Why ADU Real Estate is Booming Right Now

adu real estate accessory dwelling unit

Research shows that a record-setting 65 million Americans now live in multigenerational households.

As we welcome grandparents, in-laws, grown children, and more into our homes, there is a burgeoning need for flexible housing that can accommodate all walks of life. 

Enter, the accessory dwelling unit, or ADU.

In recent years, the ADU real estate market has grown tremendously. Now, it's setting the stage for a new era in an industry once dominated by single-family dwellings alone. Today, we're taking a closer look at why this transformation is happening and what it will mean for buyers and investors moving forward. 

What Is an ADU?

Before we dive into how they're almost single-handedly changing the market, let's review the basics behind an ADU. 

In short, this is a unit that operates as an independent residential space within a primary home. It's usually no more than 1,000 square feet in size but delivers all of the basics. 

An ADU usually has its own kitchen, bathroom, and bedroom that allows an individual or group to live independently. It can be attached to the primary home (e.g. an in-law suite) or detached from it, but on the same plot of land (e.g. an apartment above a detached garage).

Why Are ADUs Booming?

From prospective homebuyers to real estate investors, myriad purchasers across the country are eyeing ADUs as viable opportunities. Let's take a look at a few of the top reasons why they're experiencing unprecedented growth.

A Financially-Savvy Investment

Not only do ADUs extend the square footage and resale value of a home, but they also help families accommodate their loved ones in a more economical way. By building an ADU or renovating an existing space into one, you can allow seniors, college students, loved ones with disabilities, and others to comfortably live on your property without the construction of an entirely new home. 

An added benefit? An ADU can also be rented out, allowing homeowners to earn a passive income with minimal effort. 

Easy to Build

Recognizing the value that ADU dwellings bring to a home, officials are adjusting state and local ordinances to make them as easy to build as possible.

Take the recently-enacted ADU laws in California, for instance. In October 2019, the state passed five bills that allow homeowners to build ADUs on their property. Now, state residents are permitted to build a small apartment and convert their garage into an ADU. The bills also simplified and streamlined building applications and removed legal red tape from the construction process.

As a result, developers are jumping into the craze. 

In fact, the National Association of Home Builders (NAHB) reveals that in 2019, one-fifth of developers (20%) converted existing living spaces into ADUs. In addition, 18% of developers built new ADU additions onto a property.

More Affordable to Pursue

It's no secret that building a home can be a laborious and expensive journey. This is where an ADU shines. Not only are these units most cost-effective to live in, but they're also becoming cheaper to build. 

Moving forward, we can expect to see early-adopting cities, such as San Diego, help homeowners cut through most of the costs and wait time associated with traditional construction. This will be made possible via pre-approved ADU plans that take the guesswork and the legwork out of ground-up design.

By sticking to these plans, homeowners and developers alike can reduce standard fees and expedite the building process. This is especially the case when they work one-on-one with builders who specialize in ADU designs.

Pays For Itself

While there will be up-front costs associated with building an ADU, families around the country are realizing that these units will soon pay for themselves. For instance, consider the savings generated by a family that allows their college student to live at home in an ADU rather than pay for on-campus housing. 

The same applies for families with senior members who require around-the-clock care. By keeping their loved ones at home in a nearby ADU, they can save money on residential nursing homes or assisted living facilities.

Easier to Transfer Generational Wealth

Passing down real estate from one generation to the next can prove difficult, especially when younger families are unable to afford the initial expense and upkeep associated with taking on their parents' or grandparents' home. 

To this end, ADUs allow family members to live nearby and save their money. Over time, they can afford to buy into the primary home or inhabit it fully down the road. At the same time, the older generation can enjoy the perks of a secondary, interest-free income and enter their golden years more financially-stable.


Studies show that millennials now hold the majority of home-buying power, representing 38% of the market. Over the years, this generation has embraced a more minimalistic, pared-down way of living, as evidenced by the surge in tiny homes, van conversions, and apartment rentals. 

Now, they're setting their sights on ADUs. Though millennials are flocking to urban areas in droves to pursue careers, only a fraction of them can afford the sky-high prices associated with city living. As such, they're embracing smaller, more efficient living and eschewing the traditional single-family homes that their parents eyed right out of college. 

Embrace the ADU Real Estate Trend Today

Even if you never intend to sell your home, it's important to always keep its value top of mind. Adding an ADU to your property can help you protect your investment and extend the usability of your space.

Whether you intend to let your in-laws, grandparents, children, or friends stay in yours, it's an ideal way to pad your monthly income. It also helps your family weather the storm as needs evolve, dynamics shift and new living requirements emerge. 

As the ADU real estate market continues to boom, those on the cutting-edge of this movement will gain the most. If you're considering embracing it, find a local builder who can help transform or add onto your space!

When you're ready to decorate your accessory dwelling unit space, check back in with our blog! We have all of the interior design tips and tricks you need to stay on-trend. Visit the Real Estate section of the Bootstrap Business Blog right now for additional property advice.

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