Do ADUs Increase Property Values?
August 13, 2023
ADU LAW, BACKYARD LIVING
An ADU — or accessory dwelling unit — can be a significant investment for homeowners, so of course they want to know: how much value does an ADU add to your property?
In this blog we’ll outline how much value an ADU will add to your home, the types of ADUs that add the most value, if an ADU will increase property taxes, and more.
How much does an ADU add to property value in California?
When you consider how much value an ADU can add to your property value there’s generally two ways to think about it: how much additional square footage the ADU adds to your home and how much rental income you could get for the ADU.
For square footage, you’d see how much homes in your area are selling for by square foot, for example $500 per square foot. So if your home is 1,500 square feet, it would likely be appraised around $750,000. In general, ADUs increase the value of your home by 30% of your homes value.
So if your home is valued at $750,000, adding an ADU could potentially increase the value of your home by $225,000.
However, appraisals are often based on how the ADU is categorized, like a rental property or extra space for the homeowner. Buyers value both of those things and therefore you could see an uptick in what your home is worth beyond the typical 30%.
What Type of ADU Adds the Most Value?
There are different types of ADUs and they’re not all valued the same way. The three main types of ADUs are attached, detached and a conversion.
Detached ADUs, also known as prefab granny flats, are constructed separately from the main home and generally are the highest value. This is because detached ADUs offer the most flexibility in maximum size in California, therefore you can add more livable square footage to your property which appraisers could use to calculate your home’s value.
Attached ADUs are attached to the main home and for obvious reasons offer less privacy to homeowners, but it still adds habitable space to your square footage.
However, in California, you can only increase the size of your home by 50% of its existing size, which limits the size of your ADU — and therefore the potential value — considerably. You can still create a lot of value for your home, just not as much as a detached ADU.
A conversion ADU, like a garage conversion, will also increase the value of your home, but less so than either a detached or attached ADU. This is because by converting an existing space, you ultimately lose the value of the space for its intended purpose.
However, with a conversion ADU, you can add a significant amount of monthly passive income, which could ultimately increase the value of your property for the right buyer.
How ADUs Increase Value for You and Your Family
Adding an ADU to your property adds way more to your life than value to your property — and although added value is great, don’t forget about all the other benefits:
Guest space for short visits from friends and family
Aging in place option for parents and relatives
Work from home space or your small business HQ
Play space for kids
Short, medium and long term rental and passive income
Your very own boutique gym studio
The options really are endless with the flexible space of an ADU. Abodu customers use their spaces in plenty of unique ways, from space to display art to a personal yoga and meditation studio.
FAQs for ADU Property Values
Here are some frequently asked questions we get from customers when they’re considering adding an Abodu ADU to their property.
Does adding an ADU increase property taxes in California?
Your property is only reassessed when you move or when new construction on the property is completed. When you add an ADU, the country tax assessor will do a blended assessment of your property.
This simply means the assessor will estimate the value of the ADU, most likely based on how much it cost to build. They will then add that number to the current assessed value of your property and create a new assessed property value — and the value of your primary home will not be reassessed.
Once your ADU project is complete, your property taxes will only increase based on the additional value created by your ADU and the taxes you pay on your primary home won’t change.
To get a general idea of how much extra you’ll pay in property tax, estimate the cost to build your ADU and multiply that by your combined city-county property tax rate. This amount is an estimate of what you’ll pay over a year in addition to your existing property tax.
How Much Land Do You Need for a Backyard ADU?
Let's say you want to build a detached ADU, like an Abodu, which will give you the most value. You’ll need at least a 4 foot setback from the edge of your ADU to your property line on all sides and must be at least 150 square feet.
So break out your tape measure and see how big of an ADU will fit in your backyard based on those requirements. Abodu offers prefab ADUs built to accommodate small and narrow backyards.
How Much Value Can an ADU Add to Your Home?
The value your ADU will add to your home depends on home values in your area and if there’s a strong rental market. In general, ADUs can add around 30% of the value of your home.
Build Your New ADU with Abodu
Abodu has placed hundreds of beautifully designed prefab ADUs across California and is a trusted partner for homeowners wanting to add an ADU to their property.
We offer a variety of floorplans that have all been designed by world-renowned architects and offer a highly livable space with small footprints.
Our white-glove service is what really makes us stand out from the crowd: with Abodu you get a dedicated project manager that handles everything from start to finish.