Using the 1997-2019 Multiple Listing Service (MLS) transactions data, new Freddie Mac’s study identified 1.4 million properties with Accessory Dwelling Units (ADUs) in the United States. The study showed that first-time listings with ADUs grew most rapidly during the last decade, averaging 8.6% per year. The expansion of listings with ADUs was fastest in high-cost fast-growing areas in the South and West regions.
Accessory dwelling units (ADUs) are housing units that provide independent living though built on the same lot where the principal unit is located. As such, ADUs are owned by the owner of the main house and, in most cases, cannot be sold independently of the main property. ADUs can be detached or attached to the principal residence and are known by a variety of names – in-law suite, basement units, granny flats, carriage houses, guest houses, garage apartment, etc.
Since ADUs are legally part of the same property as the main house, the Census and most other government housing surveys fail to identify them. In places, where construction of ADUs is now legalized, building permit data can serve as a good proxy for the number of new legally built ADUs but do not capture unauthorized units coming to the market illegally. As a clever alternative, the Freddie Mac team analyzed over 600 million MLS transactions going back to 1997 and identified listings mentioning ADUs for the first time, thus estimating monthly additions to the national ADU inventory.
The Freddie Mac estimates show that the number of first-time listings with ADUs, including for-sale and for-rent units, increased noticeably during the last decade, growing 8.6% on average. Close to 70,000 properties with ADUs were sold in 2019, representing 4.2% of total homes sold on MLS. By comparison, only 8,000 properties (1.1%) with ADUs were sold in 2000.
The percentage and number of rental ADUs increased as well. Close to 8,000 ADU rentals were leased in 2019, representing 2.9% of total homes leased on MLS. By comparison, less than 1,000 ADU rentals, or 1.2%, were leased in 2000.
The growth in ADUs matches NAHB survey data, which find that ADU development was widespread in the remodeling industry. A 2019 survey found that approximately one in five remodelers completed at least one ADU development project, with a median cost of between $100,000 to $150,000.
According to the Freddie Mac estimates, the rapidly expanding states of California, Florida, Texas, and Georgia account for half of the 1.4 million ADUs identified. While the number and share of ADU listings increased across the Unites States, the growth was higher in the South and West – the fastest growing regions of the country. Shares of active rental listings for ADUs in Sun Belt states increased from 3% in 2010 to almost 5% in 2019, while shares in Northern states just inched up from 2.2% to 2.4% during the same time. Similarly, the share of for-sale listings with ADUs increased from 4.3% to 9.2% over the last decade in the South, while in the North the growth was more subdued – from 2.7% to 4.1%.
The study identified Portland, Dallas, Seattle, Los Angeles, and Miami as the fastest growing ADU markets, each with double-digit growth of first-time ADU listings since 2015. Detached ADUs are more prevalent in sprawling Western metro areas, while homeowners in denser East Coast cities are more likely to create attached ADUs through conversion of attics, basements or garages.
While the Freddie Mac estimates cannot provide a definitive and complete count of all ADU properties in the United States, they certainly deliver a good quantitative measure of growth in the ADU market that is consistent with the rising number of young adults living with their parents, relatives and sharing housing with roommates.