Maximizing Your Property: The Benefits of Building an Accessory Dwelling Unit
- Eric Morrison
- Feb 18, 2023
- 13 min read
Updated: Dec 11, 2023
Table of Contents
Key Takeaways
The Boise Metro Area and the Treasure Valley of Idaho are seeing an increase in the popularity of accessory dwelling units (ADUs).
ADUs are compact living areas that are constructed on the same lot as a single-family home and are intended to be used separately for a variety of purposes, including rental housing, care for elderly relatives, or a home office.
An accessory dwelling unit can provide extra revenue as a rental and increase the value of the property, among other advantages.
Building an ADU is a smart investment strategy due to the steady and expanding Boise housing market.
ADU construction costs can range from $60,000 to over $360,000 depending on the ADU type, size, design choices, materials, finishes, and landscaping.
Cash savings, home equity lines of credit, first mortgage cash-out refinance, loans from friends and family, unsecured loans and credit cards, and renovation loans are all choices for financing the construction of an ADU.
The construction of a secondary dwelling can benefit homeowners greatly and offer a sensible solution to the housing crisis in the Treasure Valley, but it requires careful planning and the hiring of qualified experts.
Introduction
The Boise Metro Area and the Treasure Valley of Idaho are experiencing an increase in the popularity of accessory dwelling units, or ADUs. Homeowners are turning to them as a solution due to the rising expense of housing and the demand for additional living space. However, what precisely are ADUs and what should homeowners know before constructing one? For homeowners in the Boise area, this article offers a thorough review of ADUs, including what they are, the various varieties that are available, and the advantages and disadvantages of constructing one.
An ADU can be the ideal choice for you whether you're searching for additional income, a place for elderly family members, or simply a home office. If you’ve ever thought about building an “in-law suite” or backyard cottage, keep reading to find out everything you need to know.
Understanding Accessory Dwelling Units
Definition of ADUs
An accessory—or secondary—dwelling unit, is a small living space that is built on the same lot as a single-family home. It is intended to function as a separate dwelling for a variety of uses, including as a rental unit, a separate home for an elderly family member or grown child, or a home office. They are more commonly known as granny flats, coach houses, in-law suites, garage or basement apartments, and tiny houses (though mobile tiny houses aren't currently legal in most jurisdictions).
In Boise, as in many other cities, accessory or secondary dwelling units are designed for occupancy, as the term “dwelling” implies. However, there are alternative solutions for additional living and working space that don't classify as full ADUs. These are known as Accessory Structures in the City of Boise. The primary distinction between these structures and an ADU isn't in their construction but in their intended use, particularly the absence of a kitchen.
Types of ADUs
There are several types of ADUs, including:
Detached ADUs
Detached ADUs (or DADUs) are stand-alone homes or apartments on the same lot as a larger, primary dwelling. Similar to a single family home, they have their own door, kitchen, and bathroom. They are usually in the backyard or on the same property but separate from the main house.
Attached ADUs
Attached ADUs are joined by a common wall, roof, or floor to the main home. They can be a suitable alternative for homeowners who wish to add a secondary living space without taking up additional yard space because they can give more privacy than a converted garage, but less seclusion than a detached ADU.
Interior ADUs
Interior ADUs are residences built inside an existing building, like an attic or basement. This kind of ADU takes advantage of underutilized space inside a single-family home. Interior ADUs, in contrast to detached or attached ADUs, are not independent buildings and are sometimes accessed from the main living area of the house, but more often have their own private entrance.
Garage Conversions
Garage conversions transform an existing garage into a separate living area. Either linked to the main house or as a stand-alone structure, they offer amenities like a kitchen, bathroom, and sleeping area. They are a well-liked choice for homeowners who wish to expand their living area without having to erect a brand-new building. Depending on the desired outcome and the state of the garage space before conversion, the process may involve a little refurbishment or a more significant overhaul.
Characteristics of ADUs
All ADUs have a few things in common, including:
They are built on the same lot as a single-family home.
They are typically smaller than the main house.
They are designed for use as a separate living space.
They can be used for a variety of purposes, such as a rental unit, a guest house, a space for aging relatives, or a home office.
Benefits of Having an ADU
There are several benefits to owning an ADU, including:
Providing monthly income as a rental unit
Providing a space to house family members and aging relatives
Providing quarters for temporary workers or travelers
Serving as a guest house, home office, or workspace
Adding value to the property
Constructing an ADU can be a terrific way to make the most of your property and offer more space, money, and value. You can decide whether an ADU is the correct choice for you by being aware of the many types, their features, and advantages.
ADUs in Boise and the Treasure Valley
Overview of the Boise Housing Market
The steadily rising cost of homes in Ada County is all too familiar to longtime residents. Our median home sale price has tripled since 2011, according to data from Boise Regional Realtors. And there are no signs that this trend is slowing down.
In Boise, we experienced extraordinary housing market conditions during the last two years, brought on by the pandemic. High demand and unusually low inventory levels resulted in an above-average price increase. However, we are seeing improvements. Data on slowed price growth, higher inventory, and slower market times suggests we are moving toward more usual and stable market conditions.
In spite of the year's second half seeing a steep decline in demand, thanks partially to rising interest rates, Ada County's supply of open houses has decreased by 40% since August 2022. Additionally, in December, the number of newly listed homes reached multi-year lows.
The housing problem in the Treasure Valley is mostly caused by the simple rule of supply and demand. Both those moving here from out of state and people staying in their current homes are increasing. The perfect storm, so to speak, has been created because millennials are now of buying age and mortgage rates are still at historically low levels.
The most important way to address our housing crisis is to increase the housing supply. ADUs are being cited by numerous organizations, governments, and developers as an essential and underappreciated way to increase the availability of affordable housing.
Regulations and Zoning Laws Related to ADUs in Boise and the Treasure Valley
If you're considering building an ADU, it's important to be aware of the zoning regulations, which vary among the different cities of Boise, Eagle, Meridian, Kuna, Star, Middleton, Nampa, and Caldwell. While ADUs are allowed in all of these jurisdictions, they all have different rules for square footage, building height, and lot size requirements.
The City of Boise Approved Code, which outlines the regulations for ADUs, can be found here. The zoning rules for ADUs outside of Boise city can be found on the cities’ websites:
Here are the key requirements for ADUs in Boise (updated for new 2023 zoning code):
The ADU cannot be larger than 900 square feet.
The ADU can have a maximum of 2 bedrooms.
Currently only one ADU is allowed per property.
A detached ADU must be built in the rear of the main house, and meet all property setbacks per the residentail zone.
The design of the ADU must be compatible with the existing neighborhood and portray the character of a single-family dwelling.
If you live in a Historic District, ADUs require a Certificate of Appropriateness before submitting an application. It's also important to note that 'tiny homes' on wheels are not considered ADUs by the city’s development code, and are therefore not allowed.
When it comes to the application process, the applicant must submit a completed application, a detailed letter of explanation and justification for the proposed project, a statement of legal interest, a detailed site plan, a landscape plan, building elevations, floor plans, and site photos. Note: as of December 1, 2023 a deed restriction of owner-occupany is no longer required, offering greater rental flexibility.
Upon approval of your building permit, you will be required to pay fees in the range of $4,000-$6,000, which includes the planning and zoning application fee, the Ada County Highway District fee, Boise City impact fees (police, regional park, local parks, fire, and sewer), and building permit fees, which vary based on the value of the project.
Popularity and Demand for ADUs in the Boise Metro Area and the Treasure Valley
The popularity of ADUs has been on the rise in western Idaho, driven by the growing need for extra living space and the increasing cost of housing. With the region's growing economy and steady housing market, building an ADU on your property can be a great way to maximize your investment and take advantage of the current market trends.
The City of Boise has seen a steady increase in the number of permits issued for ADUs, from 14 permits issued in 2017 to 20 in 2019, to nearly 30 in 2022.
According to Freddie Mac, ADUs can benefit renters by boosting supply and bringing down costs. ADUs frequently offer comparably less expensive, high-quality accommodation in popular neighborhoods when they are made available for rent. They offer a chance to make the most of a community's existing housing stock rather than giving up priceless open space that improves a neighborhood's quality of life.
ADUs can provide sustainability advantages in terms of the emissions associated with their construction and energy use due to their smaller size and lower environmental impact.
Cost and Financing Options for Building an ADU
The biggest question for most people considering building an ADU is the cost. Like any construction project, it depends on several factors, including size, location, design choice, and materials. The cost per square foot to build an ADU can range widely, from $150 to $400. It's important to note that using cost per square foot as a metric can be misleading for ADUs. Unlike larger homes, where costs are distributed over additional areas like bedrooms and living rooms, ADUs encapsulate all the expensive elements of a home — like utility connections, kitchens, and bathrooms — in a smaller footprint. Therefore, per square foot costs may appear higher, but they reflect the concentration of these essential features within a more compact space.
According to Angi.com the typical national price falls between $60,000 and $360,000, though most projects in the Boise area lie between $150,000 and $300,000.
Building an ADU can be expensive, so it's important to understand the different financing options available. Most homeowners who build ADUs finance them with a combination of the following methods:
Cash Savings or Other Liquid Assets
The first and most obvious route homeowners choose is tapping into their own savings, stocks, equities, or even their 401(k) plans. This way they are able to avoid paying interest on a loan, which may add up over time. However, construction is a significant investment and not all homeowners are in a position to pay out of pocket. Yet, for individuals with the resources and the risk tolerance, drawing on cash reserves or other liquid assets is a sensible choice.
Home Equity Lines of Credit (HELOC)
A HELOC is a loan that is based on the amount of equity you have in your home. Banks provide a loan for an amount up to the percentage of equity owned in the home. After approval, the bank provides the homeowner with a checking account with a certain balance. Homeowners that use HELOCs can borrow money as they need it rather than all at once, making them flexible financing choices. This can be helpful for homeowners who don't know how much their ADU new build or renovation will ultimately cost and want to have access to money as needed.
First Mortgage Cash-Out Refinance
A First Mortgage Cash-Out Refinance is a type of loan that allows you to access the equity in your home by refinancing your first mortgage. Your current mortgage will be paid off by the new loan, and you will get the cash difference. Given that you'll be taking on a higher mortgage and adding to your debt, this form of refinance demands a strong financial foundation and a credit score that is in good standing.
Friends and Family Loans
"Friends and family" financing means borrowing money from relatives or friends instead of banks or credit unions. This financing strategy has many advantages. First, lenders are more eager to deal with borrowers, thus repayment is more flexible. Second, it may cut interest rates. Friends and family finance can also strengthen lender-borrower connections. Yet, borrowing money from friends might damage the connection if the loan goes unpaid.
Unsecured Loans and Credit Cards
Unsecured loans and credit cards are cautiously advised due to their high interest rates. Credit cards may be useful for paying for furnishing materials. Homeowners can do a cash-out refinance and consolidate their debt to quickly pay off high-interest credit cards or bridge loans at the end of the project.
Renovation Loans
Renovation loans, also known as rehab loans or construction loans, are types of financing that let property owners repair their homes while receiving money based on the increased worth of the home once the renovations are finished. These loans can be difficult to obtain, especially if the lender is unfamiliar with the potential and value of ADUs. Yet, some financial institutions that focus on financing ADUs might be more knowledgeable about and open to offering this type of financing.
Construction Loans
Though often used interchangeably, construction loans are different from renovation loans. Construction loans are typically used by builders or developers to finance the construction of a new building or home. This kind of loan gives money for paying for the land, building expenses, and any licenses required. Payments are usually made based on the progress of construction. The construction loan is often changed into a long-term mortgage once the building is finished and fit for habitation. However, this type of financing is not commonly used for homeowners building an ADU.
Pros and Cons of ADUs
Benefits of Building an ADU
Extra Income
The opportunity to earn additional money is among the most significant advantages that come with constructing an ADU. A homeowner can produce passive income by renting out an accessory dwelling unit which can then be used to offset monthly mortgage payments, property taxes, and other obligations.
Space for Aging Relatives or Adult Children
A secondary dwelling provides additional space for elderly relatives, adult children, or guests staying for an extended period of time. This is a terrific method to make sure that loved ones have a nice place to live while still allowing them to keep their privacy and maintain their independence.
Home Office
ADUs can double as home offices, which are becoming increasingly useful as more individuals want to work from home. They provide a calm and private environment for working or studying, which can lead to higher levels of productivity and fewer interruptions.
Challenges of Building and Owning an ADU
Cost
Building an ADU can be expensive, and homeowners need to consider the cost of construction, permits, utility connections, and any other expenses related to building and owning an ADU. Before beginning construction, it's crucial to carefully analyze the project's budget and costs.
Permitting
Permitting for an ADU can be a laborious and challenging procedure. Homeowners who undertake the construction of an ADU on their own, without the aid of an architect, consultant, or contractor, must familiarize themselves with local building ordinances, zoning laws, and other requirements.
Additional Property Taxes and Utility Costs:
Any Homeowner looking to build and/or rent an ADU should be prepared for the increased tax burden and utility costs. These expenses can add up, so it's important to factor them into the overall cost of building and owning an ADU. To fully grasp these fees' scope and potential effects on your finances, it's a good idea to speak with a tax expert.
Conclusion
Building an accessory dwelling unit can bring a multitude of benefits to homeowners in Idaho’s Treasure Valley. An ADU offers a second income stream, extra living space for aged family members or adult children, and even a studio or home office. The region's ongoing housing crisis serves as a reminder of how crucial it is to build more small-footprint housing units in order to address the shortage of affordable housing.
An ADU is an excellent option for homeowners, but there are drawbacks as well, including the expense, the need for permits, and higher utility and property tax bills. Despite the challenges of building and owning an ADU, the long-term benefits far outweigh any risks or roadblocks.
As the demand for affordable housing continues to increase, ADUs provide a practical and sustainable solution for homeowners and the community. With careful planning and implementation, an ADU can offer financial stability, more space, and help to solve Boise’s housing crisis.
If you're thinking of constructing an ADU, we encourage you to take the next steps by reaching out to experts for advice and mapping out a plan that works for you. Boise’s ADU specialist, Alley Homes, can direct you to the right information, lead you through the whole process, and help you express and achieve your goals. Please get in touch with us if you need advice or help at any point.
Frequently Asked Questions
What is an Accessory Dwelling Unit (ADU)?
An ADU is a small living quarters that is built on the same lot as a single-family home. It can be an attached ADU, detached/standalone unit, a garage conversion, or basement apartment, and is designed for use as a separate residence.
Are ADUs allowed in the Boise Metro Area?
Yes, the Boise Metro Area allows for the construction of ADUs, but there are city-specific zoning restrictions and building codes that must be followed.
What are the benefits of building an ADU in Boise?
Building an ADU can help Boise homeowners make extra money through rental income, provide a comfortable space for aging relatives or adult children, or be used as a home office or workspace. ADUs are also an important way to alleviate Boise’s housing shortage while providing more and better options for renters.
How much does it cost to build an ADU in Boise?
The cost of building an ADU in Boise can vary widely depending on the location, size, and type of ADU. On average, the cost of building a detached ADU can range from $150,000 to $325,000, excluding landscaping.
Does an ADU add value to my home in Boise?
Yes, an ADU can add value to your home in Boise by providing additional rental income and increasing the overall value of your property.
Does an ADU require a kitchen in Boise?
An accessory dwelling unit—different from an accessory structure like a shed or home office—is a living space that requires a certificate of occupancy. As such, ADUs must have the following:
Kitchen
Full bath
Access to essential utilities such as water, electricity, and sewage.
What is the permitting process for building an ADU in Boise?
To embark on your ADU project in Boise, you'll navigate a comprehensive permitting process with the City of Boise Planning and Development Services. The key steps are:
Submission of Comprehensive Documentation: Begin by submitting a detailed ADU application to the city. This includes essential documents like floor plans, a Letter of Explanation and a Statement of Legal Interest.
Historic Districts Special Requirement: For ADUs in historic districts, a Certificate of Appropriateness is required to maintain the area's architectural integrity.
ADU Construction Plan Set: Submit a full construction plan set for your ADU, outlining detailed architectural and engineering specifications.
Detailed Site and Landscaping Plan: Along with the construction plan, a comprehensive site plan, including landscaping details, must be provided. This plan should illustrate how the ADU will be situated on your property, considering local setbacks and zoning requirements.
Working with a knowledgeable local contractor or a specialized service provider like Alley Homes can greatly streamline this process. Our expertise in Boise’s ADU regulations and experience in handling similar projects can be invaluable in navigating the complexities of the permitting process efficiently.