Mortgages & Home Loans Homeowner Guide What Is an Accessory Dwelling Unit (ADU)? Accessory Dwelling Units (ADUs) Explained By Carissa Rawson Updated on December 3, 2021 Reviewed by Lea D. Uradu In This Article View All In This Article Definition & Examples of Accessory Dwelling Units How Accessory Dwelling Units Work Types of Accessory Dwelling Units Do I Need an Accessory Dwelling Unit? Photo: FG Trade / Getty Images Definition An accessory dwelling unit (ADU) is a secondary living space on your property. It’s also known as a “granny flat” and can function as a place to stash your parents or in-laws when they come to live with you. An accessory dwelling unit (ADU) is a secondary living space on your property. It’s also known as a “granny flat” and can function as a place to stash your parents or in-laws when they come to live with you. They may be attached to your existing dwelling or can simply be built on the same grounds. Definition and Examples of Accessory Dwelling Units Accessory dwelling units aren’t a new idea. They’ve been around in one form or another for hundreds of years, though they’re rising in popularity due to the potential to earn extra income. The short of it is this: An accessory dwelling unit is a secondary living facility added to your existing property. ADUs have gone by many names throughout the years, but the concept has always remained the same. These are fully functioning additional homes built onto land you already own. There are many reasons to build them, not the least of which is that they can be more affordable than building a traditional home; a granny flat doesn’t cost you new land, major new infrastructure, elevators, or new parking. Alternate names: granny flat, in-law unit, backyard cottage, carriage house, secondary unit Acronym: ADU How Accessory Dwelling Units Work There are two main reasons for building an accessory dwelling unit: to house additional family members (generally aging parents) or to secure additional income. Accessory dwelling units aren’t allowed everywhere, but more cities are becoming keen on the idea because they have the ability to increase diversity and density in suburban neighborhoods. Although regulations have been evolving to accommodate and even incentivize ADUs, you’ll need to check with your local government to figure out the laws applying to your situation. There are different ways to work with an accessory dwelling unit, depending on your needs. Once you have one on your property, you’ll want to consider your choices. Is there an owner-occupancy requirement in place in your city? If not, you’re able to rent out one or both of your units without any issue. If there is such a requirement, you’ll need to live in at least one of the units, while the other can be rented however you like. Note If you’re a small family, you may want to consider living in the accessory dwelling unit and renting out the main home for extra income. If your family is larger, you may want to do the opposite. Regardless of what you decide, secondary units can be lucrative in the rental housing market. Because the cost of building an accessory dwelling unit can be more affordable than an entirely separate property, you may be able to recoup that money and earn a net positive income more quickly. Even if you’re not looking to rent out an accessory dwelling unit, you may still want to consider building one if you’re looking to have family live with you. Granny flats maintain privacy and space while allowing family members to remain in the same household. This can be especially important when it comes to aging parents for whom retirement homes aren’t a good option. And they can be more affordable—the average cost of a private room at a nursing home is $8,821 per month. Accessory dwelling unit costs vary greatly. According to a survey of ADU owners in Portland, Oregon, the median cost to build an attached ADU was $45,500, and the median cost for a detached ADU was $90,000. Types of Accessory Dwelling Units Internally attached: These units are completely inside your home, such as within a basement. Externally attached: These units may exist as an addition to your home.Detached: These units are completely separate from your existing home. Do I Need an Accessory Dwelling Unit? Determining whether to build an accessory dwelling unit depends on very personal wants and needs. Are you looking for a little extra room to spread out? Do you want to have additional family members nearby? Could you use a little more income and don’t mind being a landlord? Once you’ve answered these questions, you’ll want to research the regulations surrounding accessory dwelling units in your area. Some cities provide incentives to build ADUs, which can help defray the cost of building one. Key Takeaways An accessory dwelling unit is a second home located on your property.The two main reasons people build accessory dwelling units are to earn extra income and to house family members.Each city governs accessory dwelling units differently; you’ll need to check your local regulations before you add one to your property. Was this page helpful? Thanks for your feedback! Tell us why! Other Submit Sources The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy. Genworth. "Nursing Home Costs in 2021." Accessed July 14, 2021. Accessory Dwellings. "How Much Do ADUs Cost To Build?" Accessed July 14, 2021.