ADU Costs and ROI: Is an Accessory Dwelling Unit Worth Building?

Accessory dwelling units — backyard cottages, garage conversions, basement apartments — have exploded in popularity as 25+ states passed legislation streamlining ADU permitting since 2020. California alone saw ADU permits jump from 6,000 in 2018 to over 25,000 in 2024.

The appeal is obvious: rental income from your own property, multigenerational living flexibility, and property value increase. But the costs are substantial, timelines are long, and ROI depends heavily on your local rental market.

These costs include permitting, utilities connections, and basic finishes. High-cost markets (CA, NY, WA) trend toward the upper ranges. Note that 2026 tariffs have increased material costs 10–20% for new construction compared to 2024 estimates.