Why aren’t more ADUs being built!

Jim Smith and I are publishing short articles related to ADUs. They are published in the 24 Community Media papers serving the greater Denver area.

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Why Aren’t More Accessory Dwelling Units (ADUs) Being Built?

This is part 2 of a 6-part monthly series on the topic of ADUs. 

JIM SMITH

JUN 04, 2025

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This is the second installment of my monthly series about one of the hottest topics in real estate: Accessory Dwelling Units. ADUs have gotten a lot of attention recently as a housing option. My thanks to John Phillips of Verdant Living for helping with the research for it.

ADUs – accessory or additional dwelling units, also called granny flats — are a wonderful idea. They use an existing piece of residential real estate and create a separate living space. They are often used for intergenerational housing (aging parents, adult children just starting out, etc.) and have long-term value as rental property and add to the value of your real estate. But very few have been built in Colorado. The experience in the City of Denver is instructive. I have been told that since June 2015 the city has issued 528 ADU permits, of which 418 have been built and have received Certificates of Occupancy. There are thousands of possible sites. There are no easily attainable totals for areas outside Denver, but there are a few ADUs scattered around the suburbs, and there must be tens of thousands of possible sites.

So, one might ask, why aren’t more ADUs being built?

For many years, they were discouraged by local zoning regulations which did not allow a second residential unit on a single-family parcel. That made a lot of sense when land was relatively inexpensive, housing was generally affordable, and single-family residences were the preferred option. But times have changed.

Now, land in urban areas is scarce (thus more expensive), homes are more expensive to build and aren’t as available, and smaller living spaces in closer proximity to others is more acceptable, often preferred by many buyers or renters. In Denver, applications for a variance to build an ADU were rarely denied, but the variance process could take months and was expensive.

However, that is no longer as much of a problem. Laws have been passed that override local zoning regulations; Colorado did that last year, and that law takes effect this July.

That has opened the door, but there is a long way to go. Most homeowners have never even heard of ADUs, much less thought of how building an ADU on their single-family parcel might address their needs. This series is my attempt to address that education gap.

Other impediments:

Other local regulations and rules. Some of these are hangovers from the anti-ADU sentiment, but many are necessary to ensure the quality and safety of the dwelling as well as it being an acceptable addition to the community. These range from soil testing, setbacks, size limitations, parking, utility fees, construction inspections, and more. These sorts of things are dealt with as a matter of course by builders of multi-family buildings and main residencesbut the complexity quickly baffles the typical homeowner.

Cost. The amount of money needed, even for the least expensive ADUs, is not trivial for most homeowners. It exceeds the purchase of a car or the cost of a tiny home, and many don’t understand why.

Finance. Beyond the raw cost, financing an ADU can be a challenge. Most lenders (but not Wendy Renee, Golden Real Estate’s in-house loan officer) are not yet comfortable with the dynamics, and there are few lenders actively doing it.  Call Wendy at 303-868-1903!

Time. The time between signing a contract to build an ADU and receiving a certificate of occupancy could be a year (and often longer). Before you get to the contract phase, investigation of options and selecting a vendor takes even more time. Sometimes a homeowner who wants an ADU has an immediate need, and the timelines may not match.

Market awareness. As mentioned above, most potential purchasers of ADUs are unaware of the opportunity. That education is happening, slowly.

Vendors. In Colorado the cottage industry of ADU vendors and other service providers is only now developing. It exists but is small, hard to find and vet, and doesn’t have a broad community presence.

All these factors are self-reinforcing and limit the development of ADUs. And there is another factor at work. The very nature of ADUs which makes them such a terrific addition to the housing stock, works against widespread adoption. The create “gentle density,” one here, one there. They are rarely installed on residential lots close to each other. The impact, such as traffic, on a particular neighborhood is minimal. They don’t change the character of the neighborhood, but individual homeowners must have the need and desire.

Most homeowners have little experience with a construction project, understand how to research the options, are willing to turn their backyard into a construction site, and, especially for homeowners of moderate means, able to take on the risk and responsibility of a second mortgage (or make the necessary decisions). The whole thing is not part of their perspective.

To help with these issues Verdant Living has published a buyer’s guide, which you can find at BuyersGuideColoradoADUs.com. A good place to begin is the Verdant Living website, VerdantLiving.us or just contact John Phillips at 303-717-1962.

I want to thank John and the following people for their input: Gary Fleisher, Modular Home Source; Kol Peterson, Accessory Dwelling Strategies, Renee Martinez-Stone, Denver Housing Authority and West Denver Renaissance Collaborative, and Eric Scott, TinyMod.