Should You Build an ADU?

When I was young, my parents rented a house with an unexpected amenity: a small cottage in the backyard. My mom used it for her counseling practice and we also used it as a space for guests. Sometimes, when my friends and I were too loud, the cottage served as a respite for my parents.

Today, we would call this structure an accessory dwelling unit or ADU. ADUs are having a moment. Urban planners view ADUs as creating greater housing density that would otherwise be difficult to achieve in built-out communities and neighborhoods. Affordable housing advocates see it as a strategy to lower the cost of housing by adding supply to the market. For homeowners, ADUs can serve various functions, from providing separate workspaces to guest accommodations to living quarters for boomerang kids and older family members. In some jurisdictions, it can be rented either for short-term or long-term stays and provide a revenue stream.

ADUs can be controversial, but they have a place. Should you consider building an ADU?

For maximum flexibility, it best to have an ADU with no stairs (Source: Living Room Realty)

Designing for Flexibility

As you project needs for you and your family, ADUs can provide value across a wide range of uses. Designing for flexibility on the front end is important. Even if you envision it primarily as a workspace, consider options for guest quarters. Designing for a range of uses may require more square footage (i.e., guest accommodations require more space than an office) and, therefore, greater cost, but, in return, it may provide far greater value down the road. Retrofitting an ADU for alternative use can be an expensive proposition.

A key consideration is designing for all ages. How can the space be used to accommodate a young family? How can it be used for an older adult? To make an ADU age-friendly, it is important to include universal design principles, such as minimizing or eliminating steps, incorporating slip-resistant tiles and showers (instead of baths) in the bathroom, and creating larger doorways, among other elements.

The value of designing a flexible space is not just for your needs. Particularly in high-demand housing markets, a thoughtfully designed ADU can add significant resale value by opening up the market for a broader range of buyers. For example, if a family is looking for a home that can support regular visits or a more permanent stay for an older relative, having an ADU that meets this need may be seen as very attractive. Further, with the advent of remote and hybrid work, having a dedicated space away from the chaos of family life may be necessary for some people.

It is important to consider a range of uses for the ADU (Photo by Dan Gold on Unsplash)  

Consider Cost/Benefit

Technically, ADUs don’t have to be a detached structure. They can also be converted portions of existing homes (i.e., internal ADUs) or additions to new or existing homes (i.e., attached ADUs). ADUs, especially detached ADUs, typically cost more than adding the equivalent square footage to an existing single-family home. This is primarily because detached ADUs require a new structure, including a foundation, and the need to run plumbing and electricity to a new location.

Cost varies by market but typically range between $150 to $300, but $600 and above is not uncommon on the higher end.  For an ADU of 600 square feet, this equates to around $100,000. For a higher-end ADU of 1,200, the cost is $700,000 or more. 

 One way to minimize cost is to convert a garage to an ADU (Source: Living Room Realty)

Other Factors to Consider

If you see the value of an ADU and can afford the likely costs for what you are looking for – and your local zoning permits it, there are additional factors to consider.

First, be sure to consider not just the initial costs but the ongoing costs of an ADU. A particular area to note is property taxes. Adding an ADU may trigger a reassessment of your property. In such a scenario, your annual property tax will likely significantly increase.

Second, consider the time and cost of ongoing maintenance. As a separate space, you may not use the ADU as regularly as other parts of your home and, therefore, not be aware of issues that may arise. Investment in reliable and energy-efficient appliances, including HVAC systems, may be particularly important.

Third, sharing your plans with your immediate neighbors may be wise. While they may not have the power to deny your plans if they object, communicating your needs and vision for the ADU – and potentially incorporating feedback they may have, may be helpful for neighbor relations. Who knows – your neighbors may also have designs for an ADU, and you may appreciate similar communication.

A Housing Solution Worth Considering

One can expect ADUs to be an increasingly popular housing option for various reasons at the government and homeowner levels. Advances in construction, particularly through pre-built models, may improve the cost/value curve and make it a more viable option in the future.

Considering and executing are two different things. For those with a planning personality, there is little harm in evaluating the options and exploring the feasibility of an ADU. Down the road, you may just find that building an ADU is the right solution for you.