What States are Leading the Way on ADUs?
Accessory Dwelling Units (ADUs) have gained popularity as a flexible housing solution in the United States.
As housing shortages continue to drive up costs, ADUs provide an affordable, scalable way to increase housing supply without major infrastructure expansion. Some states have taken the lead in promoting ADU construction by reducing regulatory barriers and offering financial incentives. Let’s look at the states leading the way, but first, why would someone choose to build an ADU in the first place?
Why Build an ADU?
There are several compelling reasons why homeowners choose to build ADUs:
- Rental Income & Mortgage Offset – ADUs offer homeowners a way to generate passive income by renting out the unit, helping to offset mortgage payments or other living expenses. In high-cost states like California and New York, rental income from an ADU can make homeownership more attainable.
- Multigenerational Living – Many families use ADUs to house aging parents, adult children, or extended family members while maintaining privacy and independence. With rising elder care costs, ADUs provide a cost-effective alternative to assisted living.
- Affordable Housing Solutions – ADUs increase the supply of affordable housing, especially in dense urban areas where large-scale development is difficult. They provide lower-cost rental options in neighborhoods that might otherwise be inaccessible to lower-income renters.
- Property Value Appreciation – Adding an ADU can increase the overall value of a property by creating additional livable square footage and potential rental revenue.
- Flexible Use & Home Office Space – ADUs can serve as home offices, artist studios, guest houses, or short-term rentals, providing a versatile space that adapts to changing needs.
- Sustainable Development – ADUs make efficient use of existing infrastructure, reducing the need for large-scale new developments while promoting walkable, well-connected neighborhoods.
Three States Leading ADU Development
California
California is, by most measures, the national leader in ADU-friendly policies. Since 2016, the state has passed several laws to streamline ADU approvals, remove zoning barriers, and encourage widespread construction. Key policies include:
- Reduced Zoning Restrictions – Homeowners can build both an ADU and a Junior ADU (JADU) on the same lot, effectively creating triplex-like housing in single-family zones.
- Fast-Track Approvals – Local jurisdictions must approve ADU applications within 60 days.
- Statewide Funding Support – Homeowners can apply for up to $40,000 in grants to cover pre-construction costs (though 2024 funds have been fully allocated).
Los Angeles saw ADU permit applications jump from just 80 in 2016 to nearly 2,000 in 2017, proving the effectiveness of these reforms. In 2022, 30,000 ADU permit applications were filed in the state of California and, today, 1 in 7 of all homes built across the state were ADUs.
Vermont
Vermont has adopted a more incentive-driven approach to ADU development. The state offers:
- $50,000 Grants – Available to homeowners who create ADUs for rental purposes.
- Flexible Zoning & Permitting – Vermont has eased restrictions to encourage ADU development in both urban and rural areas.
- Affordable Housing Expansion – ADUs play a key role in Vermont’s efforts to combat housing shortages without disrupting the rural character of the state.
New York
New York has introduced the Plus One ADU Program, offering up to $125,000 per homeowner to build ADUs. The state has already distributed $60 million in funds, with additional grants available on a rolling basis. This initiative aims to:
- Increase Housing Density – Particularly in suburban areas where single-family zoning dominates.
- Support Aging Homeowners – Many older homeowners use ADU grants to build units that allow them to downsize while generating rental income.
- Expand Affordable Rentals – New York sees ADUs as a critical tool to combat housing shortages in high-demand areas.
By reducing zoning barriers and offering financial incentives, California, Vermont, and New York are leading the way in making ADUs a mainstream housing option. Whether for rental income, family housing, or property appreciation, ADUs provide an accessible, cost-effective way to maximize housing potential in existing communities.
For more information on ADU regulations and incentives, visit:
