Welcome to our updated series on Accessory Dwelling Units (ADUs)! This first episode will give you an overview of what an ADU is, basic zoning regulations, some considerations for building your own ADU, and various benefits and uses of an ADU.
- This post is part of our Denver ADU Course. ADU’s are a hot topic! This series is to keep you informed and updated on the ADU scene. View our Colorado ADU Directory list.
- Listen to the podcast “#330: ADU Series Episode 1: ADU Overview and Zoning Regulations for the Denver Metro Area” 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.
Three Learning Options:
What Is an ADU?
An ADU is a separate unit on your primary property. As of right now, zoning doesn’t allow you to disconnect the two units—you can’t sell an ADU separately from your house. ADUs go by many different names: granny flats, mother-in-law suites, carriage houses, or alley houses.
While they come in many shapes and sizes, these units are meant to be small, accessory structures. Depending on the municipality, they can be attached or detached. An attached structure is typically a mother-in-law suite, while a detached structure is usually a carriage house-style building.
What Are the Zoning Requirements for ADUs in the Denver Metro Area?
The Denver metro area is made up of five counties and many different townships. Because Denver has the most robust guidelines for ADUs, we’re focusing most of our course there, but we are also providing high-level context of how to balance the rules and changing landscape. Several other municipalities are getting on board with ADUs and putting out their own guidelines. We’re working on putting together a directory that will aggregate all of the local data.
Denver county is trying to make it easier for people to build ADUs. If you’re interested in building an ADU, check the specific zoning on your property as a starting point. We did a deep dive into zoning code that you can refer to here.
About 25-30% of lots in Denver are zoned for ADUs, and the city council is trying to increase that percentage. Chaffee Park and Sloan Lake are the first areas where they are allowed neighborhood-wide.
When trying to figure out if your lot is zoned for an ADU, check for TU, which means Two Unit. That means you can build an ADU without having to rezone the lot. If your zoning code is 1, that also means you can have an ADU on your property.
If you’re buying a property and the MLS says it’s zoned for an ADU, be sure to do your own due diligence to verify that information. It’s easy to go to the Denver Accessory site and check, or call the city to verify.
The size of the ADU you can build depends on the size of your lot. In Denver, the lot size requirements are broken down into three categories:
- If the lot is over 7000sqft, the max size for an ADU is 1000sqft
- If the lot is between 6000-7000sqft, the max size for an ADU is 864sqft
- If the lot is less than 6000sqft, the max size for an ADU is 650sqft
There are also lot coverage requirements to keep in mind. Lot coverage is how much of the lot can be covered by a building; all lots need a certain amount of yard space. About 50% of your lot can be covered by a structure, and ADUs must be in the rear 35% of the lot. This can be tricky if your primary house is in the middle of the lot.
ADUs can only be 1.5 stories max, which is why you see a lot of ADUs with slanted roofs. Variances from these rules require a case to be made for an exception.
What are the Pros and Cons of Having an ADU?
A great benefit of ADUs is how flexible they are. They can be a source of income when rented out, a place for a nanny or relative to live, or even a home office. While we focus a lot of on the rental aspect, there are a lot of possibilities. Since ADUs are permanent structures, they can take on different uses over the years, too.
We all know there is a housing shortage happening right now, and ADUs are one solution to that: they’re simple to build and can provide the extra housing we need in this market.
However, there are a lot of hurdles people face that can deter them from building an ADU. One of them is complicated zoning, which we’re trying to work through at a city level. Another is the financial aspect—ADUs are expensive to build and can be difficult to finance because they are such a unique product. FHA and conventional loans can’t be used for financing, and often people need to find a lender who specializes in this niche area. In future episodes, we’ll discuss more about how to finance them and what options people have for building them.
Because of the housing shortage, the city of Denver is offering grant funds to build an ADU if you live in the western area of the city. The city will give $30K towards building costs and the unit must be restricted, meaning there is a cap on rent and how income the renter can make. We’ll look at this program in greater detail in a later episode.
As we dive more into ADUs, we’ll do analyses and run numbers to give our audience a better idea of how ADUs perform. We’ll also talk to different people who operate in this space to provide a holistic view of these unique structures.
In the meantime, if you have any questions, reach out to us.