The ADU Boom Has Begun. Is It Adding the Housing We Need?

In 2021, city officials in Malibu, California, denied a family’s request to attach a 460-square-foot accessory dwelling unit (ADU) to their home to accommodate an immunocompromised grandmother in her eighties. As the California Globe reported, they believed that "because of its status as a coastal city, it was free to ignore the state law on ADUs." After three years of litigious back-and-forth, in July, the family appeared to have prevailed, and were able to apply for building permits.

While the scenario may present a less-than-flattering picture of the exclusive, upscale oceanfront community, it also signals the phenomenal advent of ADUs. Over the last several years, design publications—including, of course, Dwell—and social media platforms have piqued interest in ADUs with images of compact, smart-looking structures, which are often stunning examples of minimalist architecture. But their growing popularity is less about living sleek and small than about housing at large. In the last four years, U.S. housing prices have skyrocketed by 47 percent, and long-standing housing shortages culminated in a deficit of more than seven million homes last year, "the result of more than a decade of underbuilding relative to population growth," according to Realtor.com.

Such dynamics have prompted new local and state policies that promote ADU construction. After some Pacific Northwest cities began relaxing restrictive residential building regulations, California passed two bills in 2016 that produced a statewide pro-ADU law effective in 2017. Six other states—Colorado, Oregon, Washington, Montana, Arizona, and Massachusetts—and British Columbia have since followed suit; ADU-friendly ordinances have appeared in more than a hundred jurisdictions coast to coast.

"This is coming up in places as different as New Mexico and New York," says Celeste Goyer, operations director for Casita Coalition, a California multisector nonprofit that works to advance middle housing. "Solutions that fit more than one home on a parcel, like ADUs, duplexes and triplexes, townhomes, and cottage clusters, provide more housing and bring down rental and sales costs, which is the only way to get a pipeline to more attainable homes."

Casita Coalition helped author the bills for the 2017 California law, a watershed moment that continues to resonate beyond the state’s borders, especially since the pandemic. In the least affordable housing market in 40 years, steep land and construction costs compel developers and builders to target higher-income buyers in active markets, jacking up local rents at a pace that far exceeds income growth and pushing more people to the edge, and over. From 2019 to 2023, the number of people who used emergency shelter for the first time rose by 23 percent. "Only 15 percent of Californians can afford a median-priced home," says Goyer.

As housing policy organizations like Casita Coalition chipped away at zoning and other regulatory barriers, California has passed a raft of laws around ADUs since 2017, including one in October 2023 that allows people in participating jurisdictions to buy and sell ADUs as condos. San Jose, with one of the country’s priciest housing markets, became the first city to opt in earlier this year. As the L.A Times reported, more will likely follow and lay out a potential welcome mat for "a new generation of starter homes that cost a fraction of a full-sized house on a full-sized lot."

This year, three new Casita Coalition–supported bills were signed into law to further expand ADU production by streamlining permitting and lowering costs, including one focused on "coastal zone" communities where the nonjudicial California Coastal Commission has development oversight. Effective July 2026, SB 1077 will require the commission to work with the state housing department to help local governments simplify ADU permitting in what is expected to be an incremental housing win in coastal zones statewide.

As legislation supporting ADU construction continues to evolve in California and beyond, the underlying question that set much of it in motion remains: What kind of impact are these units actually having on the housing crisis?

Los Angeles and San Francisco

While some communities have been hesitant to get on board, Los Angeles emerged early on as a clear leader in "the backyard revolution." In the two years since the first statewide law passed, nearly half of all ADU permits were in the L.A. area, where a robust ecosystem around ADU production has thrived. 

"The population size and critical mass of homeowner demand supported the development of a large cottage industry of ADU designers and builders," says Goyer. "Every day they’re helping to realize the advantages of this flexible long-term housing type."

Like its potential uses—multigenerational living, aging-in-place, generating rental income, and more—the housing type comes in various forms. In L.A., garage conversions represent a significant percentage of ADUs, but the state allows for a wide range of ADU possibilities, from fully detached stand-alone structures to junior suites attached to main houses, with separate entrances and kitchenettes. The average unit size is around 600 square feet.

In 2020, California added a now-popular multifamily ADU provision allowing for the conversion of non-livable spaces into ADUs—up to 25 percent of the existing unit count, plus two new detached units. Effective in January 2025, a new bill will increase the number of detached units to a maximum of eight. This is especially significant considering how restrictive zoning laws discourage new development in wealthy cities.

Mark Hogan is a principal of OpenScope, an architecture firm that wrote the ADU handbook for the city of San Francisco: "There’s been all this huge growth in high-wage jobs here in the last ten years and the city just stopped building enough housing in general, which has driven up the cost of housing and construction and everything else, so it kind of becomes a self-perpetuating cycle," he says.

The new laws enable more housing production, often at much lower costs and with accelerated timelines, according to Hogan. "They allow supply to enter the market, often in lower-income neighborhoods that don’t typically get a lot of new housing since rents aren’t high enough pencil out for new construction," he says. "And even if rents are much lower there, it can still [work favorably] for homeowners because construction costs are lower."

ADUs are typically tacked onto stand-alone homes or erected in backyards, but Hogan’s firm has designed dozens of multifamily ADU projects around the Bay Area and throughout the state, often for apartment complex owners. In some cases, his clients added up to 40 new units, with many as large and indistinguishable from the apartments themselves.

"It could be, say, a 20-unit building that adds six more units, and it’s owned by a professional landlord, not somebody using it as a yoga studio or something like that," says Hogan. "It’s important ADUs are allowed in multifamily because it really does promote building them as actual housing."

Not in My (Neighbor’s) Backyard

As for resistance to ADU policy, concerns typically focus on neighborhood character, overcrowding, traffic congestion, and parking. The appearance of ADU duplexes in a "desirable" San Diego neighborhood, for instance, aroused heated backlash against the city’s ADU Bonus Program, which "allows additional ADUs to be built on a property after the owner has maximized the number of ADUs allowed by right." In areas within a half mile of major transit, the initiative permits a one-to-one exchange of bonus units for rent-restricted affordable units, with no limit to the total number. 

As CalMatters reported: "Depending on your perspective, San Diego’s [program] is either an ingeniously clever use of state law to provide a much-needed boost to the local housing supply or a sneak effort to foist an intolerable degree of construction and density upon unsuspecting residents while only providing a token degree of affordability."

Regarding parking concerns, two studies that examined ADU development, in Sacramento and in Portland, Oregon, show them to be negligible or unfounded.

"I don’t see the ADU boom subsiding anytime soon because leaders know they must enact reforms."

–Christina Stacy, housing researcher at the Urban Institute

There’s also debate around short-term rentals (STRs). Using the units as STRs such as Airbnb rentals is not permitted in California, where rental durations can be no less than 30 days. Arizona’s new statewide ADU policy, signed by Governor Katie Hobbs in May 2024, however, does not restrict using the units as STRs, though some cities, including Phoenix, have implemented such measures.

"Some [places] ban it outright, whereas others put restrictions on the number of days per year they can be rented short term," says Christina Stacy, a researcher with Washington, D.C.–based Urban Institute who helped create an ADU-friendly ordinance for the city of Alexandria, Virginia. But even where permitted, Stacy says few owners actually use them as STRs, citing a 2018 point-in-time study in Portland that found around 74 percent of ADUs were being used as long-term rentals.

Hogan suggests that STR bans may be counterintuitive. "Allowing STRs can be a big motivator for homeowners to build them, but then they often get really sick of renting them after a year because there’s a huge amount of work involved," he says. "And on the single-family home side, there are plenty of situations where people legitimately build them because they have relatives who will be living with them for half the year and being able to get some income the rest of the year helps pay their mortgage and offsets construction costs."

Stacy adds that "it can be tough to finance an ADU since most banks are still trying to figure out how to, so having the flexibility at least to recoup some of those costs can really help homeowners who have less wealth."

Pricing In

Of course, upfront building costs can be prohibitive, full stop. But pricing does vary widely, based on building type, location, finish level, site challenges, and other factors. Goyer says a range of $200 to $400 per square foot is a starting point, which translates to about $125,000 to $250,000 for the average-sized ADU in California. In areas with higher construction costs, that obviously goes up, but is still significantly lower than the average cost of building one unit of traditional affordable housing in California, at around $600,000, and above $1 million in San Francisco.

"Cost-constrained homeowners can make choices to reduce sticker shock, too," says Goyer. "Choosing manufactured ADUs, staying under 750 square feet to eliminate impact fees, or under 500 square feet to eliminate both impact fees and school fees, converting existing space into a J-ADU [junior suite] with only an efficiency kitchen, using a repeated plan set, and more."

Also, last year, the Federal Housing Administration announced it would expand options to allow inclusion of ADU rental income in qualifying criteria, enabling "more borrowers to qualify for FHA financing for properties with ADUs, including 203(k) rehabilitation mortgages."

Still, some are skeptical about the potential of ADUs to meaningfully add to affordable housing stock. "Most leaders are interested in ADUs to help address affordable housing, but they tend to be a drop in the bucket in terms of supply," says Stacy. "ADU allowances lead to very little change in supply. In most places there are only one or two ADUs built in entire neighborhoods, and little research shows they can actually increase supply or reduce rental costs."

Bringing It All Back Home

The success in California, however, suggests otherwise. Prior to the initial state law, in 2016, only about 1,300 ADU permits were issued in the state. Just by removing zoning obstacles, the state has seen more than 113,000 ADU permits issued from 2017 to 2023; and the percentage of ADUs compared to all residential permits grew from 19 to 21 percent from 2022 to 2023. 

"ADUs now make up a significant percentage of new housing permits in many cities and counties, and they’re being built in every corner of the state," says Goyer. "And surveys show the majority are rented to long-term tenants. With some local variability, on average about half are affordable to low-income renters."

In 2022, when more than 25,000 ADU permits were issued statewide, the four L.A. neighborhoods with the most were jurisdictions with household incomes at or below median levels, according to the U.S. Census Bureau. A report by the NYU Furman Center also found that in both the Bay Area and Southern California, ADUs tend to be located in census tracts with good access to jobs and relatively low rents.

"We need ADUs to be legal everywhere, but we also need more inclusionary zoning, upzoning, and larger zoning changes."

–Mark Hogan, architect

"This is a grassroots response by homeowners who mostly have no experience as developers or builders to the need for housing for family members or for rental income to meet their own financial needs," says Goyer. "As ‘naturally occurring affordable housing,’ ADUs are well worth encouraging and preserving, including through low-interest loan programs, fee waivers, project management, and other local incentives, all of which amount to a very small public investment."

Goyer adds that she believes streamlining and fee reductions for homeowners building ADUs, as the new state bills aim to provide, will also help bolster local strategies to increase infill and make neighborhoods more inclusive for people at a variety of income levels.

Building Blocks and Opening Doors

But ADU policy alone will not resolve the larger housing crisis. A New York Times article reported that California is growing for the first time since 2020, noting "a bump in new housing, including a net gain of more than 21,000 units in Los Angeles" and more than 22,800 additional ADUs in the state last year, but also that "the state still needs millions of new homes to address its housing shortage, not just tens of thousands."

Still, ADUs represent a lot of potential for bringing much-needed middle housing. They provide affordable housing options in high-opportunity neighborhoods and can complement traditional affordable housing programs, according to a recent Brookings Institution report.

"Of course, we need traditional affordable housing developments to be well-funded and built in all kinds of neighborhoods," Goyer says. "But what happens to those who make just a little more than the thresholds for traditional affordable housing but can’t afford market rate? Or to people whose situation improves just enough to get them kicked out of traditional affordable housing? Without naturally occurring affordable homes and more attainable middle homes, including ADUs, they’ll be left without options."

Mark Hogan agrees. "We need ADUs to be legal everywhere, but we also need more inclusionary zoning, upzoning, and larger zoning changes," he says. "As a society, we really need to reexamine how to look at space going forward."

Taking cues from the past may be instructive. While banning other housing forms last century, the government promoted a single-family suburban tract home model that has produced ecological degradation, greenhouse gas emissions, social division, inequity, discrimination, redlining, and so on. Before this, communities offered a range of home variety—from rooming houses, above-garage carriage houses, basement apartments, and cottage courts, to duplexes and triplexes and low-rise multiresidential and larger apartment buildings. "A person could move to a new city for a job or to attend school and know they could afford a home of the size and price they needed," says Goyer.

In the meantime, experts say ADU-friendly policy will likely keep gaining ground. "I don’t see the ADU boom subsiding anytime soon because leaders know they must enact reforms," says Urban Institute’s Christina Stacy. "ADUs are an easier reform to pass than larger upzoning and whether they lead to broader changes is unclear. It depends on whether they make people feel better and more open to larger reforms—or if they use up the political capital needed for larger reforms, which probably varies from place to place."

Yet, Goyer and so many others remain convinced that policy that promotes ADUs and other middle housing is necessary to alter the country’s problematic housing trajectory.

"Without these housing types on single-dwelling properties, we’ll get more large, unaffordable homes," she says. "Instead, we can build thriving neighborhoods with a variety of home types that people can actually afford."

Top image by Adam Rouse

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