Introduction to Accessory Dwelling Units
An accessory dwelling unit commonly called a granny flat or in-law suite must exist on a lot that’s zoned single-family. It has its own entrance, separate from the primary house, as well as a kitchen, bathroom and living space. These units can be rented, year-round, and add a lot of value to a property.
Accessory dwelling units take different structural forms. They can be garage conversions, stand-alone units, attic or basement conversions, or be attached to the main house.
Previous Palo Alto zoning regulations:
R1 (including subdistricts), R2, RE, RMD, OS, RM, and PC, providing property is used for a single-family dwelling
Since the new 2020 laws have come into effect, an ADU is allowed on a lot that is zoned to allow single-family or multifamily dwelling residential use and includes a proposed or existing dwelling.
This part can get tricky, so we recommend booking a free appointment with a Maxable expert to find out if your lot would qualify.
Thanks to new ADU legislation there are no longer minimum lot size.
Min/Max Building Sizes
Since the 2020 laws have come into effect, the state of California allows an ADU to be a minimum size of 150 square feet and a maximum size is 850 square feet, or 1000 square feet for an ADU with more than one bedroom.
Palo Alto allows detached ADU's to be a maximum size of 900 square feet.
An ADU has a height restriction of 17 feet (one story).
No parking is required for an ADU that meets any of the following criteria:
The ADU is located within .5 mile of a public bus stop or rail station, and the path of travel is publicly accessible.
The ADU is part of or within the primary residence or existing accessory building.
The ADU is on a street that requires on-street parking permits, but the permit has not been offered to the occupant of the ADU.
The ADU is located within one block of where a motor vehicle provides hourly and daily service as part of a regional fleet operated by a public agency or publicly-leased motor-vehicle-sharing organization.
The ADU is located within a historic district listed in the City’s Historic Resources Inventory.
If you convert your garage the parking spaces are no longer required to be replaced. This is in alignment with the new state laws.
It is required that an ADU maintains a 4-foot minimum rear and side setback.
Owner occupancy requires that the homeowner either live in the ADU or in the primary dwelling. Owner occupancy has been removed in all jurisdictions in California until the year 2025. Any homeowner who builds and ADU from 2020-2025 will forever be grandfathered into no owner occupancy requirement even if the legislation changes to require owner occupancy in the future.
An ADU can always be rented long-term. A long-term rental is defined as a rental period that is 30 days or greater. Often Airbnb, or other short-term rentals are restricted for ADUs. Check your local planning department to find out if a short-term rental in your ADU would be legal.
How to Evaluate ROI
People often underestimate the cost to build a small unit. There are a lot of fixed costs and the expensive square footage, like a kitchen and bathroom, are not offset by large cheaper square footage (for example, large living rooms, hallways, and multiple bedrooms).
With that being said, building an accessory dwelling unit, especially if you intend to keep the property for a few years, represents an enormously beneficial opportunity to maximize your property.
By constructing an accessory dwelling unit you are adding additional square footage to the property. So if you can build a unit for $500-600 a square foot, but the average value of homes in your neighborhood are worth $1,503 a square foot you are gaining instant equity through the project. Plus, you also now have the added benefit of a flexible space that can be rented or used for family.
Property Value (avg value per sq ft)
$1,503 (Figure provided by Zillow)
Construction Costs (avg cost per sq ft)
$600 (Cost will vary depending on the size of the structure. The smaller you build the higher your cost per square foot will be)
Equity Gained through project
$1,503-600=$903 (Meaning you are gaining $903 in property value for every square foot built)
Updated on: 2/17/2020