Accessory Dwelling Units (ADUs) effect on real estate in Tucson

Tucson has implemented significant changes to its Accessory Dwelling Units (ADU) regulations that are now in effect January 2025. This is thanks to House Bill 2720.This mandates that cities with populations over 75,000 permit ADU's on single family lots. This legislation aims to increase housing options and may influence property values and market dynamics.

New regulations represent a significant shift in Tucson's approach to urban housing, aligning with broader trends in addressing housing affordability and diversity in urban areas.

Increased Housing Supply and Affordability: ADUs in Tucson have contributed to increasing the housing stock without the need for new land development, which is particularly beneficial in addressing housing affordability. By allowing smaller, additional living spaces on existing lots, they provide lower-cost rental options compared to traditional single-family homes. This helps in introducing more diverse price points within neighborhoods, potentially making housing more accessible to a broader demographic, including students, especially given the presence of the University of Arizona.

Property Value and Rental Income: Building an ADU can significantly increase property value. Homeowners can benefit from additional rental income, which can be a substantial advantage in a city where rental demand is high, particularly near educational institutions. This income can offset mortgage costs or provide additional funds for homeowners, particularly appealing in a market where property values have been on the rise.

Regulatory Adjustments: Recent changes in Tucson's ADU regulations have made it easier for homeowners to build these units. The city has adjusted its policies to allow for more ADUs per lot, removed minimum parking requirements, and adjusted size and height limits. These changes are expected to encourage more ADU construction, thereby impacting the real estate market by increasing both supply and potential density in residential areas

Community and Neighborhood Impact: While ADUs can contribute to creating mixed-income communities and support multigenerational living, there are concerns regarding their impact on neighborhoods. Issues include potential increases in property taxes due to higher assessed values, parking challenges, and the possibility of units being used for short-term rentals like Airbnb, which could change neighborhood character or lead to overcrowding. Additionally, there's a debate on whether ADUs primarily benefit wealthier homeowners who can afford to build them, potentially not serving as an equitable solution for housing across all income levels.

Economic and Social Benefits: ADUs have been seen as a solution for providing affordable housing options, supporting aging in place for seniors, and offering flexibility for families. They also promote local job creation through construction and related services. However, there's a call for more balanced policies to ensure that the benefits are not only for those who can afford to build ADUs but also support lower-income homeowners through incentives or assistance programs.

In summary, ADUs in Tucson have a generally positive impact on the real estate market by increasing housing options and property values while potentially offering financial benefits to homeowners. However, their implementation requires careful consideration of local regulations, community impacts, and equitable distribution of benefits to ensure they contribute positively to the city's overall housing landscape.

As a real estate professional, I have noticed properties with ADU’s or potential for ADU construction are more attractive to buyers. The ability to generate rental income or to provide housing for family members adds value to properties. However, the cost-effectiveness of building an ADU varies, with construction costs potentially ranging from $100k to $250k, influencing how beneficial the investment is based on rental yield expectations.

If you are buying a home, now you can add a casita and put a full kitchen in it. If you have questions, or would like to find a property that might be perfect with ADU, please call me today and I can help you find it.