States are making ADUs easier to build. Now it is up to the municipalities to follow it.

The national housing shortage, the benefits of increased density, the continuing shift in consumer preferences toward smaller homes near urban centers of activity, and other factors have prompted state legislatures to facilitate housing development.

In 2024 alone, Colorado, Arizona, Massachusetts, and Hawaii passed major ADU legislation, and California added several laws to open the doors to ADUs. Ultimately, however, local governments remain important gatekeepers when it comes to ADU freedom. Although state-level ADU policies focus on local laws that hinder ADU development, there is still work to be done.

But first, good news. Colorado’s HB24-1152 and Arizona’s SB 1415 followed the main tenets of what has become the standard way to encourage ADU development. They legalize ADUs by right (meaning local governments can’t simply ban them), repeal or reduce additional parking requirements, prevent municipalities from enforcing stricter ADU zoning requirements than in original residential areas, and relax or eliminate owner-occupancy requirements. Hawaii’s SB 3202 follows suit, although it does not address parking requirements.

The Massachusetts Affordable Homes Act, passed in August, allows ADUs of less than 900 square feet in right-of-way on single-family properties. State officials expect 8,000 to 10,000 ADUs to be built over the next five years as a result of the law. And in California, which passed its first ADU law back in 1982, five ADU-related laws were passed:

• AB 976 makes permanent the sunset ban on owner occupancy requirements.
• AB 1033 allows for the separate sale of an ADU in a large residence.
• AB 1332 requires all cities and municipalities to develop pre-approval systems for ADU plans posted on the agency’s website, streamlining the review process.
• SB 1211 makes it easier to build ADUs in multifamily buildings.
• SB 1210 requires utilities to post estimated fees and completion times for common service connections, including ADUs (to ensure that owners have an upfront idea about the cost and time of connecting utilities).

As state legislatures continue to pressure municipalities to relax or remove ADU-related restrictions (13 and counting have done so), utility and other fees—known as impact fees—are moving to the center of pro-ADU policy discussions. That’s because the impact costs may be more than enough to deter ADU development.

Take a few examples from Colorado, where many states and municipalities are working hard to change the regulatory landscape in favor of large single-family homes. The city of Lyons, near Boulder, is looking to increase density. But probate laws that favor large single-family homes mean that the door-to-door fee for a single-unit development makes it financially unviable. So, without a strong community of ADUs that align with the goals of the Lyons community, it looks like the world will go to the typical single-family home builder.

In Nederland, another city near Boulder, impact fees for building an ADU — or any other home — add up to about $65,000. If you’re building a $2 million mansion, that’s probably a big mistake. But when you consider a $200,000 ADU, it’s a big hit.

To Nederland’s credit, they are working on a water course and intend to reduce those costs. The city is following a clear trend: Rarely does a week go by when a municipality somewhere in the country doesn’t loosen its ADU-related regulations. Based on that and my experience, there are a few things municipalities can do to help ADUs beyond what is often found in new state mandates:

• Impact costs are estimated based on the size of the building, not just whether it is residential or not. A 750-square-foot ADU is not, from a utility perspective, the same as a 5,000-square-foot house.
• Consider a program to waive system development costs, as Portland, Ore., does if the ADU is not intended for temporary occupancy. Those costs can include transportation (with possible right-of-way development), water, sewer and stormwater, and parks and recreation.
• If historically the single-family home dominates, check how zoning and permits work (or don’t) for multi-unit or small-unit developments.
• As California did with AB 1332, it fast-tracked allowing ADUs to be built based on pre-built plans submitted by ADU builders.

Finally, a broader consideration: Think about the long-term benefits of higher density, including higher sales tax revenue and property tax benefits—and without the headaches that can come with multifamily buildings in, for example, public safety.

States and municipalities have come a long way in paving the way forward for those hoping to add significant public housing through ADUs. Ultimately, however, municipalities hold the keys to whether ADUs can open more doors in addressing the ongoing US housing shortage.

Mike Koenig is the President and founder of Studio Shed.

This column does not necessarily reflect the opinion of HousingWire’s editorial department and its owners.

To contact the editor responsible for this piece: [email protected].

Related