Americans on the hunt for affordable housing are finding it in a new and unexpected place: Accessory Dwelling Units (ADUs). ADUs are popping up in backyards in some of the most expensive neighborhoods in the country, and their popularity is growing quickly.
Expansion of Accessory Dwelling Units
Data source: Cotality, 2026
New analysis of Cotality building permit data shows that between 2015 and 2025 the number of permits granted to build ADUs rose 1,100%. A decade ago, the number of new ADUs was a rounding error. Today they account for 7% of all residential construction permits nationwide. In some especially pricey cities like Los Angeles and San Francisco, more permits were issued to build ADUs in 2025 than for all other forms of housing combined.
Which states allow ADUs?
Building more houses can be easier said than done. Zoning restrictions, building permit hurdles, and regulatory resistance constrict what type of housing can be built and where. Having ADUs as an option is only possible if zoning allows. Growing affordability concerns have spurred both demand for this housing type as well as zoning reform, especially in California where Cotality data shows that the median price of a newly built, entry-level home in California is 81.7% higher than the national average.
ADUs are a flexible housing type that can serve as an apartment, a short-term rental, or just extra square footage for a growing family, and where ADUs are allowed, they are popular. In some markets, they are emerging as a key source of new housing supply.
Top markets for ADU permits:
- California: 41,000 ADU permits (52 for every 100 conventional residential permits)
- Washington: 2,200 ADU permits (11 for every 100 conventional residential permits)
- Florida: 2,000 ADU permits (1 for every 100 conventional residential permits)
- Oregon: 1,600 ADU permits (8 for every 100 conventional residential permits)
- Arizona: 1,600 ADU permits (5 for every 100 conventional residential permits)
- Colorado: 1,300 ADU permits (6 for every 100 conventional residential permits)
- North Carolina: 900 ADU permits (1 for every 100 conventional residential permits)
- Tennessee: 600 ADU permits (3 for every 100 conventional residential permits)
- Texas: 600 ADU permits (0.5 for every 100 conventional residential permits)
- Massachusetts: 400 ADU permits (4 for every 100 conventional residential permits)
Legality is only the first step. Feasibility is the second. Knowing where zoning, costs, and demand collide provides assurance of certainty that helps developers, investors, and homeowners judge projects with confidence.
