regulate how a property can be used in a locality. They often limit whether an ADU can be built. They also may require ADUs to be a set distance from a primary residence and/or a property line, and there may be a limit on interior space. For example, in Richmond, Virginia, the zoning requirements state, “The ADU cannot exceed one-third of the floor area of the main single-family dwelling or 500 square feet, whichever is greater.” 

A few states and cities have supported ADUs for decades, while others have recently waived special permits due to housing shortages and a lack of affordable housing. 

For instance, California passed the first ADU law in 1982, making it one of the most ADU-friendly states. Washington and Oregon also have progressive ADU laws. Richmond, Virginia, eased its ADU regulations, allowing homeowners to have accessory dwelling units on their property without a special permit in all residential areas. San Jose, California, is the first major city that allows property owners to sell their ADUs as condos.

There are several financial and personal benefits of operating an ADU.

• An ADU adds a stream of rental income that can help improve a homeowner’s standard of living by paying off debts, boosting savings, funding college tuition or paying for vacations.
• A stream of income also boosts property value. A real estate agent can help you price your home if and when you sell.
• The unit can provide affordable housing for consumers priced out of the single-family home market.
• It also can serve as a dwelling for aging parents. This has given ADUs the nicknames of “granny flats” or “in-law suites.”

• They can be costly to maintain. Homeowners must pay utilities, cleaning, landscaping, repairs and upgrades.
• They can cause a homeowner’s property taxes to increase because they add to the value of a property.
• They can compromise a homeowner’s privacy as they share their property with a tenant.

Zoning laws may prohibit additional dwellings on a property. Building codes will govern what can be built, and permits are necessary for construction.

Most ADUs cost between $150 to $300 per square foot, according to 2026 data from home services marketplace Angi. Prices vary by type of construction and size of unit. The costs will include labor, materials and legal permits/inspections. Homeowners also should set aside an emergency fund, possibly 10% of the costs.

Homeowners can choose multiple funding structures. Many choose a home equity line of credit, a home equity loan or rely on savings or investments.

Review contractors who are credible. Ask friends and family for recommendations or find a local resident who operates an ADU to ask who they used. Once you get a few candidates, ask for quotes and estimated time of construction.

Ask contractors how long each part of the project will take, adding extra days for unanticipated construction issues. Consider starting a project after vacations or major events on your schedule.

Build an ADU that is attractive to tenants, if that is your target market. ADUs intended for aging parents should have accessibility features such as larger doorways, walk-in showers or railings in the hallways. If your ADU will be a rental, build it so that the space will be attractive and marketable to tenants.  

After completing an ADU, a homeowner can test it for themselves by being the first person to stay overnight. Test out your new ADU by spending the first night there. See for yourself if there are any amenities residents will need or anything you need to fix before leasing.