What Are Accessory Dwelling Units (ADUs)?
Accessory Dwelling Units, commonly known as ADUs, are separate housing units built on existing single-family residential properties. They are also referred to as second dwelling units, guest houses, backyard cottages, mother-in-law units, and granny flats. ADUs come in many forms, including detached structures located in a back or side yard, as well as conversions of existing spaces such as basements, attics, and garages. As an ADU builder or accessory dwelling unit builder, understanding these distinctions is key to helping homeowners make the right choice for their property.
ADUs are allowed on all residential properties in Oregon, and most cities across the U.S. have updated their zoning codes to permit and even encourage their development. Major West Coast cities like Portland and Seattle actively support ADU construction, and states like California and Oregon have passed laws that prevent local governments from prohibiting them outright.
Property owners are increasingly choosing to build ADUs for a wide range of reasons — from generating rental income and increasing property value, to creating space for multigenerational living, aging in place, or simply making better use of available land. ADUs serve many different needs, which is a major reason they have become one of the most popular forms of new housing in the country.
Financing the Cost of Building an ADU
The decision to build an accessory dwelling unit is ultimately a financial one. Homeowners are making a long-term investment in their property, and unless they have sufficient cash on hand, financing will typically be part of the process. Fortunately, there are a growing number of options available to help cover the cost of ADU construction.
Homeowners who lack sufficient equity may qualify for a first or second mortgage that incorporates some or all of the projected value of the ADU. These loan products can help bridge the gap, provided the property has existing equity and the ADU's contribution to value represents less than 50% of the total project cost. Homeowners are encouraged to compare loan options carefully, taking into account interest rates and repayment schedules before committing to a financing path.
Common Questions About ADUs
Is my property suited for an ADU? Many types of properties can accommodate an ADU. In most cases, a flat backyard with few obstructions and a minimum open space of 40' x 25' will work. A local ADU contractor or detached ADU builder can review the property to determine suitability.
How affordable is an ADU to rent? Monthly rents for ADUs typically reflect local market rates. In Portland, Oregon, for example, rents for a single-family ADU generally range from approximately $1,000 to $1,500 per month.
Do ADUs affect property taxes? Yes, adding an ADU will result in an increase in property taxes based on the assessed value of the new unit as a property improvement. However, it should not trigger a reassessment of the rest of the property.
How do ADUs connect to utilities? ADUs typically connect to the primary residence's existing sewer, water, and electrical systems. In most cases, existing service capacity is sufficient to support the additional unit. If upgrades are needed, the cost is generally borne by the homeowner and may not be included in a standard construction bid. Many newer ADUs are built without natural gas connections.
What about mail service? All permitted ADUs are assigned a separate mailing address, usually by adding "A" to the primary residence address and "B" to the ADU.
Working with an experienced ADU builder or garage conversion contractor ensures that all aspects of the project — from utility connections to permitting — are handled correctly, giving homeowners confidence in their investment and the long-term value it brings to their property.
