Want to build an Accessory Dwelling Unit (ADU) in California?


Accessory dwelling units (ADUs) are the subject of many conversations among California legislators right now. Recent changes in the economy and in legislation have made an ADU in California more attractive for property owners.

Given the significance of these changes, it's an excellent time to delve into:

  • What ADUs are
  • How ADUs can be used
  • ADU benefits
  • The legal restrictions surrounding ADUs
  • The changing legal landscape
Photographer: Aysegul Yahsi | Source: Unsplash

What is an ADU?

An accessory dwelling unit (ADU) is a secondary residential dwelling space. ADUs are located on the same property as another stand-alone residential structure. They're often constructed for the homeowner to make space for more relatives or to produce rental income.

Many types of ADUs, with a variety of names, are available. You've possibly heard them called "secondary suites" or "backyard cottages."

Regardless of the secondary structure specifics (or what you call it), all ADUs serve some or all of these functions:

  • Affordable housing amid high property costs
  • Innovative solutions to housing challenges
  • Better use of space for many property owners
  • Additional rental income for the property's owner

ADUs are an exciting phenomenon in California, where they're increasingly popular but also heavily regulated. California legislators see ADUs as one of several practical remedies to the state's housing crisis. As recently as 2019, Governor Gavin Newsom signed five ADU California regulating bills.

If you live in California, it's no surprise that you're reading this to learn more about ADUs and their potential effects. To paint a complete picture for you, we'll go over:

  1. The most commonly used ADU types
  2. The costs of building and maintaining ADUs
  3. ADU construction restrictions in California
  4. The benefits of installing an ADU on your property
  5. The regulatory landscape of ADUs going into 2022
Photographer: Jed Owen | Source: Unsplash

Common Types of ADUs and Costs

ADUs can be set up in a few ways. Each has its own unique points, with widely ranging costs between each ADU type.

Backyard cottage

A backyard cottage is perhaps an ADU in its most basic form. It's simply an additional detached house located on a property with an existing detached house. Essentially, a backyard cottage is just another house on the same property. Backyard cottages go by several names, each nominally referring to their intended purposes, locations, and appearances:

  • In-law apartments
  • Elder cottage housing
  • Guesthouses
  • Alley flats

In all cases, they are standalone structures located in backyards or other existing space on a property. So, how much does a backyard cottage cost to build? Well, that depends on which path you take and factors such as:

  • Complexity of the building design
  • Construction site conditions
  • Interior finish

Backyard Cottage Costs

In general, you can expect a backyard cottage to cost anywhere from $100,000 up, but you shouldn't expect to spend more than $300,000 for a single story unit unless you are building a structure with special requirements, such as to house another entire family. Any backyard cottage needs its own:

  • Plumbing (including access to water and sewage facilities)
  • Electrical
  • Gas (optional)
  • Additional components

The two primary factors going into the cost of a backyard cottage relate to the number of floors.

Single-story: $100,000 to $300,000

Two-story: $300,000 to $550,000

Comprehensive additions like garages may of course push you beyond these top-end ranges. Either way you'll need a building permit to build an ADU in California.

Attached ADU

You can have a legal ADU that's attached to the primary structure of your home. This can be an addition on the side of your existing home, or an attic converted into an ADU. But before you decide, it's important to consider the key aspect of access to the unit.

An attached ADU will most often come in the form of a townhouse or apartment unit. It must have its own entrance separate from the entrance to the main part of the structure. There are a few ways to approach this:

  • A single patio or mudroom that forks into the two separate units
  • A side entrance that only leads to the new ADU

In general, you can expect to have to take additional efforts to insulate sound. Particularly in the case of rentals, you'll want to measure utilities separately for billing.

Why Choose An Attached ADU?

Attached ADUs are a better option than backyard cottages when space is an issue. Also, the logistics of creating an attached ADU are far simpler. This also all translates into attached ADUs having the lowest costs associated with any type of ADU.

Attached ADUs vary greatly in terms of costs. But overall, you can expect to pay less than you would for an equivalent basement or backyard cottage ADU.

Basement ADU

A basement ADU is an additional basement unit. However, you shouldn't confuse a simple refinished basement with a basement ADU. The main differences lie in how ADUs are regulated. California is one of many states with specific rules about what exactly an ADU is.

A basement unit can be considered an ADU in California once it has met the general rules for an ADU. For the specifics, scroll down to "Rules & Regulations for California in 2022".

We won't go over all the tedious specifics for ADU classification here. But some regulations are grounded in common sense when it comes to considering a space to be a livable unit. Many basements, for example, don't have sufficient ceiling height, insulation, or accommodations (e.g., kitchen and bath facilities) to be considered an ADU. For a basement ADU to be used as a rental, it may require immense upfront investment to meet all the minimum requirements.

Basement ADUs carry significant but separate benefits and drawbacks compared to other ADUs, so basement ADUs are worth looking into.

Photographer: Adam Winger | Source: Unsplash

Basement ADU Benefits

The main benefit of basement ADUs above other ADUs is that they don't take much additional space. If your home lacks the backyard space for a backyard cottage, a basement ADU is the main practical alternative.

Basement ADUs make excellent rental units. The nature of basements often means you can get far more space than you could for a backyard cottage. Simply that the space is a basement isn't a rental price benefit for the property owner, but because basements have far more square footage than, say, a backyard cottage, you can justify a higher rental price and fit in more people.

Basement ADUs increase the value of a property substantially. Also, the use you get out of your home's main structure is greatly expanded. What's more, many tenants or family members may greatly appreciate the privacy of living below ground.

Basement ADU Drawbacks

Basement ADUs have a few drawbacks, however. For one thing, optimizing them as living places is difficult. A lot of thought and effort may have to go into getting any amount of meaningful natural light into them. Perhaps more importantly, overhauling a basement to meet ADU standards often requires an immense investment. You may need to pay a hefty sum for:

  • Digging deeper to meet height requirements
  • Lifting the home to create more natural light
  • Adequate ventilation
  • Plumbing
  • The addition of a kitchen and bathroom
  • The need for a side door if the home doesn't already have one

How Big Can an ADU be in California?

Regardless of specific jurisdiction, an ADU in California can be built up to 800 square feet. They also must be less than 16 feet high.

In many localities, ADUs can exceed the established statewide 800 square foot maximum. In many cities and some counties, an ADU can have up to 1,200 square feet.

At this point, it's important to mention that jurisdictions can set up their own unique ADU rules and restrictions. In some places, these restrictions are both unique and cover very specific details. For example, square footage restrictions may be tied to the number of bedrooms in the ADU.

It's your responsibility to comply with statewide, county, and local regulations when building an ADU. You must refer to your municipal or county codes to make sure your ADU is legal. Unfortunately, in some cases municipal and county jurisdictions overlap. For example, San Francisco is the only consolidated city-county in California, making it a uniquely confusing case. But because of this and another potential jurisdiction overlap, you'll want to consult a legal professional to explain any confusion you have.

Benefits of Installing an ADU

Installing an ADU carries several benefits. The primary benefits are consistently present for all types of ADUs. However, different ADU types may affect the extent to which you receive these benefits.

Rental income

Rental income, unsurprisingly, is the main motivator behind the construction of new ADUs. Renting out ADUs as livable and legal units is a source of profit for property owners. While ADUs won't demand as much in rent as many apartments or entire properties, they can ease the financial burden of managing a property. The additional income people produce with ADUs normally helps them cover their own utility and property tax expenses.

Depending on the location, ADUs can be an especially lucrative source of income. They offer a great path to vacation rentals, where applicable. Or, you can simply get the most out of the value your home's location offers if you live in a popular tourist destination.

Providing a Decent Home

Not everyone adds an ADU for profit. ADUs can also be a great way to keep your relatives close, but not too close. They strike a good balance for some families' oldest and youngest members. They can be great starter apartments for teenage children seeking independence. Or, they can serve as luxurious guest accommodations, if that's what you're going for.

Added value to your property

ADUs can also be viewed as a long-term reinvestment into an existing investment - your primary residence. Adding a well-thought-out ADU greatly increases the market value of your property. If you're thinking of a long-term path to selling your property, an ADU is an impressive sight for an appraiser.

Photographer: Andrea Davis | Source: Unsplash

Enhanced Property Uses

ADUs don't necessarily need to become guesthouses, rental units, or "granny shacks." The base benefit of increased property value remains regardless of what you use your ADU for. This is because an ADU can be repurposed into a rental/domicile unit at any time.

Backyard cottages and other kinds of ADUs can be used for other recreational or productive purposes.

If you have a hobby such as golfing, motorcycles, or anything in between, an ADU can become an elaborate and useful practice area or workshop. You can fill your ADU with any kind of equipment you need to enhance mechanical, sport, or artistic hobbies. The separate space gives you and others a segregated space to focus on hobbies without getting in the way of others.

Another increasingly common use for ADUs in the Covid-19 era is as "backyard offices". You can make a great office space out of any ADU type. ADUs provide an excellent space to focus entirely on productivity without any of the distractions of regular home life.

In any of these cases, ADUs, especially backyard pods, make using a specific space for separate activities better. For rental units, a separate structure can have its own meters for utility bills, making renting the space out easier.

Again, thinking forward is a great way to approach ADUs. They can be repurposed down the road. Then, as ADUs become increasingly easier to erect as regulations become more relaxed, you can more easily benefit from their versatility.

Social Benefits

ADUs are becoming an increasingly welcome feature of homes in competitive residential areas, although it's not a primary motivation for most people to build an ADU. Regardless, ADUs for rent or for housing relatives have been embraced as a natural solution to housing problems and rising costs of homeownership. This is especially true in places like California.

Rules & Regulations for California in 2022

The last couple of years has seen sweeping changes to California's regulations surrounding ADUs. The overwhelming trend is towards financial incentivization and reduced enforcement of existing restrictions.

Public Funding in 2021

Going just one year back, many ADU-friendly policies were passed by California's legislature. The California Health and Safety Code Section 65583(c)(7) required that California localities incentivize ADU development. The changes were targeted at the challenges of low-to-middle income households, so if you're worried about the costs of constructing an ADU, you may be eligible for financial support.

The California Department of Housing and Community Development (HCD) created a list of existing state grants assisting with the planning, construction, and operation of new ADUs. These incentives, which are still available to Californians, include:

  • The CalHome Program
  • Regional Early Action Planning (REAP) Grants
  • SB 2 Planning Grants
  • Local Early Action Planning (LEAP) Grants
  • Local Housing Trust Fund (LHTF) Program
  • Community Development Block Grant Program (CDBG)

2022 Changes (Assembly Bill No. 1584)

The end of 2021 saw some changes to ADU regulations in California. California Assembly Bill No. 1584 relaxed the ADU regulations in a meaningful way.

Existing covenants and restrictions on the construction or use of an ADU are now void and unenforceable. So, while some old restrictions and covenants are still technically in place, they're not a concern to property owners anymore.

While the bill does relax restrictions across the board in almost all mentions of "accessory dwelling units", it makes exceptions for restrictions that do not "unreasonably increase the cost to construct, effectively prohibit the construction of, or extinguish the ability to otherwise construct, an accessory dwelling unit or junior accessory dwelling unit consistent with the provisions of Section 65852.2 or 65852.22 of the Government Code."

The loosening of zoning laws is another facet of the bill that addresses the concern of construction in the areas where ADUs are seen as most necessary. The changes brought forward in this bill are targeted at suburban neighborhoods where residents most oppose zoning law changes.

This bill also declared any Covenant, Conditions, and Restrictions (CC&R) deed, contract, or security instrument that prohibits or restricts ADU construction or use on lots in single-family zones to be unenforceable.

Governor Newsom Signs Legislation to Boost Housing Supply in California

Announced September 16th 2021, Governor Newson rolls out the California Comeback Plan that can add over 84,000 additional housing units.

  • SB 8 extends the Housing Crisis Act of 2019 to jumpstart more housing production
  • SB 9 allows homeowners to add additional housing to their property
  • SB 10 allows jurisdictions to rezone any parcel up to 10 residential units. This bill can potentially increase housing when California needs it most.
Photographer: Jack Foster | Source: Unsplash


ADUs are increasingly popular due in large part to the housing crisis in California and social trends affecting the entire US. ADUs have many potential uses and always provide a net benefit to the value of the property they're located on. Because ADUs are becoming less regulated, now's a better time than usual to consider acquiring one and enjoying its benefits.

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