T
he United States is in dire need of housing solutions, and one approach gaining traction is the development of accessory dwelling units (ADUs). Also known as backyard cottages or granny flats, ADUs have been hampered by zoning laws, which can be difficult to change. However, 14 states have enacted ADU reform bills, with California and Washington state leading the way.

    Washington state has passed some of the strongest reforms, requiring localities to allow at least two ADUs per lot and limiting impact fees to half of what would be required for a single-family house. Some cities in Washington and California are even allowing ADUs to be sold separately, like condominiums, which has led to a sharp increase in building permit applications.

    Seattle, for example, issued twice as many permits for ADUs as for single-family homes in 2023. A report by the Seattle planning office found that about a third of the city's ADUs are long-term rentals, while 44% are condominiums with a median price of $757,500. California has also seen a rapid rise in ADU construction, with the number of permits increasing from around 1,000 in 2016 to over 24,000 in 2022.

    On the East Coast, Massachusetts has loosened its restrictions on ADUs, and Governor Maura Healey's administration estimates that between 8,000 and 10,000 ADUs will be built across the state in the next five years. New York City and Denver have also adopted reforms to increase the number of ADUs in those metros.

    Real estate agents need to do their due diligence when working with buyers interested in building an ADU, as zoning ordinances vary even within areas that allow them. Buyers should also be reminded that while an ADU might boost property value and provide rental income, it could make the home more difficult to sell.