ADUs: The biggest unlock in the history of living near friends

When you’re trying to live near friends, knowing that ADUs are an option expands the range of properties you can consider. Instead of limiting your search to duplexes, you can now also include single family homes, which are available in much greater supply (almost 96 percent of total residential land in California is zoned as single-family-only). Or if you were previously looking for fully vacant triplexes or quadplexes, which are rare, you can now also consider duplexes. 

A decade ago in California, it was difficult to get a permit to build an ADU. But a series of regulatory changes in recent years removed roadblocks to the ADU approval process, making it easier for homeowners to build ADUs, and build more of them on multifamily properties. In most major Bay Area cities, you’re now allowed to build an ADU of up to 1000-1200 sq ft.

As a result of these regulatory changes, it’s faster, easier, and cheaper to build an ADU in California than it used to be, and there are a number of companies that hold your hand through the approval, financing, design, and construction process. This has led to a boom in ADU construction: between 2016 and 2022, the number of ADUs permitted annually in California increased by 15,334%, resulting in a total of 83,865 ADUs permitted during this period. And excluding the year 2020, which was affected by the COVID pandemic, ADU permitting has grown by 42% to 76% each year since 2016. 

Wait, what’s an ADU?

Essentially, just a normal home.

An accessory dwelling unit (ADU) is an independent living space built on the same property as an existing home. ADUs can contain everything you’d expect to see in a regular home, like bedroom(s), bathroom(s), and kitchen. 

While they are typically smaller than the main home, they can feel very much like full-sized homes. That’s been the case for Carmen and Osman, who live in a 930 sq ft ADU with their toddler. “It doesn’t feel tiny,” Carmen says. When their friends offered to build an ADU for them in their backyard, accepting the offer felt like a no-brainer. Carmen was heavily involved in the design process, resulting in a house that she says feels luxurious and open despite being so small. 

You don’t need tons of square footage to build an ADU that can comfortably house multiple people: 

And some example floor plans:

Types of ADUs

There are three main types of ADUs:

• Detached: free-standing buildings that are not attached to the main home
• Attached: built as an addition to the main home, sometimes as a second floor
• Conversion: built by converting part of the main home (often the garage) into a new unit 

When it comes to construction, there are two options, each with different pros and cons:

• Ground-up construction: this means building the ADU from scratch, typically involving an architect, engineer, and design team. 
• Prefabricated: the ADU is built entirely off-site in a factory, and is then transported to your home. Because the ADU is already built, this option is usually faster, has more predictable costs, and is less disruptive with reduced onsite construction. But it usually only works for detached units and when your lot can accommodate the standard sizes. Contrary to what you might think, it is not always cheaper than ground-up construction.

Building an ADU is often cheaper than buying a home

When you buy a home, you are also buying the land under it, which is a pricey part of the equation in the Bay Area. ADUs also utilize existing infrastructure like sewer connections, electrical, and plumbing. Because these costs have already been paid as part of the initial home purchase, building an ADU is often cheaper than buying a new home. 

There’s obviously a huge range in ADU costs, depending on size, finishes, and utilities, among other factors. But if you’re trying to get a benchmark to evaluate whether ADUs should be an option in your housing search, here are a few helpful figures: 

• A typical garage conversion ranges from $80 – $150K
• Prefab ADUs are typically around $600 per square foot
• Ground-up construction ADUs range from around $400 – $800 per square foot

What this means practically is that ADUs are a way for two friends to live next to each other, each in their own house, for much less than it would cost to buy two side-by-side properties: 

If you buy a 1200 sq ft house with enough land, you can add a 1200 sq ft ADU and on average each home costs (A+B)/2. And you and a friend can share in those savings. 

Here are a few real-life examples:

106 Denslowe Dr, San Francisco

You buy a single-family home in San Francisco for $1.35M. You add a 500 sq ft ADU for $300K, turning your $1.35M single-family home into a $1.65M two-family property. 

6838 Saroni Dr, Oakland

You buy a single-family home in the Oakland Hills for $775K. You add a 700 sq ft ADU for $420K, turning your $775K single-family home into a $1.2M two-family property. 

387 63rd Street, Oakland

You buy a triplex for $1.7M. It’s on an almost 8,000 sq ft lot, and there’s enough room to add an 800 sq ft ADU in the backyard. You spend $500K on the ADU, turning your $1.7M three-household property into a $2.2M four-household property.

Ownership structures

There are a few different options when it comes to ownership structure for ADUs:

• Rent: the cleanest and simplest option is to rent an ADU on your property to a friend. 
• Co-own: tenancy in common allows you and a friend to each own an agreed percentage of the overall property. Signing a TIC agreement grants you each exclusive usage rights to individual units. And you can get TIC financing.
• Own separately as condos: in some cases, ADUs can be converted into separately salable units, most notably in San Jose. In this case your friend can buy it from you like a normal home.

(Much of what we’ve written about joint ownership structures for duplexes applies here as well.)

How to evaluate a property’s ADU potential 

Here’s what to look for when evaluating a property’s ADU potential:

Garage 

Garage conversions, whether the garage is attached or detached, are often the easiest type of ADU. Because the structure is already built, the “work” is limited to the utilities and finishes. 

As an added bonus, regulations are more lenient when you’re converting an existing structure as opposed to building a new one. For example, standalone ADUs are usually required to be four feet from property lines and 10 feet from the primary residence. But these standards often don’t apply to existing structures. 

Two-car or larger garages, with ceiling heights of at least 16’, are best suited to ADU conversion (but ADUs can work in smaller spaces, too). 

Lot size

If you want to build a standalone ADU, you need a lot that’s big enough to accommodate it. The bare minimum total lot size for most standalone ADUs is 3,500 sq ft (including the existing house), but even more important than lot size is floor to area ratio (how big the existing structure is compared to the lot size). 

You can use the online tool Symbium to visualize whether an ADU might fit on a particular property. Enter any property address into the tool, click on “accessory dwelling units”, then “sketch an ADU”. You’ll be able to try various ADU dimensions and see an analysis of whether your design is likely to be permitted. 

Terrain

A flat lot is easier and cheaper to build on than a hilly one. 

Utilities

Existing infrastructure has a big impact on the cost and complexity of any ADU project. Is there enough electrical capacity on the electrical panel? Is the sewer line in good enough shape to accommodate a higher waste flow? Is there enough water pressure going to the house so every time someone takes a shower in the main home the water in the ADU doesn't turn into a trickle?

A lot of the surprise costs of building new homes is from unexpected utility fees and upgrades.

Some cities are more lenient on utility requirements for single-family homes adding an ADU than multi-unit properties.

Local restrictions

Generally speaking, if your planned ADU is less than 800 sq ft, less than 16’ tall, and more than 4’ away from the property line, your city is required to permit it. But thanks in large part to YIMBY advocacy, most major Bay Area cities’ ADU rules are significantly more permissive than the state minimums. It’s worth checking to see what’s allowed in the city where you plan to purchase a home. 

Bay Area ADU Guidelines

City guides:

• San Francisco
• San Jose
• Oakland (single family homes only)
• Berkeley

What about ADU limitations for multifamily properties? SB1211, which was passed in 2024, increased the number of detached ADUs that can be built on multifamily properties from two to up to eight (!), (not exceeding the number of existing units). 

The law is a game changer for those pursuing maximalist live-near-friend dreams: now you can buy, say, a triplex and double its capacity by building three additional ADUs. It would be almost unheard of to find a 6-household friend compound in the existing housing stock, but SB1211 makes it possible. 

ADU building process & timeline

There are many different types of ADUs, so there’s no standard timeline for the building process. For planning purposes, you can figure roughly a year from start to finish, but this varies depending on the size of your ADU project, whether you’re building ground-up or prefab, and topographical features of your property. 

The steps involved in ground-up construction include:

1. Research & planning: Conducting a site assessment, understanding zoning requirements in your area, arranging pre-approval if loan financing is needed.
2. Design & documentation: Developing a design for your ADU, ensuring compliance with local building codes
3. Pre-construction: Selecting an architect, getting multiple bids for a contractor, arranging financing if needed
4. Permitting: Submitting building permit applications and construction drawings, addressing city requests for revisions
5. Construction: Trenching and foundation work, framing of the structure, mechanical/electrical/plumbing, vertical construction

Want to build an ADU for a friend?