Accessory Dwelling Unit (ADU) Cost Guide 2026

Accessory dwelling units come in several forms, each with dramatically different costs. A detached ADU — a fully separate structure on the same lot — is the most expensive option at $180,000–$400,000 for a 400–800 sq ft unit in most markets. It has a separate foundation, full exterior shell, and all mechanical systems, which is why it costs nearly as much per square foot as a full home.

An attached ADU shares a wall with the main house but has a separate entrance. Costs run $120,000–$250,000 because it shares the foundation and at least one wall but still needs its own mechanical systems, kitchenette, and bathroom. A garage conversion ADU — converting an existing attached or detached garage to living space — is the most economical option at $80,000–$180,000 because the shell already exists.

Junior ADUs (JADUs) are contained within the main home's footprint — a converted bedroom with an efficiency kitchen — and are the least expensive at $30,000–$80,000. However, they typically require sharing a bathroom with the main home under most local codes.

ADU permitting has improved dramatically since California mandated streamlined ADU approval in 2020, which sparked similar legislation in Oregon, Washington, and other states. In California, many jurisdictions now issue ADU permits in 60 days or less for pre-approved plans. In other states, ADU permitting can still be slow, uncertain, and subject to opposition.

Key permitting issues to research before committing to an ADU: minimum lot size requirements, setback requirements (ADUs must typically be 5–10 feet from property lines), height limits, owner-occupancy requirements (some jurisdictions require the owner to live on the property), and parking replacement requirements when converting a garage.

Some jurisdictions have pre-approved ADU plans that can be submitted with minimal review — a significant time and cost savings versus custom plans. Check your local building department's website for pre-approved ADU programs before hiring an architect.

A 400–600 sq ft ADU in a desirable urban or suburban market commands $1,200–$2,500/month in long-term rental income, or $80–$200/night on short-term rental platforms in markets where short-term rental is permitted. Annual gross income of $15,000–$30,000 is a realistic range for a well-located ADU.

The cap rate calculation: a $200,000 ADU generating $18,000/year in gross rent, minus operating expenses (insurance, maintenance, vacancy, property management) of roughly 35%, yields net operating income of $11,700. At a 5% cap rate, this represents $234,000 in value created — slightly above the construction cost. In high-rent markets the numbers work better; in lower-rent markets they may not pencil.

The more relevant financial frame for most homeowners is that the ADU rental income offsets the mortgage payment on the construction loan used to build it. A $200,000 construction loan at 7% over 20 years costs $1,550/month — covered by $1,800/month in rent with $250 in net cash flow plus equity buildup.

Cash-out refinance is the most common financing method for homeowners with equity. If your home is worth $600,000 and you owe $300,000, a cash-out refi can access up to $180,000 (30% of value) to fund ADU construction. Rates are currently higher than during 2020–2021, making this less attractive than it was — but still often the lowest-cost option.

Home equity lines of credit (HELOCs) offer flexibility — borrow as needed during construction rather than all upfront — at rates that float with prime. For a project that takes 8–12 months, the interest carrying cost on a HELOC is lower than on a fully drawn construction loan.

ADU-specific construction loans have emerged as a product category, with some lenders underwriting against projected rental income as well as appraised value. Fannie Mae's HomeStyle and CHOICERenovation programs can finance ADU construction as part of a purchase or refinance. Several states have created dedicated ADU loan programs at below-market rates.