An ADU can add rent or a home for family, but it is a large, slow project, and lenders count only part of the rent.
Published October 2026. Sources checked October 6, 2026.
| Figure | What it is | Source |
|---|---|---|
| $90,000 to $180,000 | California 2020 survey medians, garage conversion to new detached unit | [S1] |
| 12 to 18 months | for most projects, per Alameda County | [S2] |
| 30% | of qualifying income: the most ADU rent can count for | [S3][S4][S5] |
| 75% | of the rent FHA counts, and the most of the lease Freddie Mac counts | [S5][S4] |
| 16% | of California ADUs surveyed housed relatives rent-free | [S1] |
| $485 to $550 | per square foot, Alameda County 2023, all costs included | [S2] |
| $75,000 | FHA Limited 203(k) cap since November 4, 2024 | [S34] |
Is an ADU for you?
An accessory dwelling unit (ADU) is a second, smaller home on the same lot, added or bought.
It may not fit if
Buying a home that already has an ADU
| Lender | Rule on an existing ADU | Source |
|---|---|---|
| Freddie Mac | Rent from illegal ADUs may not be used to qualify | [S4] |
| FHA | The ADU must meet zoning and be legally rentable without restrictions | [S5] |
| Fannie Mae | May still buy the loan if zoning does not allow the ADU, when it will not jeopardize a future insurance claim | [S13] |
- For family use the rent line is $0; the gain is what family no longer pays elsewhere.
Where state law requires cities to allow ADUs
These are the statewide laws we verified in statute or agency text; a state law does not mean your lot qualifies.
| State | Law and year | Key limit |
|---|---|---|
| California | Gov. Code 66310 to 66342, recodified 2024 | Approval without a hearing; no owner-occupancy rule; rentals may be limited to 30 days or more[S14][S10] |
| Oregon | ORS 197A.425; 2017, 2019 | Cities over 2,500, counties over 15,000, inside urban growth boundaries[S15] |
| Washington | RCW 36.70A.680 to .681; 2023 | At least 2 ADUs per lot in urban growth areas; no owner-occupancy rule; impact fees capped at 50% of the main home’s[S16] |
| Montana | MCA 76-2-345; 2023 | 1 ADU by right; no owner occupancy or impact fees[S11] |
| Maine | 30-A M.R.S. 4364-B; 2021, amended 2023, 2025 | 1 ADU per single-family lot; owner need not live there[S17] |
| Vermont | 24 V.S.A. 4412; 2003, amended through 2024 | 1 ADU, protected only on an owner-occupied lot[S7] |
| New Hampshire | RSA 674:71 to 73; 2016, amended 2025 | 1 by right; towns may require owner occupancy; 950 sq ft cap unless the town allows more[S8] |
| Connecticut | C.G.S. 8-2o; 2021 | 1 by right; towns that opted out before 2023 stay out[S18] |
| Rhode Island | R.I. Gen. Laws 45-24-73; 2022, 2024 | By right in 3 cases only, including inside an existing footprint[S19] |
| Massachusetts | M.G.L. c. 40A, 3; 2024 | By right from February 2, 2025; up to 900 sq ft or half the house, if smaller; no owner-occupancy rule[S12] |
| Arizona | A.R.S. 9-461.18; 2024 | Cities over 75,000; private covenants still apply[S6] |
| Colorado | C.R.S. 29-35-401 to 405; 2024 | 1 ADU, administrative approval in covered areas by June 30, 2025[S20] |
| Utah | Utah Code 10-21-304; 2026 | Specified cities: detached ADUs on lots of 11,000 sq ft or more from October 1, 2026; owner residence may be required[S9] |
| Hawaii | SB 3202; 2024 | Counties must allow 2 ADUs or the equivalent by December 31, 2026[S21] |
| Maryland | HB 1466; 2025 | Certain localities had to adopt an ADU law by October 1, 2026; compliance unknown[S22] |
| Nevada | AB 396; 2025 | Large counties and cities; without an ordinance by July 1, 2026, ADUs allowed on residential parcels[S23] |
- No statewide law: New Jersey and Texas, aduzoning.org reports[S24]; unlisted states may still have one.
- Still apply: HOA rules, owner-occupancy requirements and short-term rental bans[S6][S8][S10].
- HOA bans void: in California and Colorado, which still allow reasonable restrictions[S25][S26].
What it costs
The best published numbers are from California and are dated, so use them as a check, not a price[S1].
| ADU type | Median cost | Per sq ft |
|---|---|---|
| New detached unit | $180,000 | $300 |
| Addition to the main home | $150,000 | $250 |
| Conversion inside the main home | $100,000 | $173.04 |
| Garage conversion | $90,000 | $189.19 |
| All types | $150,000 | $250 |
The complete cost, line by line
| Line | Default or rule | Basis |
|---|---|---|
| Construction | A local bid. In the 2017 study, labor was 33% and materials 34% of the total | [S28]; California medians above are a check only[S1] |
| Design and engineering | About 8% of the total; Alameda says 10% to 20% of construction | [S28][S2] |
| Permits and fees | About 8% of the total, or your state’s fee rule (California: no impact fee under 750 square feet; no new utility connection in existing space) | [S28][S27] |
| Utility connections | About 5% of the total | [S28] |
| Site work | Get a bid | None published |
| Contingency | 10% | Loan rules: HomeStyle, 10% on 2-4 units, up to 15%, none on 1 unit[S29]; FHA 203(k), up to 20% (OCC, 2018)[S30] |
| Property tax | Added value × your tax rate | [S31][S2] |
| Insurance, upkeep, vacancy | Your own quotes | None published |
How to pay for it
These routes work now; the Title I ADU loan does not yet.
| Route | What to know | Source |
|---|---|---|
| Cash or a home equity line of credit (HELOC) | 53% paid cash; 66% of bank borrowers used a HELOC (California survey) | [S1] |
| Cash-out refinance | Fannie Mae: up to 80% of the value of a 1-unit home you live in | [S32] |
| Fannie Mae HomeStyle Renovation | Renovation up to 75% of the lesser of price plus renovation or as-completed value; a detached accessory unit, but not “another residential dwelling” | [S33] |
| FHA 203(k), a mortgage with renovation costs | An ADU attached to an existing structure is eligible; the Limited 203(k) cap will not cover a detached unit at California’s median | [S5][S34] |
| Freddie Mac CHOICERenovation | Adds an ADU to an existing home or a purchase | [S4] |
On the calendar: Title I ADU loans
- Law since July 11, 2026 (P.L. 119-101), with no money appropriated, CRS notes[S35].
- Allows ADU construction as a Title I use, in an amount HUD may set, for up to 30 years: a ceiling, not a given[S36].
- Not usable yet: HUD’s rule still listed $25,000 on October 1, 2026[S37]; guidance is listed as upcoming[S38].
Will a lender count the ADU rent?
Yes, in part: all three cap ADU rent at 30% of qualifying income and count less than the full rent[S3][S4][S5][S39].
| Lender | How much rent counts | Other conditions |
|---|---|---|
| FHA | 75% of the lesser of market rent or lease, if little history[S5] | 2 monthly payments saved after closing[S5] |
| Fannie Mae | Up to 30% of qualifying income[S3] | Your 1-unit home, purchase or limited cash-out refi, in DU since March 21, 2026[S3][S40]; under 12 months as a landlord: capped at the payment[S39] |
| Freddie Mac | Up to 75% of the lease[S4] | Buyers without landlord experience take landlord education[S4] |
Estimating the rent
Start from HUD’s Fair Market Rent (FMR) for a studio or 1-bedroom in your area.
- Look up the FMR on HUD User[S44]: FY2027 FMRs, effective October 1, 2026, estimate rent plus utilities at the 40th percentile[S41].
- Subtract utilities if your tenant pays them.
- Replace it with the appraiser’s rent schedule (Form 1007) or local listings[S39].
Time and property tax
Most projects take 12 to 18 months[S2], and in California the finished ADU is assessed at market value[S31].
- 24 monthsor more for some projects, Alameda County says[S2]
- 11 to 15 monthsCalifornia median, approval start to completion[S1]
- 60 daysthen a complete California application is deemed approved[S42]
- $1,500 a yearAlameda’s example: $150,000 of added value at a 1% rate[S2]
- California: the existing home is not reassessed (Santa Clara County Assessor)[S31].
- Elsewhere: ask your assessor; Multnomah County, Oregon, calls it hard to predict[S43].
Check it where you live
Ask these locally before you pay for plans.
| What to check | Who to ask |
|---|---|
| Allowed on your lot, size, owner occupancy | The planning office |
| HOA limits on ADUs | The HOA’s CCRs |
| Rentals under 30 days | The city |
| Fees, connections, meter upgrades | The permit office and utilities |
| Permits for an existing ADU, if buying | The building department |
| Loan route, counted rent, reserves | 2 lenders |
| Tax and insurance changes | The assessor and your insurer |
Modeled example: a garage conversion paid with a HELOC
Borrowing $99,000 for a garage conversion costs $660 to about $828 a month, plus $75 of property tax.
| Line | Input or arithmetic | Result |
|---|---|---|
| Construction | California 2020 median, garage conversion[S1] | $90,000 |
| Impact and connection fees | Under 750 sq ft, in existing space (assumed)[S27] | $0 |
| Contingency | $90,000 × 10% | $9,000 |
| Amount borrowed | $90,000 + $9,000 | $99,000 |
| Interest only at 8% (assumed) | $99,000 × 0.08 ÷ 12 | $660 a month |
| Repaid over 20 years at 8% (assumed) | Standard loan formula | About $828 a month |
| Property tax | $90,000 × 0.01 (added value and rate assumed) | $900 a year, $75 a month |
Modeled garage conversion: what is borrowed and what it costs each month
We stop before rent (no sourced California FMR): estimate it and compare with $660 to $828 a month plus tax, insurance and upkeep. The median already includes design, labor, materials and permits[S1].
My own case: a basement suite
My build-out is a furnished basement suite in my duplex, not an ADU on a single-family lot[S45][S46].
- Roughly $30,000to build out, plus about $20,000 for a boiler[S47]
- $1,300a month from one furnished stay, Q3 2026[S46]
- About 23 monthsof gross rent repays the build-out ($30,000 ÷ $1,300), not the boiler
Utilities, furnishing, vacancy and repairs make it longer. Listed on Furnished Finder more than Airbnb[S47].
Build your own worksheet in the Housing Path Check, ADU mode. For the federal law, read our ROAD to Housing Act guide and what the ROAD Act means for ADU financing.
Common questions
Can I build an ADU if my state has no ADU law?
Possibly: local zoning decides. See state laws.
Can I get a Title I ADU loan now?
Not yet: HUD has set no amount or guidance[S36][S38]. See how to pay for it.
Do I have to live on the property?
Six states bar that rule; Vermont, New Hampshire and Utah (detached units) can require it[S7][S8][S9]. See the state table.
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Sources
- Implementing the Backyard Revolution: Perspectives of California’s ADU Owners, Chapple, Ganetsos and Lopez, UC Berkeley Center for Community Innovation, April 2021 (accessed October 6, 2026). California ADU owner survey (2020, 823 owners): costs by type, financing, rents, timelines, family use.
- ADU Guidebook v1.0, Alameda County, August 2023 (accessed October 6, 2026). Per-square-foot costs, design share, 12 to 18 month timeline, and the $1,500 property tax example.
- Selling Guide Announcement SEL-2025-08, Fannie Mae, October 8, 2025 (accessed October 6, 2026). ADU rent can count on a 1-unit principal residence, capped at 30% of qualifying income.
- Accessory Dwelling Units fact sheet, Freddie Mac, undated (accessed October 6, 2026). 30% cap, 75% of lease, landlord education, illegal ADU rent excluded, CHOICERenovation.
- Mortgagee Letter 2023-17, U.S. Department of Housing and Urban Development, October 16, 2023 (accessed October 6, 2026). FHA ADU rent at 75% of the lesser figure, 30% cap, 2 months of reserves, zoning and 203(k) eligibility.
- A.R.S. section 9-461.18, Arizona Legislature, current text (accessed October 6, 2026). Cities over 75,000; private restrictive covenants survive.
- 24 V.S.A. section 4412, Vermont General Assembly, current text (accessed October 6, 2026). ADU protection tied to an owner-occupied lot.
- RSA 674:72, New Hampshire General Court, current text (accessed October 6, 2026). One ADU by right; towns may require owner occupancy; size limits.
- Utah Code section 10-21-304, Utah Legislature, effective October 1, 2026 (accessed October 6, 2026). Detached ADUs on lots of 11,000 square feet or more; owner residence may be required.
- California Government Code section 66315, Justia, current text (accessed October 6, 2026). No owner-occupant requirement; rentals may be limited to terms of 30 days or longer.
- MCA 76-2-345, Montana Legislature, current text (accessed October 6, 2026). One ADU by right; no owner occupancy or impact fees; short-term rentals may be regulated.
- Accessory dwelling units, Massachusetts Executive Office of Housing and Livable Communities, undated (accessed October 6, 2026). By-right ADUs from February 2, 2025; size cap; no owner occupancy; short-term rentals may be restricted.
- Selling Guide B2-3-04, Special Property Eligibility Considerations, Fannie Mae, October 8, 2025 (accessed October 6, 2026). Conditions for a property with an ADU not allowed under zoning.
- California Government Code section 66323, Justia, current text (accessed October 6, 2026). Ministerial approval of ADUs.
- ORS 197A.425, oregon.public.law, current text (accessed October 6, 2026). Oregon ADU mandate inside urban growth boundaries.
- RCW 36.70A.681, Washington State Legislature, current text (accessed October 6, 2026). Two ADUs, no owner-occupancy requirement, impact fee cap.
- 30-A M.R.S. section 4364-B, Maine Legislature, current text (accessed October 6, 2026). One ADU on single-family lots; owner need not live there.
- C.G.S. chapter 124, section 8-2o, Connecticut General Assembly, current text (accessed October 6, 2026). One accessory apartment as of right; pre-2023 opt-outs.
- R.I. Gen. Laws section 45-24-73, Rhode Island General Assembly, current text (accessed October 6, 2026). By-right ADUs in 3 cases only.
- HB24-1152, Accessory Dwelling Units, Colorado General Assembly, signed May 13, 2024 (accessed October 6, 2026). Administrative approval of 1 ADU in subject jurisdictions by June 30, 2025.
- SB 3202 CD1, Hawaii State Legislature, 2024 (accessed October 6, 2026). Counties must allow 2 ADUs or the equivalent by December 31, 2026.
- HB 1466 (2025), Maryland General Assembly, approved April 22, 2025 (accessed October 6, 2026). Certain counties and cities must adopt an ADU law by October 1, 2026.
- AB 396 (enrolled), Nevada Legislature, 2025 (accessed October 6, 2026). Large counties and cities; ADUs authorized if no ordinance before July 1, 2026; transient lodging may be prohibited.
- ADU laws by state, aduzoning.org, undated (accessed October 6, 2026). Reported: New Jersey and Texas have no statewide ADU law.
- California Civil Code section 4751, Justia, current text (accessed October 6, 2026). HOA rules that prohibit or unreasonably restrict ADUs are void.
- Accessory dwelling units, Colorado Department of Local Affairs, undated (accessed October 6, 2026). HOA rules restricting ADUs void; reasonable restrictions allowed.
- California Government Code section 66324, Justia, current text (accessed October 6, 2026). No impact fee under 750 square feet; connection rules for ADUs in existing space.
- Jumpstarting the Market for ADUs: Lessons from Portland, Seattle and Vancouver, Terner Center for Housing Innovation, UC Berkeley, 2017 (accessed October 6, 2026). Average cost and the cost breakdown by share.
- Selling Guide B5-3.2-04, HomeStyle Renovation Mortgages: Costs and Escrow Accounts, Fannie Mae, December 10, 2025 (accessed October 6, 2026). Contingency rules: 10% on 2- to 4-unit homes, up to 15%, not required on 1-unit.
- Community Developments Investments, February 2018, Office of the Comptroller of the Currency, February 2018 (accessed October 6, 2026). FHA may require a 203(k) contingency reserve of up to 20%.
- Granny units and accessory dwelling units, Santa Clara County Assessor, undated (accessed October 6, 2026). Existing home not reassessed; ADU assessed at market value.
- Eligibility Matrix, Fannie Mae, August 5, 2026 (accessed October 6, 2026). Cash-out refinance maximum 80% LTV, 1-unit principal residence.
- HomeStyle Renovation FAQs, Fannie Mae, December 10, 2025 (accessed October 6, 2026). Detached accessory unit allowed, another residential dwelling not; renovation costs capped at 75%.
- Mortgagee Letter 2024-13, U.S. Department of Housing and Urban Development, July 9, 2024 (accessed October 6, 2026). Limited 203(k) rehabilitation costs up to $75,000 from November 4, 2024.
- CRS Report R49354 on the 21st Century ROAD to Housing Act, Congressional Research Service via EveryCRSReport, September 17, 2026 (accessed October 6, 2026). Enactment on July 11, 2026 without signature; no appropriations; Title I ADU use.
- 12 U.S.C. 1703, Office of the Law Revision Counsel, current through P.L. 119-101 (accessed October 6, 2026). Title I ADU eligible use, ADU amount set by HUD, term up to 30 years.
- 24 CFR 201.10, eCFR, as of October 1, 2026 (accessed October 6, 2026). Regulation still lists $25,000 for single-family property improvement loans.
- 21st Century ROAD to Housing Act implementation tracker, Bipartisan Policy Center, modified October 1, 2026 (accessed October 6, 2026). Title I guidance listed as upcoming.
- Rental and boarder income flexibilities, Fannie Mae, November 14, 2025 (accessed October 6, 2026). Form 1007 required; rent capped at the housing payment with under 12 months of experience.
- Desktop Underwriter version 12.1 release notes, Fannie Mae, March 2026 (accessed October 6, 2026). ADU rental income implemented the weekend of March 21, 2026.
- Fair Market Rents for Fiscal Year 2027 (notice 2026-17891), U.S. Department of Housing and Urban Development, Federal Register, September 1, 2026 (accessed October 6, 2026). FY2027 FMRs effective October 1, 2026; 40th-percentile gross rent including utilities.
- California Government Code section 66317, Justia, current text (accessed October 6, 2026). Deemed approved after 60 days.
- Accessory dwelling units, Multnomah County Assessment and Taxation, reviewed November 28, 2025 (accessed October 6, 2026). Tax increase is hard to predict under Measures 5 and 50.
- Fair Market Rents, HUD User, FY2027 (accessed October 6, 2026). Where to look up your area’s FMR.
- About, VanToVault, undated (accessed October 6, 2026). The founder’s owner-occupied duplex.
- Duplex real results, Q3 2026, VanToVault, September 15, 2026, updated September 24, 2026 (accessed October 6, 2026). Basement suite rent in Q3 2026 ($1,300 a month from one furnished stay).
- How much the tenants actually covered, VanToVault, September 3, 2026, updated October 4, 2026 (accessed October 6, 2026). Basement build-out and boiler cost; listed on Furnished Finder more than Airbnb.