How homeowners can start exploring Accessory Dwelling Units to fight the affordable housing shortage
For years, the idea of adding an Accessory Dwelling Unit (ADU) in the backyard has been floated as one way to chip away at America’s housing shortage. These compact homes can be placed behind an existing house, offering space for an aging parent, an adult child, or a paying tenant.
But while the potential is obvious, so are the hurdles. Local resistance from “NIMBY” neighbors, restrictive zoning laws, and a lack of easy financing have all slowed the growth of ADUs. Until now, most have been built by affluent homeowners using cash or home equity loans—locking out those who might benefit most from the extra income an ADU can provide.
That’s why a new bipartisan bill from Sam Liccardo (D-Calif.) and Andrew Garbarino (R-N.Y.) could change the game. It would offer government-backed financing to homeowners who build a code-compliant ADU with a kitchen, bathroom, and sleeping area. The lawmakers hope this could open the door for middle- and lower-income families to create housing and build wealth, while generating rental income that helps pay their mortgage.
Step One: Know What’s Allowed Where You Live
Before sketching floor plans or dreaming about rental income, homeowners need to get clear on local rules. Zoning ordinances vary wildly—even between neighboring towns—and can include restrictions on size, height, and setbacks, as well as parking mandates or owner-occupancy requirements. Some places even forbid detached units entirely.
The smartest place to start is your local planning or building department. Ask them what’s allowed in your zoning district, how long the permitting process takes, and what kind of design limitations exist. Understanding the rules early can save thousands in redesign costs and months of frustration.
Step Two: Run the Numbers Honestly
Even if new financing becomes available, ADUs are still not cheap. Detached units can easily cost between $150,000 and $300,000 depending on location, size, and finishes. Homeowners should talk with local lenders to see what kinds of construction loans or home equity products they offer now, and whether they would participate in the proposed federal financing program if it becomes law.
It’s also smart to research what comparable rental units earn in your area. An ADU won’t pay for itself overnight, but having a realistic projection of rental income can help determine if the project makes financial sense over the long haul.
Step Three: Start Building Your Team
ADUs may be small, but they are still real houses — and building them is complex. Homeowners should begin assembling a team early. An architect or designer with experience in ADUs can help navigate local codes and design efficiently. A licensed contractor or modular/prefab ADU company can estimate costs and manage construction. A lender who understands residential construction loans can explain how to structure financing. Even a real estate attorney may be worth consulting to review contracts and protect your investment.
Early conversations with professionals can prevent costly surprises and keep the project on schedule.
Step Four: Think About Your Why
Finally, it’s important to be clear on why you want to build an ADU. Is it mainly to generate rental income? To house a relative? To boost resale value down the road? Your answer will influence everything—from design choices to budget decisions.
If the Garbarino–Liccardo bill becomes law, it could be the spark that turns ADUs from a boutique option into a real tool to relieve our housing shortage. But for it to work, homeowners need to understand the steps, ask the right questions, and build with purpose.
The backyard may not seem like much space, but for someone who can’t afford rent—or a family struggling to cover their mortgage—an ADU could be life-changing.
Getting Started: Your First Five Moves Toward an Accessory Dwelling Units
Check Local Rules
Call your city or county planning department to confirm if ADUs are allowed on your property and what size, height, parking, and setback restrictions apply. Understanding this early prevents expensive redesigns later.
Talk With Your Lender
Ask your bank or credit union what financing options are available now, and if they plan to offer government-backed loans if the proposed Sam Liccardo / Andrew Garbarino bill passes. Knowing your borrowing power shapes your entire plan.
Estimate the Budget and Return
Get a rough cost estimate for the type of ADU you want, then research local rental rates to see if the numbers make sense. Factor in added property taxes and maintenance.
Find Experienced Professionals
Reach out to local architects, designers, contractors, or modular ADU companies who have experience navigating permits and building small-scale housing. Having a skilled team in place will save time and stress.
Clarify Your Purpose
Decide whether your ADU will be for family, rental income, or resale value. Your “why” will drive your decisions on design, size, materials, and investment level.
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With over 9,000 published articles on modular and offsite construction, Gary Fleisher remains one of the most trusted voices in the industry.
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