Affordable housing? Think small! (Maybe an ADU?)

Published by Jim Smith, the owner of Golden Real Estate:

ADUs have gotten a lot of attention recently as a housing option. My thanks to John Phillips of Verdant Living for helping on the research for it.

ADUs (accessory or additional dwelling units) are a wonderful idea. They utilize an existing piece of residential real estate and create a separate living space. They have been around for a long time. In the TV series Happy Days, Fonsie lived in one, on top of a garage. And often they have been a converted basement (still worth considering). They can be a separate building, usually in the backyard. Until recently, zoning regulations made that difficult to do. Throughout the United States, as a part of the need for more housing, zoning codes are being changed to allow ADUs. In Colorado, a law was passed last year allowing ADUs in all major metropolitan areas. That was the subject of my “Real Estate Today” column on February 13, 2025.

When Colorado’s General Assembly passed the law, the legislature was concerned that ADUs would be possible for homeowners of moderate means and add to the affordable or “attainable” housing. Up until now, most of the few detached ADUs that have been built in Colorado have been done by relatively well off homeowners and have been relatively expensive. They really don’t qualify as affordable.

So, can accessory dwelling units play a role in affordable housing? Absolutely, for a very understandable reason. They are smaller. The smaller living space is less expensive to build. Is it for everyone? Of course not, but the well-designed living spaces are comfortable and mimic the way most of us live, which is in just a few rooms anyway.

Rita and I now live in a 3-bedroom apartment, having sold our 4,000-square-foot home in Golden. Back then, we really only used the eat-in kitchen, the living room, the primary bedroom/bathroom, and the office. The basement was filled with stuff we didn’t use, except for a ping pong table we used a couple times a year and a portable sauna that we used a half dozen times. The formal dining room was made into a game room, but we hardly used that. The second bedroom was only occasionally used by a guest.

Now, in our 1,200-square-foot apartment, our life hasn’t changed much. We eat next to our kitchen, which is part of the living room. One bedroom is my office, and we have a guest bedroom that we’ve only used twice, but it’s nice to have. True, we have no room for a piece of exercise equipment that I’d like to buy, but there is a fitness center on the main floor which has more equipment than I need. The apartment has all we need for daily life — sort of like an ADU.

ADUs are perfect for intergenerational housing (AARP loves them), for young adults as starter homes, and for childless couples, like Rita and me.

ADUs are part of a larger movement emphasizing smaller, high quality living spaces. There are entire developments of smaller homes on smaller lots, some of them the size of an ADU.

Affordability Characteristics

Cost. Because of their small size, ADUs offer a more affordable option compared to traditional homes, making homeownership accessible to a broader segment of the population, including young adults and seniors.Housing stock. By integrating ADUs into the housing market, communities increase the overall housing supply, especially when they are located in areas dealing with an affordable housing shortage.Operational expense. Because of their smaller footprint, ADUs require less heating and cooling, as well as less long-term maintenance.Versatility. ADUs can serve various housing needs, including for family members or as rental properties, providing the homeowner with an additional income source.Land cost. This is a big one. When the ADU is a backyard bungalow, it utilizes land that is already owned. For a standalone mini home, the size of the real estate is much smaller.Water & Sewer. When the ADU is just that — accessory to an existing single-family home — it can share the same water and sewer tap, saving a 5-figure cost associated with building a new standalone home.

Another positive is that an ADU adds long-term value to an existing single-family home, increasing the wealth of the homeowner.

If you want to find out more about ADUs, you should check out the buyer’s guide on the Verdant Living website, which lists many other companies and resources.

Or call or text John Phillips on his cell: 303-717-1962.

Next month: Why aren’t more ADUs being built in Colorado?