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What is an ADU?
Learn about types, benefits, costs, laws, and the build process in the Bay Area.

Definition
Accessory dwelling unit (ADU) is the technical term used in the housing or real estate industry to refer to a structural unit that is built as an accessory or a supplement to the primary residential structure for the purpose of providing additional independent habitable space. That being said, and to support basic lifestyle needs as well, it is required to have its own provisions for living, sleeping, eating, cooking, and sanitation.
Purpose
For convenience and easier reference, the acronym, ADU, is commonly used to refer to an accessory dwelling unit. It could also be referred to in many ways dependending on the purpose it serves or what the ADU is used for.
In-law suite and granny flat are two of the most common terms alternatively used to refer to an ADU because of the purposes they serve, which are already self-explanatory as their names suggest - in-law suite for in-laws and granny flat for seniors or grandparents.
More alternative terms include casita, guest house, and backyard cottage. Casita is a Spanish-word which literally translates to little house and is commonly used to refer to an ADU in the Southwestern U.S. and California. The term guest house, which sounds fancy because of the fact that you have an exclusive extra space to offer a friend anytime, highlights the use of ADUs for hosting visitors, while the term backyard cottage gives the ADU a small-home vibe in a suburban backyard. Some more terms used to refer to an ADU include secondary unit, rental unit, and tiny homes.
While there could be a long list of terms that could be used interchangeably to refer to an ADU, it should be well noted that there are sets of specific rules, regulations, and designs to be followed for an ADU to be legally permitted and built on your property. It is best to consult with your local agency or an ADU Expert in your city or locality.

Benefits
As mentioned earlier, ADUs can serve different and multiple purposes. It is a living space solution that could cater to various lifestyle needs, whether it's providing a comfortable space for love ones, earning extra income through rentals, or simply making better use of underutilized areas on your property. ADUs have become not just a smart investment, but a lifestyle solution for many California homeowners. Let’s explore the key benefits that make ADUs a worthwhile addition to your home.
Multigenerational Living
Did you know that, according to a research study by USA Facts, 7.3% of households in California are multigenerational? This record surpasses the national average rate of 4.7% thereby indicating that the number of multigenerational households in California is higher compared to the average number of all multigenerational households in the country.
As a matter of fact, the state of California ranks second to Hawaii for top states in the US for multigenerational families. Additionally, the Census Bureau estimates the number of multigenerational households in California to be at around 809,442.
Multigenerational living is notably prevalent in California. Housing affordability and elderly care both contribute greatly to this trend. And despite being a multicultural community, Californians share very similar cultures, and one of those is being family-oriented, keeping families closer together.
With a custom ADU, it is more convenient for families to stay connected and keep loved ones close. Whether it’s to provide a convenient retirement home for seniors to support aging-in-place or a comfortable private space for extended families or long-term guests, there’s always a perfect custom ADU that could address your family’s needs.
Extra Income
California, being a hub for promising economic opportunities, has attracted many skilled and talented individuals from different places. This influx of job-seekers and future workers or employees calls for additional housing units.
Putting up an ADU for rental purposes is like hitting two birds with one stone, that is, while you actively help in addressing the current housing crisis in California by providing additional residential homes, you are also earning passive income for yourself!
Accessory Dwelling Units (ADUs) in the Bay Area have become a strategic investment for homeowners seeking extra income through rentals and property value appreciation.
Now, the cost of an ADU varies depending on many factors such as the size, the floor area, materials and finishes. But to give you numbers, it can range from $200,000 to 475,000. Refer to these projects:
Additionally, average monthly rates for ADU rentals can range from $2,000 – $5,000.
To illustrate the payback period for an ADU investment, let’s use these figures:
Build Cost: $300,000
Monthly Rent: $2,500
Annual Rental Income: $30,000
Estimated Payback Period: 10 years
From the figures above, payback period for an ADU which costs $300,000 to build, and is rented at a monthly rate of $2,500, is 10 years . The payback period for an ADU investment in California—especially in high-rent areas like the Bay Area—typically ranges from 7 to 15 years, depending on factors like rental rates, build costs, maintenance, and occupancy.
If you have extra space on your lot and want to maximize its value and rental potential, it’s time for you to consider building your own ADU and take advantage of your undeveloped assets for an extra source of income!
Flexible
That overlooked side yard? With the right design, it could be a perfect spot for an attached ADU, seamlessly expanding your home while making smart use of space that often goes unused.
Dusty or abandoned garages? Why not convert them into a bright, modern living space that generates passive income?
Even that quiet, unclaimed corner of your yard holds so much potential, perfect for a compact guesthouse or your own studio!
Through smart land use and with proper consultation with an ADU Expert, underused areas in your property could be turned into something that could provide you financial benefits. An ADU is even so flexible that it could serve multiple purposes and provide solutions for your lifestyle or family’s needs. It makes efficient use of every square foot of your property!
Increases Property Value
Let’s do a recap. First, an ADU provides additional living space. Accessory dwelling units are perfect for multigenerational living, which is a trend in the Bay Area. It provides an extra source of income. It is very flexible that it can be used as an in-law suite, a guesthouse, a rental unit, your own home office, a retirement home — whatever you need it to be. Obviously, an ADU will increase your property’s value. It can range from about 20%–35%, depending on location, unit size, and finishes.
Now, not every home can add an ADU due to zoning or lot limitations. If your property qualifies and already has a legal ADU, it stands out on the market. If you're thinking of boosting your property’s resale value, consult with a local ADU Expert now.
Types of ADU
There can be many different designs for ADUs. They can be built above a garage, below a main home, beside the primary residence, or even within existing spaces. But technically, we can categorize them into four main types based on how and where they’re constructed: Attached, Detached, Conversion, and Junior ADUs. Each category comes with its own set of design opportunities and regulatory considerations. Knowing the difference will help you choose the right ADU for your property, lifestyle, and goals.
Attached ADUs
As its name suggests, an attached ADU is an ADU that is attached or connected to the primary dwelling structure.
The California Department of Housing & Community Development (HCD) technically defines it as a newly created or constructed dwelling structure that structurally abuts and connects to an existing or proposed primary dwelling or accessory structure. It can be constructed on top of or below the primary dwelling and, basically, extends beyond the building plane of the existing or proposed primary dwelling unit. Note that an attached ADU shall not exceed 50 percent of the existing primary dwelling’s floor area size.
Detached ADUs
Detached ADUs, as implied, are ADUs that are built as separate structures from the primary dwellings. Although it's built separately, it can still share utility connections with the primary dwelling.
HCD technically defines detached ADUs as newly constructed dwelling units that are created on a lot with an existing or proposed single-family or multifamily dwelling structure but are detached from the primary dwelling.
Note that multifamily lots qualify for two detached, new construction ADUs on lots with a proposed multifamily dwelling, or up to eight detached ADUs on a lot with an existing multifamily dwelling. However, it should not exceed the total number of existing units on the lot. These ADUs are detached from the primary multifamily structure but do not have to be detached from each other or other accessory structures on the lot.
Conversion ADUs
To define it simply, let’s use an example. The most common conversion ADUs are garage conversions.
Garages, sheds, and other existing detached accessory structures are permitted to be converted to an ADU subject to all applicable building, health and safety, and fire standards for dwellings.
HCD defines converted ADUs as dwelling units that are created from existing space within proposed or existing primary dwelling units or existing accessory structures.
For single family residences, the converted ADU is created from the proposed or existing space of the single-family residence or the existing space of an accessory structure. For multifamily dwelling structures, the converted ADUs are created from portions of the multifamily dwelling structures that are not used as livable space such as storage rooms, passageways, etc.
Junior ADUs
A Junior ADU is a special type of ADU where it is built within the primary structure.
HCD defines it as a unit that is no more than 500 square feet in size and contained entirely within a single-family residence. A JADU may include separate sanitation facilities or may share sanitation facilities with the existing structure.
Note that only one (1) JADU may be created per lot zoned for single-family residences with an existing or proposed single-family residence. It may be created within the walls of the proposed or existing single-family residence, including attached garages. If there are multiple detached single-family residential units on one lot, there can only be one (1) JADU.
Each type of ADU offers its own unique advantages and requirements. The best fit depends on your lot size, your goals, and how you want the new space to function. Whether it’s creating a rental unit, building a guest house, or offering a private living space for loved ones, understanding the distinctions between ADU types is one of the initial steps in making a smart, informed decision. If you're unsure where to start, consult an ADU expert who can help assess your property and guide you through the process from planning to permitting.

History, Laws & Updates
Early Concepts (Pre-1980s)
Before ADUs were officially recognized in state law, secondary housing units called “granny flats” and converted garages emerged organically in response to multigenerational living needs. These were often built informally without permits, especially in urban areas where extended family living arrangements were common. However, the lack of regulation meant they had no legal protection or uniform standards. It was only years after that the first state ADU law was enacted.
Initial Legal Recognition (1982)
Era of Local Control with Minimal State Interference
This era marks California's first attempt at formally addressing the housing shortage through accessory dwelling units. However, it did so while preserving significant local control, which limited the effectiveness of the new law.
To address the housing shortage, California introduced SB 1534, its first ADU law. However, the law heavily deferred to local governments, giving them three options:
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Local ADU ordinances: Cities could adopt local ordinances allowing ADUs and retain control over development standards like height, setbacks, and floor area.
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State minimum standards: Cities that didn’t adopt an ordinance defaulted to state ADU standards allowing only attached ADUs with a maximum 10% floor area increase.
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ADU bans: Cities could ban ADUs entirely, but only with findings showing adverse impacts on public health, safety, or welfare.
Raising Minimum Standards (1986–1994)
Gradual State Encouragement of ADU Development
During this period, the state incrementally raised the baseline ADU standards to enable slightly larger and more flexible housing solutions.
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AB 4343 (1986): Increased state minimum standards to allow detached ADUs up to 640 sq ft and allowed a 15% increase in floor area for attached ADUs.
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AB 3529 (1990): Further expanded state minimums to permit detached ADUs up to 1,200 sq ft or a 30% increase for attached ADUs.
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AB 3198 (1994): Limited parking requirements to one space per ADU or per bedroom unless additional need was justified, and required cities to allow efficiency units as ADUs.
Ministerial Approval & Permit Access (2002)
First Real Attempt to Streamline Permitting
Although state reforms had been ongoing, it wasn’t until AB 1866 that a real procedural breakthrough happened. This law aimed to prevent cities from stalling ADU approvals through discretionary review.
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AB 1866 (2002): Required that all ADU permits be approved ministerially (without hearings or discretionary review).
Major Expansion Era (2016–2019)
State Asserts Control to Remove Local Barriers
California entered a new phase of aggressive reform to break down local regulatory barriers. For the first time, the state imposed clear limits on how much control local governments could exert over ADUs.
2016:
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SB 1069, AB 2299, AB 2406:
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Created “Exemption ADUs” for internal conversions not subject to local zoning rules.
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Required local governments to approve compliant ADUs within 120 days.
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Eliminated covered parking replacement and parking near transit.
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Mandated utility connection fees be proportional to actual impact.
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Side and rear setbacks were limited to 5 feet to simplify placement on existing lots.
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2017:
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SB 229, AB 494: Allowed ADUs to be included in plans for new single-family homes instead of only after homes were built.
2019:
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SB 13, AB 670, AB 881:
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Prohibited cities from imposing minimum lot sizes for ADUs.
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Reduced setbacks to 4 feet for side and rear yards.
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Eliminated fire sprinkler requirements unless required for the main dwelling.
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Waived owner-occupancy requirement through 2025.
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Reduced review time to 60 days.
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Created minimum size protections where cities could not apply standards that prevent 800 sq ft ADUs.
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Required cities to allow at least one ADU and one JADU per lot.
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Capped impact fees for ADUs under 750 sq ft.
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Prevented HOA and common interest developments from unreasonably restricting ADUs.
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Required HCD oversight of local ordinances and expanded ADU types for multifamily lots.
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Set maximum ADU size thresholds where local ordinances must permit at least 850 sq ft for ADUs with one or fewer bedrooms, and 1,000 sq ft for two-bedroom units.
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Expanded the Exemption ADU program to include:
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One detached ADU per single-family property up to 800 sq ft, 16 ft tall, with 4-ft side and rear setbacks.
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Conversion of nonresidential space in multifamily buildings into multiple ADUs, adding up to 25% more housing units.
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Two new detached ADUs per multifamily property under 800 sq ft, 16 ft tall, and meeting 4-ft setback requirements.
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Permission to pair a new detached ADU with a JADU on single-family lots, allowing up to three units on what was previously a single-unit parcel.
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Triplex Zoning & Homeownership Tools (2021)
Reframing Single-Family Zoning & Expanding Rights
This era reimagined single-family zoning altogether. With the passage of the HOME Act and similar reforms, homeowners gained new rights to build more than one housing unit on lots once reserved for a single home.
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AB 68 (2019): Legalized Junior ADUs (JADUs) up to 500 sq ft and introduced strong statewide mandates requiring local agencies to approve one ADU and one JADU per lot in single-family zones. It streamlined the permitting process and preempted local zoning standards that limited ADU development. This bill significantly contributed to California's move toward de facto triplex zoning by allowing up to three units—primary residence, ADU, and JADU—on a single-family lot.
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SB 9 (2021): California HOME Act allowed qualifying homeowners to split their lots and build either two 800-square-foot homes or one duplex. In total, up to four units may be developed on what was previously a single-family parcel. The law also prohibits local governments from blocking these developments based on subjective design standards or additional parking requirements.
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AB 1584 (2021): Voided certain deed restrictions and covenants that prohibited ADUs.
Streamlining & Clarification (2022)
Closing Loopholes and Codifying ADU Rights
Policymakers addressed growing frustration with inconsistent interpretations of ADU law. These updates further narrowed the ability of cities to delay or deny projects, ensuring that homeowners could build by right.
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SB 897 & AB 2221 (Effective 2023):
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Enforced a 60-day approval/denial deadline.
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Required cities to use only objective and measurable development standards.
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Allowed ADUs in detached garages and permitted demolition of garages with the ADU application.
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Established a base height limit of 16 ft for detached ADUs, with allowances up to 18 ft near transit or on multifamily lots, and up to 25 ft for attached ADUs.
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Barred fire sprinkler mandates in the main house due to ADU construction.
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Protected unpermitted ADUs built before 2018 unless they posed a health/safety risk.
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Allowed enclosed uses like garages to count toward JADU eligibility.
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Barred permit denials based on unrelated zoning/code violations.
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Mandated that JADUs without bathrooms must have a separate entrance from the main home, along with interior access to the main living area.
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Required permitting agencies that deny an ADU or JADU application to issue a full written response within the 60-day timeframe, identifying all deficiencies and describing how the applicant can correct them to secure approval.
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New Ownership Options & Enforcement (2023)
ADUs Become Separate Legal Properties
This period marked a major step toward expanding ADU viability as a form of homeownership. Meanwhile, state agencies took stronger roles in enforcing ADU laws locally.
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AB 1033: Allowed separate sale of ADUs as condominiums (if allowed locally).
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AB 976: Permanently prohibited owner-occupancy requirements for ADUs.
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AB 1332: Required each local agency, by January 1, 2025, to develop a program for the preapproval of accessory dwelling unit plans
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AB 434: Empowered HCD to enforce non-compliant jurisdictions.
Supercharging ADU Growth (2024)
The Most Ambitious Pro-ADU Reforms Yet
The 2024 reforms represent California’s boldest commitment yet to maximizing housing density and accelerating ADU adoption statewide. With incentives like tax exemptions and high-density ADU allowances, the state removed many final barriers.
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SB 1211: Allowed up to 8 detached ADUs on multifamily lots (not to exceed the number of existing units).
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SB 1164: Provided 15-year property tax exemption for new ADUs.
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AB 3057: Extended CEQA exemption to Junior ADU ordinances.
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SB 477: Renumbered ADU/JADU laws into Government Code §§ 66310–66342.
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AB 2533:
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Extended protections for unpermitted ADUs built before Jan 1, 2020.
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Required cities to create a checklist of substandard housing conditions.
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Allowed homeowners to request third-party inspections before applying.
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The Future of ADUs in California
California’s journey toward universal ADU access has been decades in the making, but in many ways, it's just beginning. What started as a cautious attempt to increase backyard housing options has evolved into one of the boldest statewide housing initiatives in the country. These reforms haven’t just changed zoning codes, they’ve sort of redefined what it means to live, invest, and age in place in the Golden State of California.
Today, ADUs are no longer a fringe concept. They’re a foundational pillar of California’s response to the housing crisis—offering families multigenerational living options, landlords new sources of passive income, and communities a gentler path to increasing density.
Looking ahead, we can expect more innovation at both the state and local levels:
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The 2025 rollout of preapproved ADU plans may dramatically reduce the cost and friction of design and permitting.
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Tax incentives, such as those introduced under SB 1164, may expand further to boost affordability.
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We may also see greater coordination with climate policy, as ADUs can play a critical role in smart growth, infill housing, and reducing suburban sprawl.
If the last decade is any indicator, one thing is clear: ADUs are no longer optional, they’re essential. Stay informed with the latest news and updates about ADUs.