New legislation on accessory dwelling units could be beneficial to you and your neighborhood, depending on how you look at it
By Mark Samuelson
At a moment when an unprecedented number of Coloradans are searching for housing—not able to afford what they want or where they want it—the state legislature has delivered a law designed to create more places to live.
And if you already own a home, they’re offering you a way to provide affordable housing to others.
On June 30, Colorado House Bill 1152 goes into effect, lifting many restrictions that have blocked owners from adding ADUs—accessory dwelling units—to their homes. Governor Jared Polis signed the law last May, and it’s set to become one of the most proactive in the nation in boosting ADU construction.
“This legislation gives many Coloradans the freedom to build them on their property,” the governor said at the signing, “and [I] look forward to seeing Coloradans take advantage of this new freedom.”
What could a homeowner do with an ADU? It could be a “granny flat” for an aging mom or a home for a kid who hasn’t quite flown the coop. It could become a rental for newlyweds looking to rent something affordable or for young parents wanting to get a child into a better school.
Or, according to builders doing ADUs where they’re already legal, it might become a VRBO or an Airbnb. This rentable space could deliver extra cash without sacrificing your personal space.
The bill also includes some dollars toward creating incentives for potential ADU owners, with rebates, loans and down payment assistance programs being launched in neighboring cities, possibly coming to the south metro, too.
What might an ADU look like on your property? It could be an apartment built over the garage, an add-on to your home’s footprint, or a standalone unit like a studio if you have room on your lot.
“We saw them happening on the West Coast,” says Mike Koenig of Studio Shed in Louisville. Since 2012, he has built some 600 ADUs, including some in south metro communities.
While some south metro towns have pushed back on ADUs, Koenig says orders surged during the pandemic, and a sizable number have already been built here.
“A good chunk of those projects are parents moving in with kids and vice versa,” Koenig adds.
However, as the law enactment approaches, much of the interest is specifically in creating rental properties—an aspect with upsides and downsides, according to agent Jennifer Markus with Kentwood Company Real Estate in the Denver Tech Center.
“We like them, and we don’t like them,” says Markus, who has already been involved in several home sales involving potential ADUs—some to buyers using the possible rental income to qualify for a mortgage that otherwise might be harder to handle.
“ADUs solve a big problem, which is affordability,” Markus says. “Adding an ADU onto a home is much less expensive than building a new home.”
All major south metro communities—Centennial, Greenwood Village, Cherry Hills Village, Littleton, Castle Rock—are required to allow construction of units if they’re 750 square feet or smaller. HOAs are forbidden to restrict them beyond how they would treat a primary unit.
Moreover, the law prohibits requiring off-street parking to serve the added occupants. In south metro areas where residents value their views and sense of space, there are few protections on how an ADU might be placed on a lot.
“You could put a unit within five feet of the back of your property,” Markus says. “You could bulldoze a patio and put in an ADU. That’s almost unrestricted.”
Greenwood Village is one of several communities that have pushed back against the law in concert with the Colorado Municipal League. “We’re jumping and reaching at things without giving them the full thought they deserve,” says Greenwood Village City Manager John Jackson.
“You have parking, services and public safety to consider before you start talking about building units behind units,” Jackson adds. “You want to make sure you can get fire service to it.”
Jackson and other leaders are concerned the law undermines home rule authority—something they say is enshrined in the state’s constitution. Possible encroachments include whether local parking laws can be enforced or whether an owner must occupy the primary residence after renting out an ADU. (The new law says owners need to occupy only during the start of construction.)
Markus says she and other agents also worry about whether prefab-type units—the easiest to build and that are encouraged by the bill’s specifics—have the potential to downgrade the architectural quality of some neighborhoods.
“There are very few restrictions on architectural style,” Markus says. “You have a rambling ranch that was the bomb when it was built, but now that owner can put a sugar cube out back.”
City planners, who like the idea of adding affordable housing options, are unsure how issues like those will play out after the law takes effect. Even in communities where ADUs are already allowed by law, concerns are being expressed about how local regulations will blend in and whether conflicts could end up in court. That includes the city of Denver, where the current law has a tighter setback restriction than the new law allows.
“We will certainly talk more about the pros and cons,” says Donna Ferguson, community development director for the City of Castle Pines. She says she and other city councils are now focusing on the law’s approach and are wary of weighing in on the merits just yet.
Meanwhile, if you’re toying with how an ADU would fit your family’s picture, Studio Shed’s Koenig says you could pencil in $250 to $300 per square foot as a typical construction cost in the under-750-foot range. He expects many owners to push for larger units in a 1,200 to 1,400-square-foot range, requiring a local exemption.
Along with building permits, don’t forget to include a possible impact fee, which some municipalities already require to cover added water, sewer, electricity, parks and other infrastructure.
