As home prices continue to rise, developers and policymakers continue to seek more affordable options. One potential option is the Accessory Dwelling Unit, or ADU: a housing type made to accommodate more people living on one property. ADUs have faced a number of regulatory changes since 2016, with many more changes on the horizon as the public calls for zoning amendments.

Minneapolis and St. Paul each changed their policies to allow construction of ADUs a few years back, but, according to the latest statistics from each city, the actual number being built has been waning. Whether ADUs are a realistic solution for the affordable housing crisis remains unclear. The future is just as unclear for the much-buzzed-about “tiny home.”

An ADU is a housing type that can be built on the property of an existing home, and comes in three different forms: interior, attached, and detached. An interior ADU is a unit inside an existing house and entails the remodel of the interior to make the space its own. An attached ADU, meanwhile, is an entirely new unit built onto an existing house. Finally and most commonly, a detached ADU is a separate unit residing on the property of an existing house. These are commonly built above a detached garage.

Accessory Dwelling Units, also known as accessory apartments, secondary suites, or “granny flats,” are most commonly used by homeowners who want space for additional family members. They are also commonly rented out or made into an Airbnb. Currently, they’re demographically most common among those who are educated and have high incomes, according to Will Annett, editorial director with Minnesota Realtors.

“While [ADUs] might look like a great solution to the affordable housing crisis, construction costs and local regulations make it impractical to produce and price them at a rate that could make a difference to those most in need of homes,” Annett said in an email to TCB.

At its worst, an ADU can burn through a lot of time and money. At its best, it can be a way to offset a mortgage, provide a home for close friends and/or family, or pave the way for increased density in existing neighborhoods.

Declining numbers for ADUs

ADUs were first allowed in Minneapolis in 2014, and St. Paul in 2016, but only in certain areas of each city. For Minneapolis, ADUs were initially limited to the North Phillips neighborhood; for St. Paul, they could be built along the Green Line transit route. Within recent years, construction of new ADUs has tapered.

From 2015 to the present, the number of ADUs built has dropped, according to city data. When ADUs were first accommodated in zoning amendments in 2016, Minneapolis saw the construction of 47 of them, according to Jason Wittenberg, manager of code development with the Minneapolis Community Planning and Economic Development.

In 2020, when duplexes and triplexes in Minneapolis’s lowest density residential zoning districts were legalized, only 15 ADUs were constructed. ADU construction has since dwindled even further, with a mere 13 being built in 2022.

Still that’s not to say public interest has entirely dissipated. In total, there are currently 232 ADUs in Minneapolis, with 174 building permits being processed, according to Wittenberg. In St. Paul, just 20 ADUs have been built, with five building permits issued.

Surrounding cities like Roseville permit ADUs as well, but have seen very little interest since they’ve been legalized, according to city staff there.

Prohibitive costs?

Smaller usually equals cheaper, right? In the ADU’s case, not necessarily.

“On average in the Twin Cities it costs about $250,000 to build an ADU. And so that’s still fairly expensive, and equivalent to buying a single-family home in a lot of ways,” says Karyssa Scheck, development and communications officer at the Minneapolis-based Family Housing Fund.

Utility costs play a big role in this, as ADUs in Minnesota must be built to withstand sub-zero temperatures. “We have some unique challenges and building ADUs here in this region that other regions in the country don’t have,” adds Scheck. That’s made ADUs a bit more popular in states like California and Oregon.

“The cost has been mostly prohibitive, and the regulatory requirements to meet to get an ADU stood up on your property has been kind of what’s been driving the lack of uptake here,” says Kirsten Burch, Family Housing Fund’s program director.

Still, Scheck and Burch highlight ADUs as one way of adding “gentle density” to neighborhoods that might not want to see large apartment complexes erected. Gentle density refers to the process of easing more housing into these areas through smaller dwellings like ADUs. “There’s a lot of folks that like single family zoning and don’t necessarily want to see multifamily housing be brought into their neighborhood, and there’s a lot of folks that really value the opportunity to have neighborhoods that have a variety of housing options available,” Burch says.

It’s worth noting, too, that the ADU is not technically the same thing as a tiny home. Many of the differences between these housing types lie in city zoning regulations. Despite being similar in physical characteristics, regulations on the two are very different. An ADU must be built on the existing property of a single-family home, while a tiny home caters to the zoning regulations of a single-family home, since it is not built with dependence on another structure. Additionally, tiny homes are (you guessed it) tiny, as they’re generally required to be 400 square feet or smaller. Some of these structures are built on wheels to be portable, while an ADU is built to last on one property. Furthermore, the size of an ADU is contingent on the size of the property it is on. It is allowed to take up 45% of the lot it resides on, according to the Family Housing Fund’s website.

While there certainly are financial obstacles to building ADUs and tiny homes, they still have numerous enthusiastic backers. Sean Dixon, CEO of Colorado-based company Simply Tiny Development LLC, is among them. His company has been in the tiny homes business since 2019, and it recently built the first of a series of them in Duluth, MPR News reported late last year.

“We can help cities with their taxable revenue,” Dixon says. “That’s a major thing. If this taxable revenue increases with these lots that were traditionally not used before, this can go back into the communities. … I think that the Tiny Home and the ADU movement is something that’s going to be very, very popular in the future.”

Simply Tiny Development advocates for ADUs and Tiny Homes as being “a complete public housing solution,” with the belief that micro-housing is more affordable in the long run with the combination of asset appreciation and a lower cost of maintenance. “Housing for everybody is what we’re thinking about,” says Joshua Foreman, the company’s chief technology officer of smart home integration.

Of course, zoning issues still persist. Currently, much of the Twin Cities area is zoned for single and multi-family homes. According to the city of St. Paul’s website, as of 2017, single-family homes make up 54% of the capital city’s housing supply. Duplexes, triplexes, and fourplexes make up 11%, and multifamily with five or more units make up 35%.

But changes may be afoot. On April 14, the city of St. Paul will hold a public hearing on its “1-4 Unit Housing Study,” which is “evaluating the potential to add additional zoning flexibility to support the creation of additional smaller, neighborhood-scale housing types,” including ADUs.

The study will, of course, look into several different housing options, though, including duplexes, triplexes, and fourplexes. “What we’re proposing under the new 1-4 Unit amendments are that any homeowner with any single-family home lot, you could build up to two accessory dwelling units, and at least one of those two would have to be detached,” says Luis Pereira, planning director for the city of St. Paul.

In the end, despite all the buzz, ADUs probably won’t singlehandedly solve the housing crisis. But they may still play a role

“ADUs are by no means the silver bullet to solve the housing shortage, but they are one piece of the puzzle,” says Wittenberg with the city of Minneapolis.