What States Allow ADUs: The Top 3 Current ADU-Friendly States
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Before jumping into the legal landscape and what states allow ADUs, it’s important to understand what qualifies as an ADU. As a stand-alone additional living quarter within the same lot as an existing single-family home, an ADU space requires permanent living, sleeping, eating, cooking, and sanitation facilities within a separate, contained living space.
These self-sufficient tenant dwellings within a residential property come in a variety of forms, including:
While ADU housing gives homeowners the chance to take in family members, for investors, ADU concepts create opportunities for:
For long-term residential real estate investors, the question isn’t whether you should add an ADU to your investment property, but rather, can you?
ADU regulations are complex and vary significantly depending on your state and local laws. While navigating the evolving regulatory challenges within residential real estate is already burdensome, understanding ADU laws by state and cities is critical to reap the countless benefits of ADUs:
While there are no specific regulations or bodies governing ADUs at the federal level, states play a significant role in shaping the do’s, don’ts, and can’t of ADU housing. As you’ll find, some states are permissive and even encouraging of ADU constructions, others are more strict or have even outright banned ADU additions.
The criteria states often regulate for ADU housing include:
Cities that allow ADUs typically come with their own zoning codes, building codes, and land use policy regulations. Similar to state regulations, local rules and requirements vary widely, and the success of an investment property hinges on investors’ ability to understand these regulations before jumping head-first into an ADU project.
What states allow accessory dwelling units? Below, we’ve provided a list of each state that allows ADUs:
While the list of what states allow ADUs is longer, certain states make adding and managing an ADU substantially easier for investors.
Let’s look at the top 3 ADU-friendly states in the U.S. today:
California is hands down the most friendly and encouraging state toward ADUs. Many state and local laws make it easier for homeowners and investors to build extra living spaces on their existing property.
Some of the more beneficial state ADU rules include:
With current housing demands and a lack of inventory, California has even gone as far as to incentivize accessory dwelling units with ADU development grant programs.
After passing a progressive ADU law in mid-2024, set to take effect by June 30th 2025, Colorado’s metropolitan areas will become some of the ADU-friendliest. While regulations will vary by subject municipality, very soon, investors in Colorado cities may benefit from:
After passing its first ADU law in 2022, Maine has become one of the most ADU-friendly states, encouraging single-family ADU additions for homeowners and investors looking to bridge the housing shortage gap.
Two of the more advantageous ADU regulations include:
As ADUs continue to gain popularity as an affordable housing solution, many states are actively considering changes to ADU regulations and bans. It’s important to keep up with evolving regulatory requirements regarding ADUs, as state and local leaders continue to look for ways to address housing shortages and create affordability.
Now that you know what states allow ADUs and some of the varying regulations surrounding them, you’re probably wondering how much an ADU addition will cost. Like their regulations, ADU plans and costs can vary significantly. Average estimates range from $60,000 to $285,000. With building costs between $150 to $300 per square foot of an ADU addition, it’s important to ensure you have the right plan and adequate financing to succeed.
FACo’s team of residential real estate experts can help you navigate the complexities of ADU housing regulations while providing the most reliable and comprehensive financing programs.
If you’re looking to add an ADU unit to a single-family property, speak to a member of our knowledgeable staff about financing options. CLICK HERE to schedule a FREE consultation with a FACo team member today.
An accessory dwelling unit (ADU) is a secondary residential unit located on the same property as a primary home. ADUs can include detached backyard cottages, converted garages, basement apartments, or attached living quarters. To qualify as an independent dwelling, an ADU generally needs permanent facilities for sleeping, cooking, and sanitation. Real estate investors may use eligible ADUs to generate additional rental income.
Many U.S. states allow accessory dwelling units under certain conditions, including California, Colorado, Oregon, Washington, Maine, Arizona, Florida, and Massachusetts. However, ADU regulations vary significantly by state, city, and property type. Some jurisdictions encourage ADU construction, while others impose zoning, size, or occupancy restrictions. Investors should verify current local requirements before purchasing property or beginning an ADU project.
California, Colorado, and Maine are among the states that have adopted policies intended to make accessory dwelling unit construction more accessible. These states have introduced measures addressing zoning, permitting, parking requirements, or occupancy restrictions. However, the most favorable location for an ADU investment depends on local regulations, construction costs, rental demand, and the property's potential return on investment.
California has established statewide laws designed to facilitate accessory dwelling unit development on qualifying residential properties. These laws address issues such as permitting, parking requirements, unit size, and local approval procedures. However, the specific rules that apply depend on the proposed ADU and property characteristics. Investors should review current California requirements and consult the local planning department before starting construction.
Homeowners association restrictions on accessory dwelling units depend on applicable state laws and the community's governing documents. Some states limit an HOA's ability to prohibit otherwise permitted ADUs, while certain design and architectural requirements may still apply. Investors should review HOA covenants, local zoning ordinances, and state legislation to determine whether an ADU can legally be constructed and rented.
ADU construction costs vary according to location, square footage, design, materials, and site conditions. Project estimates can range from approximately $60,000 to $285,000 or more, with detached construction and extensive utility connections potentially increasing expenses. Investors should also budget for architectural plans, permits, inspections, and contingency costs. Obtaining local contractor estimates is essential for evaluating an ADU project's financial feasibility.
Yes, many jurisdictions allow property owners to rent accessory dwelling units to generate supplemental income. However, rental eligibility depends on local zoning requirements, occupancy rules, licensing obligations, and any applicable short-term rental restrictions. Investors should research local rental demand and estimate operating expenses before proceeding. A legally permitted ADU may improve a property's income potential, although profitability is not guaranteed.
Yes, qualifying real estate investors may be able to finance eligible accessory dwelling unit construction or renovation projects through specialized investment property loan programs. Depending on the project, financing options may include rehabilitation or construction loans. Finance of America Commercial (FACo) offers investor-focused financing solutions that may support qualifying residential improvement and development projects, subject to property eligibility, underwriting requirements, and loan program guidelines.
This content is for informational purposes only and should not be construed as investment or legal advice. Neither the author of this content nor Roc360 assumes any liability for actions taken or not taken based on information contained herein. Investments involve risk, including potential loss of principal. You should consult a qualified professional before making financial decisions.
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