ADUs increasingly allowed but infrequently built

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Edina could soon become the latest Twin Cities suburb to allow accessory dwelling units, or ADUs. The Edina Planning Commission and City Council will hold public hearings on the matter early this year, with a possible City Council vote to follow.

Edina would join at least 20 suburban cities that already permit ADUs on single-family residential lots. Both Minneapolis and St. Paul allow ADUs as well. But despite their apparent popularity, ADUs remain relatively uncommon in the metro area. Eagan, one of the first metro cities to legalize ADUs in 2014, has just three. Richfield, which legalized ADUs in 2017, likely has fewer than 10, said City Council member Sean Hayford Oleary. Minneapolis has by far the most of any metro city, but its number is still comparatively low: 232 as of early last year, representing fewer than 1% of eligible properties.

The region has relatively few ADUs because they’re expensive to build and because many municipal ADU ordinances restrict their size, features, building materials, and permitted uses.

More successful ordinances, like Burnsville’s, offer clues to how cities like Edina could shape future ADU regulations. Still, ADUs are unlikely to play a significant role in easing the regional housing shortage in the near term. Instead, they’ll remain a niche housing product for families with specific needs — and ample budgets.

What ADUs are and how they’re used

Mother-in-law apartments. Granny flats. Carriage houses. Backyard suites.

Accessory dwelling units are known by many names, some old-fashioned or downright silly. Whichever you prefer, the idea is simple enough: a separate, usually smaller unit associated with a single-family house. As the common names imply, ADU occupants are often related or at least familiar to those living in the main house. That sets ADUs apart from duplexes, whose occupants are less likely to be related.

ADUs come in three formats:

• Detached: A standalone structure, often built over a detached garage.
• Attached: At least partially contained within an above-grade addition to the main house, sometimes over an attached garage.
• Interior: Mostly or entirely contained within the original envelope of the main house, often in a finished basement or garden level.

In all three cases, ADUs are self-contained housing units. They have separate entrances, separate kitchens, and at least one bathroom and bedroom. Attached and interior ADUs may share utility service and HVAC with the main unit, but they generally have a separate thermostat.

Proponents pitch the smaller, self-contained units as a partial solution to housing shortages and affordability gaps in lower-density neighborhoods not suitable for apartment development. Where municipal ordinances allow short-term rentals in ADUs, they’re seen as having less impact on local housing availability than traditional apartments or duplexes exclusively set aside for short-term users.

Suburban policymakers and planners also see ADUs enabling older homeowners to remain in place for longer. ADU ordinances generally allow the property owner to live in either the main house or in the ADU, as long as they reside on the property.

“An ADU can be an opportunity to downsize within your own neighborhood while providing housing for family, an on-site caregiver, or simply additional rental income,” said Myles Campbell, a planner for the city of Golden Valley.

Construction costs hinder adoption

It’s an appealing vision. But across the metro, ADU approvals have been stymied by high construction costs and picky municipal ordinances.

Golden Valley has approved one ADU since late 2022, with another in the pipeline. Richfield has allowed fewer than 10 in about six years. Eagan, which only allows attached and interior ADUs, has permitted just three in 10 years. Plymouth recently greenlighted its second.

“That’s about on par with what we expected since ADUs are pretty costly,” said Chloe McGuire, Plymouth’s Planning and Development Manager.

A 2022 study by the Family Housing Fund put the average cost of a detached ADU with garage at about $255,000 in 2021 dollars. That’s not much less than a starter home in most inner-ring Twin Cities suburbs.

“You can still find two- or three-bedroom freestanding houses in Richfield for around $300,000, [so] that’s a pretty major cost” to add relatively little space, said Oleary.

Several years of material and labor inflation may have pushed detached ADU costs even higher than the Family Housing Fund’s estimates. John Sylvestre, owner of Richfield-based Sylvestre Remodeling & Design, estimated the cost of a custom detached ADU in the Twin Cities at $350,000 or more in today’s dollars. In 2021, Sylvestre “went to the mat with [Richfield] City Council” to get a single-level detached ADU design approved for an older client. Members eventually approved the proposal, but the client balked at the final cost estimate and the structure never got built.

It’s a common outcome. “We would love to build these, but none of our designs have gone anywhere,” Sylvestre said.

Attached ADUs are somewhat less expensive: about $215,000 for an attached unit with carport and about $153,000 for a second-level addition with no parking, according to the Family Housing Fund. Interior ADUs — often finished basement suites with separate entrances — are the cheapest by far, at about $76,000.

Richfield’s interest-free Transformation Home Loan program added an ADU financing pilot last year. It offers eligible homeowners up to $25,000 or 15% of total project costs. Fannie Mae and Freddie Mac recently updated lending guidelines to expand ADU financing, too.

“We’ll see if that moves the needle at all,” said Melissa Poehlman, director of community development for the city of Richfield.

Fewer restrictions, more ADUs?

Many homeowners want detached ADUs that offer truly separate living experiences, with no shared walls or utilities. But most municipal ADU ordinances have a litany of restrictions on detached ADUs that limit their usefulness.

Richfield’s requirement that detached ADUs’ exterior materials match the main house’s was an issue for Sylvestre’s client, who didn’t want to pay a premium for brickwork, Sylvestre said. They were ultimately able to work around that limitation, he said.

Richfield also requires garage space in detached ADUs, a significant cost driver that “should be changed,” Oleary said. Other cities have more lenient off-street parking requirements, but even those increase project costs and can challenge homeowners on small lots or near shorelines.

Within 1,000 feet of a shoreline, builders must abide by impervious surface ratios set by the state, said Deb Garross, planner for the city of Burnsville. Adding a driveway can be a challenge in shoreline areas, she said.

Many cities limit ADU size, occupancy, and end-uses as well, according to Jacque Randolph, a staff researcher for the University of Minnesota’s Journal of Law & Inequality. For example, Roseville has a “soft maximum” of 650 square feet and harder limits of one bedroom with two principal occupants.

Numerous cities also have owner-occupancy requirements and bans on ADUs as short-term rentals. One of the few cities without a short-term rental ban — Burnsville — has one of the more successful suburban ordinances. Burnsville permits “a handful each year,” Garross said, with a disproportionate share of detached ADUs used as short-term rentals near the city’s larger lakes.

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