The ADU: A Housing Fix for Seniors and Their Families

Accessory dwelling units (also known as ADUs, backyard cottages, guest homes, or granny flats) can enable seniors to enjoy privacy, yet remain close to family and neighborhood friends.

They don’t depend on clearing natural spaces to develop properties. Yet they offer affordable housing options — which are ever scarcer these days. No wonder ADUs have become a creative solution for older adults.

Here, we focus on ADUs as one answer to the intense competition for senior housing that looms ahead.

What Does an ADU Consist of?

An ADU is a self-sufficient living space on the same parcel of land as the main home. It can be a separate structure, or a basement, garage or attic converted into a fully equipped home. An ADU typically includes a dedicated entryway.

How Affordable Is This Idea?

According to the Old Republic Title company, most ADUs run somewhere from $60K and $285K to create. It all depends on their size and type, and where the property is. But on average, building an ADU costs about $180K.

In contrast, says the title company, the average home sold in 2025 went for just over half a million dollars.

Order a factory-made or modular ADU, and overall costs can be reduced as much as 20%, says Old Republic.

Is Financing Available?

Financing isn’t offered by all lenders.

Deed holders might look to a local bank. Some people opt for renovation or construction loans. Some apply for home equity lines of credit, or other forms of borrowing against home equity.

Ask a lender who handles ADU financing what loan product is best for your plans.

Are We Allowed to Build an ADU Here?

ADU zoning laws vary by state. There are also sets of local regulations to follow. These generally involve height, size, setback and parking regs, construction permits, and owner-occupancy rules.

So, where and how an accessory dwelling can be put up depends on a web of policy and rules.

That said, some states incentivize ADU installations: New York, Vermont, Maine, Connecticut, and the west coast states. Vermont and California even offer grants to help deed holders cover costs.

Laws that support ADU installations are opening up new options for deed holders, and helping to address the ongoing shortage of affordable and “missing middle” homes.

Why Would Anyone Want to Prohibit Homeowners From Building Extra Units?  

Sometimes, it’s about pressure from locals on their politicians. They might argue that increased density is a bad thing. They might fear more traffic and more pressure on public and emergency services if their area allows higher unit density per parcel.

Neighbors might say encouraging ADUs will change the character of the neighborhood — even claiming that property values could suffer.

The American Land Title Association recommends buying homeowner’s title insurance. If you plan to do anything nonstandard on a property you wish to buy, you might consider an extended policy, in case unknown restrictions surface later.

So, My Home Value Won’t Necessarily Rise With a New ADU?

ADUs tend to add value, given their usefulness and income potential. Nationally, the typical long-term rent for a 600-750 square foot accessory dwelling unit is $1,900 to $2,600 per month. Short-term rentals, especially in cities, can fetch quite a bit more.

Then again, keep in mind the potential home buyers out there who see an ADU as too much work or just unnecessary for the way they live.

The best approach is doing what suits your household and style of living — not trying to predict potential profits. Still, you might want to pay a visit to your local tax assessor, and look into possible impacts of an ADU on your future tax assessments.

If We’re Able and Willing to Build an ADU, How Do We Start?

Meet with a local contractor who works with ADUs in your area. An experienced contractor can guide your household through:

• Envisioning a unit that meets the future ADU resident’s needs and preferences.

• Checking the land to prepare for installation, including utility hookups.

• Drafting blueprints.

• Securing the permits.

• Actual construction.

Also necessary is good financial planning. Set up a meeting with a lending consultant, your tax expert and/or accountant.  

To learn about deeding considerations, see our guide: Is the Backyard Cottage Written Into the Deed, or Recorded Separately?