Since we got so much great feedback on our ADU series, we’re going to keep providing more content focused on this area. Every quarter, we plan on updating you with the latest news on ADUs. This is a fast-moving part of the market that is constantly in flux. Be sure to check back regularly for the latest developments.
- Listen to the podcast “#349: ADU Q1 News: Updated Denver Approvals + Resident Pushback!” on the Denver Real Estate Investing Podcast
- Watch the YouTube video (at the bottom).
- Read the blog post. Note, the blog is an executive summary. Get the in-depth breakdown from the podcast or video.
Here are the four main news items from the past few months:
In west Denver, the Barnum, Barnum West, Villa Park, West Highlands, and Regis neighborhoods are being proposed for neighborhood-wide approval for ADUs. The proposal is going to the city council, where they are expected to approve the move.
This means that all lots in these neighborhoods are automatically zoned for ADUs. Homeowners will still need to meet other requirements, such as setbacks and square footage. However, this move means there will be one less step in the process.
These neighborhoods would join other west Denver areas of Chaffee Park and Sloan’s Lake in having blanket ADU zoning.
On the other side of town, East Colfax was approved for neighborhood-wide zoning allowance for ADUs. Like west Denver, owners still must meet all of the other requirements but won’t need to have their lot rezoned. About 2,000 single-family parcels in this neighborhood are now approved for ADUs.
Contrary to the general trend we’re seeing in the city, the Hampden neighborhood in southeast Denver received its first request for an ADU, and some residents are pushing back against ADU approval. This is a more suburban area with larger lots than the ones we typically see in Denver. The lot applying for ADU approval doesn’t have alley access and at 17,500 sq ft, is about 3x the average lot size of the city.
The council will need to vote on this issue, so we’ll keep an eye on developments.
After Denverite published an article about short-term rentals of ADUs, the city of Denver put out an announcement reiterating its rules on this topic. While it’s allowable to STR your ADU, there are certain caveats:
- Residents may not rent out the primary residence and live in their ADU.
- You can STR your primary residence, but not at the same time as your ADU. You cannot have guests in both the main house and the ADU simultaneously.
- If your ADU has a separate address and you get an STR license for that address, you cannot use that license to rent out your primary residence. However, if your license is for your main address, you can also apply it to your ADU.
- If you own a duplex, you may not live in one unit and STR the other; they are considered two separate primary dwellings.
Although we don’t agree with the theory behind all of these rules, it’s important for investors to abide by them. The city is putting together a committee focused on ADUs, and you can apply to be on the committee itself or sign up to receive email updates.
In 2019, 71 permits were issued for ADUs, the highest number since 2010. It dipped in 2020 with only 54 permits, but 2021 saw an uptick with 64. This is such a low number overall that it’s not going to move the needle on affordable housing. While it’s good that the number isn’t at zero, we’re hoping to see triple digit permits in the near future.
If you want more information on the city of Denver’s ADU rules, check out their STR FAQ.
To learn more about ADUs, check out our recent series:
- #1: ADU Overview and Zoning Regulations for the Denver Metro Area
- #2: ADU in Cory-Merrill, Does it Cash Flow?
- #3: How the Hell Do I Finance My ADU?
- #4: What It Takes to Build an ADU with Phil Daughton
- ADU Directory for Denver, Colorado
As always, reach out to us with any questions about ADUs, but be sure to check with your locality for specific rules and guidelines.