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Accessory Dwelling Units (ADUs) are secondary housing units that can be built on a single-family residential property. These units, also known as granny flats, in-law units, backyard cottages, or secondary suites, are typically smaller and are either attached to the primary residence, like a converted garage or basement, or detached, such as a standalone cottage or apartment. The adoption of ADUs can certainly increase affordable housing in California and just may be what you’re looking for to house aging parents, grown children, or to generate income as a rental.

California’s low supply, high demand real estate market is tied to various interconnected factors which have amplified the need to increase affordable housing. So how did we get here?

Housing Shortage

Demand for housing in California far exceeds the available supply. Over several decades, the state hasn’t built enough homes to keep pace with population growth and demand. This shortage results in increased competition for housing, leading to skyrocketing prices and rents.

High Construction Costs

Building homes in California is notably expensive due to various reasons, including stringent building codes and regulations, high land costs, fees, labor costs, and lengthy approval processes. These costs make it challenging to construct affordable housing units.

Zoning and Land Use Regulations

Stringent zoning laws, especially in more affluent areas, have often restricted the types of housing that can be built. Single-family zoning dominates much of the state. However, these laws have been adjusted to increase affordable housing. (More on this in ADUs Increase Affordable Housing section.)

Economic Growth and Job Opportunities

California’s strong job market and economic growth attract people from around the country and the world. The influx of residents seeking opportunities in tech, entertainment, and other industries has increased housing demand and consequently raised prices.

Income Disparity 

There’s a significant income disparity in California, leading to a situation where many lower- and middle-income individuals and families struggle to afford housing in the more expensive regions of the state.


California faces a notable homelessness crisis, with a lack of affordable housing being a significant contributor. The high cost of living, limited housing options, and other factors push many individuals and families into homelessness.

Speculation and Investment

Real estate speculation and investment in the state, both domestic and international, contribute to housing prices rising, especially in desirable urban areas and coastal regions.

ADUs present an innovative approach to address the shortage of affordable housing in many communities. While the above are reasons why we have a housing shortage, here are ways that ADUs increase affordable housing options.

Increased Housing Stock

ADUs effectively increase the housing supply within existing neighborhoods without altering the area’s fundamental character. They offer more housing options without the need for extensive new infrastructure since they are built in the backyards of existing homes. Since 2021,  California has implemented state laws that aim to ease the restrictions on ADU construction. These laws override local regulations in certain cases. For instance, most single-family residential zones now permit the construction of at least one ADU. Some areas in California have even removed the requirement for the primary homeowner to live on the property when an ADU is present.


ADUs provide relatively more affordable housing options compared to larger single-family homes or apartments in the same area. They can be an accessible entry point for renters or smaller households seeking housing in desirable locations. In 2023, the average home in the United States cost $416,100. Can you guess what the median-priced home in California was? $830,620! This means that fewer than 1 in 5 homebuyers in California (only 16%) can afford to buy a median-priced existing single-family home. An ADU can cost around $250,000. Where else can you purchase a home in California for under $300,000?!?! 

Flexible Living Spaces

These units offer flexible living arrangements. They can be used by homeowners for rental income, multigenerational living, or housing for caregivers, allowing for greater flexibility in accommodating changing family needs. We’re also seeing homeowners renting out the main house and living in the ADU to generate a larger rental income. 

Maybe since COVID-19 you’re working from home. ADUs are perfect home offices, work spaces, workout spaces, pool/guest houses and more!


ADUs can contribute to sustainability by utilizing existing infrastructure, minimizing the need for new construction, and utilizing green building practices. New ADUs incorporate energy-efficient appliances, LED lighting, and renewable energy sources like solar panels. Proper insulation and energy-efficient windows also reduce energy consumption.

Community Integration

ADUs can promote community diversity by accommodating a wider range of residents, including students, young professionals, and older adults, thereby fostering more diverse and inclusive neighborhoods.

ADUs Increase Affordable Housing

To promote the expansion of ADUs, many municipalities are revising zoning laws to make it easier for homeowners to build them. Some are offering financial incentives, streamlining the permitting process, or providing pre-approved designs to facilitate ADU construction.

2024 promises to have some exciting new laws in the works to increase affordable housing. For example, Assembly Bill 1033 is codified as Government Code §§ 75852.2 and 75852.25 states that ADUs may be sold separately from the primary unit as a condominium. Additionally, CalHFA has announced an exciting new financing opportunity. “The ADU Grant provides up to $40,000 towards pre-development and non-reoccurring closing costs associated with the construction of the ADU. Predevelopment costs include site prep, architectural designs, permits, soil tests, impact fees, property survey, and energy reports.”

Overall, ADUs are seen as a practical and innovative solution to increase affordable housing. Do you have questions about adding an ADU to your backyard? Call ADU Warehouse today! We work with real estate partners who will share the estimated value of your home before and after construction. Our lenders would be happy to explain the CalHFA opportunity to you and see if you qualify. And best of all, ADU Warehouse is your one stop shop for all things ADU! We work with landscapers, insurance brokers, and designers to make sure your project is the best it can be from start to finish. Call us today!

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