Can an ADU Be a Primary Residence: What You Need to Know

An ADU can be a primary residence, providing essential amenities in a smaller, flexible unit ideal for singles, couples, or small families. It is often located on a single-family, residentially zoned lot, so it can be considered a primary residence. Property owners can either occupy or allocate the property to someone else. 

The American market has a notable shortage of affordable housing options, which has created challenges among communities looking to meet their growing housing demands. Accessory dwelling units are among the most effective solutions in many areas nationwide. 

What Is an ADU?

An ADU is a secondary housing facility on your property. It is commonly referred to as a carriage house, cottage, or garage apartment. Most individuals build ADUs for additional income or a family member. They are smaller than the main household and include a functional kitchen and a bathroom. You cannot enter into an ADU directly from your main house since it has a separate entrance from the outside. 

What Qualifies as an ADU?

An accessory apartment must include spaces for cooking, sleeping, living, and bathrooms and offer a certain level of privacy from your primary home. It can be located in the basement of a primary residence, over a garage, or it could be an entirely manufactured home. They can be financed in the same manner as any other home improvement feature. 

The Value of RenoFi

RenoFi is a new way to finance your ADU project. ADUs not only increase your home’s value after renovation - e.g. the value of the property after the ADU has been built - but can also generate rental income. However, ADUs are costly. If you don’t have enough equity in your current home, funding ADU construction with a home equity loan is impossible.

For example, let’s say your current home value is $500,000, and your outstanding mortgage balance is $400,000. You are planning on adding an ADU and expect the value of your home to increase to $640,000. Your current loan-to-value ratio (LTV) is already at 80%, which means that most home equity loans are out of reach because that’s the maximum LTV they allow. So, your borrowing power using your current equity is $0.

RenoFi, on the other hand, would allow you to go as high as 150% LTV of your current value or 90% of your after renovation value, whichever is lower. So, in this example, while using a standard home equity loan results in your borrowing power being $0, a RenoFi loan allows you to borrow up to $176,000 by using the after renovation value of your home!

Get started with your RenoFi loan here

ADU as a Primary Residence

An ADU can be a primary residence, providing essential amenities in a smaller, flexible unit ideal for singles, couples, or small families. Accessory dwelling units traditionally function as additional living spaces on your primary dwelling’s infrastructure. However, you can also use them as your main living space. Even though ADUs are smaller than the average house, you can design them to include all the amenities needed to live comfortably. You can customize them to accommodate couples, singles, or small families.

The units offer a privacy level comparable to a standalone home, promoting an independent lifestyle. It mainly appeals to individuals purchasing their first property or those who prefer minimalism and lower living costs. 

Using an ADU as a primary home is cost-effective, especially in areas with high housing prices. It is also a significant downsizing effort that doesn’t compromise the available space. Efficient design strategies can help you maximize the space in your property to achieve a versatile, comfortable living space. 

Can I Build an ADU on My Property?

Factors like lot size, setbacks, and zoning impact your property’s suitability for an ADU. California permits ADUs in most residential zones. Setbacks ensure that there is adequate spacing between structures on your property. 

The setback requirements for ADUs differ from those for your primary dwelling. You can build an ADU on a multi-family property to maximize its potential. The unit additions offer increased housing options but must constructed following regulations. 

A multi-family property can have a maximum of two detached ADUs, each 1200 sq. ft. Attached ADUs can be 25% of all the units on the main property. Regarding utility installations, there are specific requirements to follow. Proper utility ensures the safety and functionality of your accessory dwelling unit. 

Contractors are required to adhere to Title 24 standards covering lighting, insulation, and HVAC systems. Consulting local agencies and ADU professionals allows you to navigate the set regulations effectively.

California ADU Laws and Regulations

California’s legislative landscape supports the integration of ADUs into residential areas. This is due to the need to address housing scarcity and diversify neighborhood housing options. 

In recent years, state laws have eased their restrictions, allowing individuals to transform their attics, standalone structures, and garages into ADUs. These laws impact local zoning laws to a certain degree, keeping all the states aligned toward specific national standards. 

California ADU regulations revolve around the following:

• Multi-family and single-family properties can have a minimum of one ADU, with others qualifying for junior accessory dwelling units. 
• The minimum and maximum ADU size limits depend on the lot size, with conformity and safety requirements for setbacks from property lines. 
• Owner occupancy mandates are suspended, allowing property investors to add an ADU. 
• It isn’t a requirement for ADUs to have separate utility connections from the primary residence. 
• Parking was initially a barrier, but the current regulations allow you to add an ADU without creating additional parking spaces. 

Financing Options for Buying or Building an ADU

Depending on your financial situation, you may sometimes need financing for your ADU project. Companies like RenoFi offer various financing options based on how you intend to use your unit. Home equity loans leverage your primary residence’s equity to finance an ADU. This option is more affordable in the long run due to low interest rates. 

You can opt for a cash-out refinance, whereby you refinance your mortgage for more than you owe and less than the home’s value. The difference is given to you in cash, and you can use it for your ADU project. 

For a relatively small project, you can use personal savings to lower expenses and avoid loan interest and fees. Some homeowners benefit from low-interest loans and grants designed for ADU development. These come with eligibility restrictions and reduce cost burdens to individuals who qualify. 

Strategies for Adding an ADU on Your Property

Adding an ADU requires a strategic approach to maximize your property’s potential. You must first assess your available space for the presence of a garage, suitable backyard, or an above-garage space that aligns with local zoning requirements. ADU-experienced designers can help you save time and resources when planning for your project. They are familiar with local codes and implement them to create functional and compliant designs. 

Infrastructure and access are essential when designing your units. Consider whether your ADU will need a separate power and water line and whether there is room for an independent entrance. Independence enhances the privacy of the ADU and the primary residence, attracting family members and potential renters. 

Also, determine the main reason you need the ADU, whether it’s to add space or improve the value of your home. ADUs provide a home for seniors and can yield a considerable return on investment. If pre-fabricated ADU models fit your residence, they are quicker and more cost-effective to install than traditional builds. 

Impact of Lot Size on ADU Construction

Your property size determines whether or not you can build an ADU that complies with local zoning regulations. Some neighborhoods do not permit building an ADU due to the small size of their lots. You can determine your lot size by checking your annual property tax statement. 

The lot size and zoning code determine how big your ADU can be. However, some zoning codes allow homeowners to build different-sized ADUs on similar lot sizes. Building an ADU retains a constant fixed cost regardless of the structural size; therefore, it is best to determine the maximum attainable unit size. 

What Are Zoning Laws?

Zoning laws are standards that guide the building of ADUs in specific neighborhoods. It includes the local government’s rules and regulations governing permitted and prohibited land uses. Zoning laws facilitate the standardization of building heights and lot sizes in a given area. They ensure that land use in a particular area is mutually compatible, safe, and responsible.

Common zoning district types include residential, industrial, and commercial zoning. Local architects and builders are familiar with navigating the zoning codes of a particular area. If you live in a standalone single-family home, most states necessitate that you stay in the primary residence when renting out your ADU. Alternatively, you may choose to rent out your primary residence and live in the ADU. 

Consequences of Not Meeting ADU Zoning Regulations

Building your ADU without adhering to local zoning laws is risky. The municipality imposes fines based on local ordinances and the severity of the violations. Under certain conditions, authorities issue stop-working orders to halt construction activities until you achieve the required permits and compliance. Due to the legal risks of unauthorized construction, prospective buyers may hesitate to purchase your property if you decide to sell. 

Failing to comply with zoning regulations is a legal liability that can lower your property’s value. If you later modify your ADU to comply with laws, the process may be costly. In addition, lenders have low confidence in financing a property considered a legal liability. 

Insurance policies also become void, and you may be denied coverage when needed. In extreme cases, the local authorities may require you to remove the ADU, which is costly and time-consuming. 

Types of ADUs

Various types of residences are regarded as ADUs. These include the following:

• Detached New Construction: You can build a tiny house or backyard cottage for family and friends to rent or use as a guest house.  
• Garage Conversion: Insulate and install heating and cooling systems in your garage and add a plumbing fixture to supply water to the bathroom and kitchen.
• Carriage House Conversion: This is often built in a garage with high ceilings, with the downstairs remaining as a garage and transforming the upper area into an apartment. 
• Basement Conversion: Basement apartments have an exterior entrance distinct from the main house’s. Depending on its intended use, you may add an entrance to the main home from inside the ADU. 
• Home Addition: This is a separate living unit you can use with your family or as a rental. Depending on your home’s structure, you can build it as a one or two-story pop-out from one side of your primary residence. 
• Junior ADU: This is a pint-size version of the other ADU types. It can be a tiny home or a functional tree house apartment. 

Benefits of Accessory Dwelling Units

The main benefit of an ADU is the additional income it generates. If you’re renting it out, some of the income might be needed for repairs and cleaning. An ADU also adds value to your home. Due to their small size and compatibility with existing garages and basements, ADUs are affordable to build. You avoid the cost of purchasing additional land, and the unit uses the available utility infrastructure. 

ADUs allow family members to live independently and close to each other. College students can use these units to lower living costs, and seniors can live comfortably while receiving family support. Building and living in an ADU puts out a smaller environmental footprint since the structures are small. 

Constructing an ADU requires fewer materials, and the HVAC systems use less energy to maintain indoor temperatures. Financing an ADU construction is simple, and RenoFi offers flexible loans for your project.

Tips for Saving on ADU Construction Costs

Proper planning is essential in lowering construction costs like any other home project. ADU projects require architectural plans. Selecting a custom-made architectural plan is more costly than a pre-designed one. You can use suitable pre-designed plans to complete the permitting process quicker and make your ADU build less costly. Moreover, it is best to choose affordable and durable materials. This helps prevent premature renovations at future dates. 

If possible, use electric power in your ADU. Extending a gas line to an ADU is more expensive than electricity. Solar panels are a viable option for reducing ADU utility prices. Plumbing can be costly due to hot and cold supply lines, vent lines, and waste lines. You can save on plumbing costs by placing your bathroom and kitchen close to each other. 

Moreover, consider splitting the utility costs between your ADU and the main house. You can add sub-meters to the ADU utilities to determine their electricity and water usage. 

Conclusion

Accessory dwelling units provide additional living spaces in your home, and their comfort and functionality make them a suitable primary residence. You must comply with the state building codes and regulations when building an ADU. 

RenoFi loans are the smartest way to finance a home renovation project. Unlike traditional loans, which are based on your current home value or require you to refinance your primary mortgage and give up your low rate, RenoFi loans are based on the after renovation value of your home. This allows you to borrow, on average, 11x more, get a low monthly payment, and keep your low rate on your first mortgage.

Visit RenoFi for more information.