Wrapping Up Our ADU Series: What We’ve Learned

By: John Phillips with Verdant Living

This is the sixth and final installment of a monthly series about one of the hottest topics in real estate: Accessory Dwelling Units. ADUs have gotten a lot of attention as a housing option.

ADUs – detached accessory or additional dwelling units, also called mini homes - are understandably considered a wonderful idea. They use an existing piece of residential real estate and create an additional living unit.  It could be walk-out basement with its own secure entrance, a standalone backyard unit, or an apartment above a detached garage.  They are often used for intergenerational housing (aging parents, twenty somethings just starting out, etc.) and have long-term value as rental property and add to the value of the real estate.

ADUs have been around a long time but have failed thus far to become an important part of the housing stock.  The emphasis has been on single family homes designed to house one family sharing the living space.  ADUs are a separate living space used by people who aren’t necessarily related to the homeowner. (Some owners move into their ADU and rent out the main house, and a 2025 law in Colorado eliminated the need for the owner to occupy one unit or the other.)  

The attributes of an ADU (mainly reasonable cost and proximity) make them an option worth examining as one solution to the pressing need for housing. This series dealt with some of the important considerations when investigating that option.

Two factors that make ADUs attractive as a housing option are 1) the cost of building or finishing a much smaller living space, and 2) the utilization of space that was already part of the property (say, a backyard or an unfinished basement).  Zoning rules, which have been a significant impediment to creating ADUs, are being loosened, homeowners are learning about the option, and the concept of living in an ADU has gained acceptance. In particular, many are finding the small (but comfortable) living area of an ADU not only acceptable (matching the space actually used in a larger home) but also psychologically freeing. It has been difficult to finance an ADU because the mortgage finance sector had very little experience dealing with them, but that is changing, too.  ADUs are a great application for modular construction (built in a factory and delivered by truck), depending on the circumstances.

Are ADUs a solution to the need for more (and more affordable) housing? Yes, but probably only a small piece of the solution; ADUs have, in some respects, received more attention than they deserve. They are a wonderful idea, but they have been hyped. However, one thing that makes ADUs so attractive also limits their adoption. They provide “gentle” density — one here, one there.  They don’t cause disruption or change the basic nature of a neighborhood, and it takes the initiative of an individual homeowner (driven by individual circumstances) to build one. There are thousands (tens of thousands?) of possible sites for ADUs — more so, now that they cannot be disallowed under single-family zoning.  But will a substantial number be built?

The need for housing is really the need for affordable housing. People with money can always find a place to live. The real need is for housing for people of moderate means in the neighborhoods where they live, and those are the people who face hurdles (both practical and emotional) when it comes to the ADU option. 

Take the example of a homeowner on limited income — perhaps a retiree — who is just getting by financially.  If their property could accommodate an ADU, the income from having one could make a huge financial difference. But this homeowner may believe they could never qualify for the financing to create that ADU.  Don’t assume that!  Contact one a knowledgeable finance professional to learn about programs designed especially for your circumstance. 

The hurdles can be cleared, but the process is harder. The key issue for potential ADU builders of moderate means is the level of need. Are they driven to find solutions? Hurdles can be cleared with determination and the willingness to accept help and advice. And the payoff can be handsome. Not only is a critical need met (say, housing for an aging relative), but sorely needed housing is created, and the homeowner develops wealth.

To help those interested in ADUs, Verdant Living has published a buyer’s guide,www.BuyersGuideColoradoADUs.com. A good place to begin is the Verdant Living website,VerdantLiving.us, or contact John Phillips 303-717-1962

Q1: Will ADUs really help with the housing shortage?

A: Yes—ADUs add “gentle” density (one here, one there) without disrupting neighborhood character. They’re a meaningful piece of the puzzle but not a silver bullet, because each unit depends on an individual homeowner’s initiative, finances, and site. As zoning loosens and awareness grows, ADUs can steadily expand local housing options.

Q2: Can I finance an ADU if I’m on a moderate or fixed income?

A: Don’t assume you can’t. Lenders and programs are increasingly set up to finance ADUs, and many owners are surprised by what they qualify for. Speak with a knowledgeable finance professional about options that fit your situation, and review Verdant Living’s buyer’s guide for starting points: www.BuyersGuideColoradoADUs.com (or contact John Phillips at 303-717-1962).

Q3: What rules apply—do I have to live on the property, and is modular allowed?

A: Rules vary by jurisdiction, but many communities no longer allow single-family zoning to flatly prohibit ADUs. In Colorado, a 2025 law removed the owner-occupancy requirement (you don’t have to live in either unit). You’ll still need to meet local permitting, setbacks, and utility requirements. ADUs can be site-built, converted from existing space (e.g., basement/garage), or factory-built as modular—choose based on site access, schedule, and budget.