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More recently, accessory dwelling units (“ADUs”) have become a focus with increased housing availability and demands. Many have raised questions regarding whether ADUs can alleviate housing shortages or be an answer to providing some affordable housing stock. ADUs and the policy considerations surrounding whether they should be allowed and how to allow them has been a hot topic over recent years. This E-Letter will explore the pros and cons of allowing and regulating ADUs, and the recent trends associated with ADUs. We hope to offer some insight for communities that are considering whether to allow ADUs or communities that are wondering how to best regulate ADUs.

The Problem: Housing Shortages

Whether your community allows ADUs or not, many proponents claim that ADUs could help alleviate the affordable housing shortage that is plaguing many American communities:

Housing affordability is a shared problem that is getting worse across the country: 80 percent of Americans living in rural communities believe housing affordability is getting worse in their community, while 72 percent of residents in urban areas feel the same. This sense is shared across all demographics, regardless of partisan identification, race, age, gender, education, or whether you own or rent your home.

Americans Recognize Housing Affordability Crisis, Support New Policies To Fix the Market and Build More Homes, AmericanProgress.org, Oct.9, 2024. The United States is facing a housing supply deficit, and creative solutions such as ADUs may help to alleviate that deficit. ADUs are unlikely to magically fix housing shortages and the lack of affordable housing. However, they offer an additional tool to address and potentially remedy some of the issues caused by housing shortages. You may want to consider whether ADUs could offer a benefit to your community and how to address and regulate the negative impacts that may be associated with allowing ADUs.

Overview: What is an Accessory Dwelling Unit?

An “Accessory Dwelling Unit” or “ADU” is defined by the American Planning Association as “a smaller, independent residential dwelling unit located on the same lot as a stand-alone (i.e., detached) single-family home.” Accessory Dwelling Units, American Planning Association, (last visiting March 3, 2025). Colloquially, ADUs are called many different names, including accessory apartments, secondary suites, and granny flats. Although typically thought of as a detached structure, ADUs can be attached (such as renting a basement unit or a loft above a garage) or detached (as in converting a shed into an ADU).

In recent years, many communities have been interested in expanding housing options and availability by allowing ADUs in residential zoning districts. The growing popularity of ADUs has also led to criticism and concerns about whether ADUs will change the character of neighborhoods, overburden existing infrastructure, or cause other nuisance concerns associated with an increase in residential density, such as parking, noise, and traffic issues. On the other hand, allowing ADUs can offer a relatively inexpensive method to create lower-cost housing units that use existing infrastructure, such as water and sewer.

The Pros and Cons of Allowing ADUs

As with many emerging land use issues and trends, there are arguments both in favor of allowing ADUs and against allowing ADUs. The benefits and potential negative impacts associated with ADUs will largely depend on the specific circumstances within a particular community or neighborhood, and thus there is no clear answer to the question of whether to allow ADUs and how to regulate them. Below, we have summarized some of the widely recognized arguments in favor of allowing ADUs and arguments for disallowing ADUs:

Pros of Allowing ADUs:

• Affordable Housing (To Rent). The cost of constructing an ADU is typically less than a new single-family dwelling. A newly constructed detached ADU can range from $90,000 to $350,000, depending on the size, configuration, and many other factors. Accessory dwelling units, Local Housing Solutions, May 10, 2021. But, an attached ADU, such as a basement, attic, or garage conversion to an ADU, is typically cheaper, ranging from roughly $30,000 to $75,000. See id. One study found that the average cost to construct a detached ADU is around $90,000, and the cost to construct an attached ADU is around $45,000. How much do ADUs cost to build, org (last visited March 25, 2025). An example of ADUs providing more affordable housing options is in high-cost areas such as San Diego. According to one study, the average cost to rent an ADU in San Diego is around $1,200 to $2,500 per month, whereas the average rent of a conventional home or apartment in San Diego is around $3,000 per month. Argi, Avetisyan, ADU San Diego for Rent: A Comprehensive Guide, gatherADU.com, March 17, 2025; San Diego, CA rental market, Zillow Rentals, March 23, 2025. However, there is no consensus about how much ADUs will alleviate the affordable housing shortage, and each community is different. Sources tend to agree that additional methods to create affordable housing are necessary, but ADUs may be an important piece of the puzzle to alleviate affordable housing shortages. Accessory dwelling units, supra note 3.

• Secondary Income. ADUs often allow homeowners to rent their ADU to draw a secondary income. Given the price of housing and the difficulty experienced by many first-time homeowners, this secondary income may reduce some of the strain caused by increased housing costs. Thus, ADUs may allow homeowners to afford a home that they otherwise would not be able to afford. One proponent argues that “ADUs support families in several ways. They serve as a flexible resource that provides stabilizing income during some phases of life and provides housing for extended family during other phases.” Summing up ADU research: are accessory dwelling units as great, or as horrible, as people say? org (last visited March 25, 2025).

• Raising Property Values. ADUs can increase the overall value of a property by providing additional living space, rental income, and making a property more attractive to potential buyers. Increased property values also caused an increase in tax revenues. One study found that in larger cities, a home with an ADU is priced at around 35% higher than a home without an ADU. Study: ADUs Can Add 35% to Home’s Value, Realtor Magazine Media, Nov. 3, 2021.

• Provides Housing For Aging Family Members. ADUs are often built to provide housing for aging family members or adult children with special needs or circumstances. The classic example is an ADU being constructed for an elderly parent. This can have many advantages, such as allowing an elderly parent to retain independence by constructing the ADU with specific amenities for aging individuals (e.g. walk-in shower, single-story configuration, etc.). This also provides an opportunity for an aging parent to offer support to the family, such as childcare during the workday, which has downstream positive impacts for families and communities.

Cons of Allowing ADUs

• Residential Density Concerns. One of the major concerns associated with the proliferation of ADUs in residential districts is the densification of existing neighborhoods. ADUs are “infill” developments that, by definition, increase the density of existing neighborhoods. While each individual ADU may cause a small change to neighborhood density, many years of ADU proliferation may cause a notable change in neighborhood character and demographics. Some opponents to ADUs cite this concern and note that allowing ADUs to address housing shortages is a bad urban design, which leads to “backyard tenants” that are virtually strangers as opposed to neighbors, with virtually no street frontage and limited opportunities for neighborly relationship building. ADUs Can Help Address the Lack of Housing. But They’re Bad Urban Design, NextCity.org, Oct. 5, 2023.

• Traffic, Noise, Overcrowding and Nuisance. Related to the density issue, many opponents of ADUs cite the increase in traffic, noise, on-street parking scarcity, well and septic system concerns, and other nuisance-type concerns that are associated with a denser neighborhood. Many of these concerns can be addressed through zoning regulations, such as minimum parking requirements for ADUs. However, these are still valid points in opposition to ADUs.

• Decreasing Affordable Housing (to Buy). Although ADUs can provide more affordable housing for rent, the proliferation of ADUs can cause residential property values to increase, which makes it harder for buyers to afford the homes. This can effectively price out many homebuyers.

Permitting ADUs by Right or by Special Use Permit

If your community does allow or is considering whether to allow ADUs, you must decide whether to allow ADUs by right or by special land use permit. Zoning provisions can be used to mitigate some of the actual or potential impacts caused by allowing ADUs. For example, the following options can be employed to limit the negative impacts of ADUs:

• Permitting ADUs by Right. This option carries the least amount of administrative burden, allowing ADUs to be approved at the staff level. This option may be most suitable for communities that have identified a need for supplemental housing or otherwise have a strong desire to allow ADUs. This option can still impose many of the regulations that are designed to offset the potential negative impacts of ADUs, but with a less robust and burdensome permitting process. Under this option, ADUs can still be limited to specific residential districts where they are most appropriate.

• Special Land Use Approval. By requiring special land use approval, a community can attach specific requirements to the approval of an ADU. The decision of whether to approve a specific ADU can be reviewed in relation to the special use standards to ensure that the ADU is compatible with the neighborhood and will not cause an unsustainable impact on services and infrastructure. In addition, ADUs can be limited to specific residential districts where they are more appropriate and will have fewer negative impacts.

• Size and Occupancy Limits. Maximum size limits can be imposed to ensure that the ADU remains subordinate to the principal single-family dwelling. Size and occupancy limits can also ensure that the ADU is not occupied by a large family or otherwise causing overcrowding concerns.

• Owner-Occupied Requirements. Often, local regulations require that the property owner lives on the property, either in the principal residence or in the ADU. The purpose of this requirement is to minimize nuisances associated with the ADU. The general idea is that the ADU occupants will be accountable to the property owner, and the owner will be present to address issues if they arise.

• Parking. On-site parking requirements are typically required to minimize the impact on neighborhood parking infrastructure.

• No Short-Term Rental of ADUs. Regulations can prohibit the short-term rental of ADUs (e.g. rental for less than 30 days). These are meant to prevent the negative impacts caused by short-term rentals (e.g. noise, nuisance, overcrowding, parking, increased housing prices, etc.). Many of the concerns associated with ADUs stem from the short-term rental of ADUs, and thus this option may allow some of the benefits of ADUs without causing as many negative externalities.

• Lot Size. Minimum lot size requirements can help prevent overcrowding and density issues by ensuring that ADUs are only constructed on properties that are big enough to accommodate the ADU without impacting the adjacent parcel or the neighborhood as a whole.

Conclusion

Whether to allow ADUs and how to regulate them is a complicated decision, with many potential benefits and risks. Ultimately, the decision will depend on the character of your community, and thus there is no one-size-fits-all answer. The purpose of this E-Letter is to provide a primer into the pros and cons associated with ADUs and the typical local regulations that we often implement to offset the potential negative impacts of ADUs. If your community has an interest in allowing ADUs or refining the current regulations as to ADUs, we encourage you to reach out to your attorney for guidance. With properly crafted local regulations, your community can gain the benefits of allowing ADUs, while also decreasing the negative impacts that are sometimes associated with ADUs.

By: Trent Cunningham

This publication is intended for educational purposes only. This communication highlights specific areas of law and is not legal advice. The reader should consult an attorney to determine how the information applies to any specific situation.