Denver’s New ADU Policy: Unlocking Affordability and Opportunity in 2025

ntroduction: A Big Shift in Housing Policy

In 2024, Denver made one of its boldest housing moves in years: the city council approved accessory dwelling units (ADUs) citywide, allowing them in all residential zones. Once limited to certain neighborhoods, ADUs — often called backyard cottages, casitas, or granny flats — are now an option for homeowners across the metro.

This policy change is designed to address affordability, boost rental opportunities, and provide multigenerational living solutions. According to Houzeo, Redfin, and Zillow, buyer interest in ADU-capable lots has already spiked since the change went into effect. For Denver homeowners, this is more than just a zoning update — it’s a new way to build wealth and flexibility.

What Are ADUs and Why Do They Matter?

An ADU is a secondary housing unit built on the same lot as a primary residence. They can be:

• Detached backyard cottages

• Basement apartments with separate entrances

• Converted garages or above-garage units

National studies, including research highlighted in Forbes, show that homes with ADU potential often command a premium on resale. That’s because ADUs provide two things Denver desperately needs: more housing supply and affordable options for renters.

The Benefits for Homeowners

For Denver homeowners, the citywide ADU policy opens up multiple possibilities:

• Rental income. An ADU can generate steady long-term rent or serve as a short-term rental (where permitted).

• Multigenerational living. Families can house parents, adult children, or caretakers without buying separate properties.

• Increased resale value. According to Zillow, properties with ADUs often sell for more, especially in competitive markets.

• House hacking opportunities. Live in one unit and rent out the other to offset your mortgage.

With mortgage rates still elevated, this flexibility can make homeownership more attainable and sustainable.

What Buyers Should Look For

If you’re buying in Denver in 2025, ADU potential is something to evaluate closely:

• Lot size and zoning. While ADUs are now permitted citywide, certain lot sizes or existing setbacks may affect what you can build.

• Existing structures. Garages or basements can sometimes be converted more easily than starting from scratch.

• Neighborhood demand. Areas near universities, transit, and job hubs often see the strongest rental demand for ADUs.

Redfin data suggests younger buyers are particularly drawn to ADU-capable homes because of the income potential and flexibility.

What Sellers Need to Know

For sellers, advertising ADU potential can significantly boost interest in your property. Instead of just listing square footage and bedrooms, highlight the opportunity:

• “ADU-ready lot in Berkeley”

• “Basement with separate entrance, ideal for rental or multigenerational living”

• “Garage conversion potential with income opportunity”

Even if the ADU hasn’t been built, positioning your property as “future-ready” taps into one of Denver’s hottest housing trends.

ADUs and Denver’s Affordability Challenge

Denver’s housing costs remain high compared to income growth. By legalizing ADUs citywide, policymakers are aiming to:

• Increase housing stock without sprawling development

• Provide more affordable rental units in established neighborhoods

• Help owners offset high mortgage costs with rental income

According to Compass, ADUs may become a key affordability lever in 2025, especially for buyers priced out of traditional single-family homes.

Questions Buyers and Sellers Are Asking

Can I build an ADU on my Denver property now?
Yes, ADUs are now permitted in all residential zones, though building requirements still apply.

How much does it cost to build an ADU?
Most ADUs cost between $150,000 and $300,000 depending on size and finish, though garage conversions can be less.

Will an ADU increase my home’s value?
Yes. National data shows homes with ADUs or ADU potential typically sell for more than similar properties without them.

Conclusion: A Pathway to Flexibility and Value

Denver’s new ADU policy is more than a zoning update — it’s a tool for homeowners and buyers to unlock affordability, income, and future value. Whether you’re looking to build a rental unit, create space for family, or boost your home’s resale appeal, ADUs are now part of the conversation across every neighborhood in the city.

📞 Curious about buying or selling a Denver home with ADU potential? Contact me, Sallie Simmons, REALTOR® at Compass and Nostalgic Homes, at www.salliesimmons.com or 662-588-2420. Let’s explore how this new policy could benefit you.