Owning and renting

Renting out your ADU

Checked against state laws and official agency sources · Last reviewed October 10, 2026

Can you rent out an ADU?

Usually, yes, but the rules come from three places: your state's ADU law, your city's zoning and rental rules, and any private rules on your lot (such as HOA covenants).

Some state laws say so directly. Massachusetts says no zoning rule can "prohibit, unreasonably restrict or require a special permit" for a single ADU "or the rental thereof" in a single-family zoning district. Oregon's law requires larger cities and counties to allow ADUs and says the "reasonable local regulations" they may apply don't include owner-occupancy requirements.

The bigger question is usually how you can rent it. Many state ADU laws treat long-term tenants and short-term guests differently. Washington, for example, bars cities from requiring you to live on the lot, but its ADU law doesn't stop a city from "restricting the use of accessory dwelling units for short-term rentals."

Virginia's ADU law, which takes effect July 1, 2027, says it doesn't override "recorded declarations and covenants" or the governing documents of condominiums and property owners' associations, so check your HOA documents too. [5][7][8][9][10]

Do you have to live on the property?

Many cities used to allow an ADU only if the owner lived in the main house or the ADU. Several states have now banned that rule, and others still allow it within limits:

• California: for an ADU on a single-family lot, a city can't impose "an owner-occupant requirement." A junior ADU that shares a bathroom with the house is the exception: the city must then require that you live in the house (in either the main part or the junior ADU). No owner occupancy is required if the junior ADU has its own bathroom.
• Washington: cities and counties covered by the state ADU law "may not require the owner of a lot on which there is an accessory dwelling unit to reside in or occupy" the ADU or another unit on the lot.
• Oregon: a city of more than 2,500 people or a county of more than 15,000 can't require owner occupancy for an ADU, except that it may regulate vacation rentals ("vacation occupancies") "to require owner-occupancy or off-street parking."
• Massachusetts: for the one ADU the law protects in single-family zones, the state says its use "shall not require owner occupancy of either the accessory dwelling unit or the principal dwelling."
• Colorado: in the cities and counties the 2024 law covers, a city can't require the ADU or the house to be owner-occupied. It may ask you to show that you live on the parcel when you apply to build the ADU (not when the ADU is built along with a new house) or when you apply for a short-term rental license.
• Montana: a city or town "may not" require that the house or the ADU "be occupied by the owner."
• Idaho: by February 1, 2027, each city of more than 10,000 people must change its rules to prohibit an owner-occupancy requirement for the house or the ADU.
• Virginia: from July 1, 2027, a locality may require owner occupancy of the ADU or the house, "but not both," and "only at the time an application is submitted."
• New Hampshire: a town may require the owner to live in one of the units, "but it shall not specify which unit."
• Utah: under the detached ADU rule that larger cities must adopt (for lots of 11,000 square feet or more, in effect since October 1, 2026), a city may require the owner to live in the house or the ADU. A city may also ban renting an internal ADU if the home is not the owner's primary residence.

Rules in other states, and in states with no ADU law, are set by your city or county. Check your state page and city page on this site, and confirm with your local planning office. [2][3][4][5][8][9][10][13][14][15][16][17]

Short-term rentals and Airbnb: state rules

Renting your ADU by the night or week is regulated much more tightly than renting it to a tenant. What state law says:

• California: a city must require that rentals of ADUs built under the state's guaranteed-approval rules (Government Code section 66323) be "for a term longer than 30 days." For other ADUs on single-family lots, a city "may require" rentals "of terms 30 days or longer." Junior ADUs must be rented "for a term longer than 30 days."
• Rhode Island: ADUs "shall not be offered or rented for tourist or transient use or through a hosting platform."
• Utah: a city may ban renting an internal ADU "for a period of less than 30 consecutive days," and, under the detached ADU rule larger cities must adopt, a detached ADU for "less than 90 consecutive days."
• Virginia: from July 1, 2027, localities may require "a lease term for the rental of an ADU of 30 consecutive days or longer."
• Washington, Massachusetts, Colorado, Oregon, Montana and Vermont: the state ADU laws leave cities free to restrict or regulate short-term rentals (Massachusetts says ADUs "may be subject to restrictions and prohibitions on short-term rental").
• Arizona: "A city or town may not prohibit vacation rentals or short-term rentals." But it may require the owner of a short-term rental to live on the property if the property has an ADU that got its certificate of occupancy or similar final approval on or after September 14, 2024.
• Idaho: cities and counties can't ban short-term rentals, but can adopt reasonable health and safety rules. They can't require owner occupancy "for any amount of time" as a condition of a short-term rental.
• Florida: local rules "may not prohibit vacation rentals or regulate the duration or frequency of rental of vacation rentals," unless the local rule was adopted on or before June 1, 2011.

Washington also requires every short-term rental operator to carry primary liability insurance of at least $1 million, or to book each stay through a platform that provides equal or greater coverage. Washington's law defines a short-term rental as a stay of "fewer than thirty consecutive nights."

Even where state law protects short-term rentals, your city may require a license, registration, taxes or inspections. Check your city page and ask your city before you list. [1][2][3][4][5][6][7][9][10][13][14][15][18][19][20][21][22][23]

Rental licenses and registration

Many cities license or register rental housing, and an ADU usually counts. Some examples:

• Washington, DC: the Department of Licensing and Consumer Protection's "two-family rental" license covers "an English basement apartment, converted basement apartment, or carriage house in a single-family home where the main residence is occupied by the property owner or another tenant." It costs $219 for 2 years or $438 for 4 years, and DLCP says a Certificate of Occupancy is required for two-family rentals. See DLCP's housing business licenses.
• Denver: a residential rental property license is required for "any building, structure, or accessory dwelling unit that is rented or offered for rent as a residence for 30 days or more at a time." See Denver's residential rental property license page.
• Minneapolis: "If you plan to charge rent for a stay of 30 days or less, you will need a short-term rental license." An owner can have only one short-term rental property besides their home. See the city's short-term rental license page.
• Utah: state law lets cities require the owner "to obtain a permit or license for renting an internal accessory dwelling unit."

Ask your city's licensing or housing office what applies before you sign a lease or list the unit. [3][24][25][26]

Being a landlord: tenant law and fair housing

Once you rent your ADU to a tenant, you are a landlord, and state and local landlord-tenant laws apply. They cover things like security deposits, notices, repairs and evictions. This site doesn't give legal advice; start with your state's official guidance:

• California: the Attorney General's Landlord-Tenant Issues page explains the Tenant Protection Act (AB 1482), which caps rent increases for most tenants at "10% total or 5% plus the percentage change in the cost of living – whichever is lower – over a 12-month period." The Attorney General lists units issued a certificate of occupancy within the past 15 years among those the Act doesn't cover. The law exempts some owner-occupied duplexes, but only if "neither unit is an accessory dwelling unit or a junior accessory dwelling unit."
• Washington: the Attorney General says "If you rent your home, you are covered by the Residential Landlord-Tenant Act (RCW 59.18)" and keeps a list of landlord-tenant resources.

Federal fair housing law applies too. HUD says the Fair Housing Act prohibits discrimination in housing because of race, color, national origin, religion, sex, familial status or disability. See HUD's Fair Housing Act page.

Renting also changes your insurance. The Texas Department of Insurance warns that "Most homeowners insurance won't cover damage to a rental property, or it might limit what it pays for." See our ADU insurance guide. [27][28][29][30][31]

How much rent can an ADU bring in?

One free, official benchmark is HUD's Fair Market Rents. HUD defines them as "estimates of 40th percentile gross rents for standard quality units within a metropolitan area or nonmetropolitan county." HUD uses them to set payment standards for the Housing Choice Voucher program, among other uses. New figures take effect at the start of the federal fiscal year (generally October 1).

Fair Market Rents are a starting point, not a quote for your unit. When ADU rent is used to qualify for a mortgage, the lender relies on the appraiser's comparable rents and, in some cases, a lease or your tax return (see below).

To test the numbers, try our ADU cost and rent calculator, which estimates rental cash flow and payback from the cost, loan and rent you enter. [12][32][33]

Income tax on ADU rent

The IRS says that "In most cases, you must include in your gross income all amounts you receive as rent." Advance rent counts in the year you receive it. A security deposit you plan to return is not income when you receive it, but any part you keep is.

Expenses: "In most cases, the expenses of renting your property, such as maintenance, insurance, taxes, and interest, can be deducted from your rental income." If you rent part of your property, such as an ADU on the lot where you live, "you must divide certain expenses between the part of the property used for rental purposes and the part of the property used for personal purposes, as though you actually had two separate pieces of property."

Depreciation: You can't deduct the cost of building the ADU at once. "The cost of improvements is recovered by taking depreciation." Residential rental property, including an addition to a rental house, "is depreciated as residential rental property over 27.5 years" under the general depreciation system. Land can't be depreciated.

Where to report: "The basic form for reporting residential rental income and expenses is Schedule E (Form 1040)." But if you provide substantial services primarily for your tenants' convenience, "such as regular cleaning, changing linen, or maid service, you report your rental income and expenses on Schedule C."

Renting to family: a day counts as personal use if a family member uses the unit, "unless the family member uses the dwelling unit as their main home and pays a fair rental price." Personal use can limit your deductions.

Very short rentals: if you rent a home you also use as your home for "less than 15 days during the tax year, don't include the rent you receive in your income," and those expenses are not rental expenses.

See IRS Publication 527, Residential Rental Property for the full rules, or ask a tax professional. For property tax, see how an ADU affects your property taxes. [11]

Using ADU rent to qualify for a mortgage

Fannie Mae and Freddie Mac let lenders count some ADU rent when you buy or refinance a one-unit home you live in. Each has limits.

Fannie Mae (Selling Guide B3-3.8-02, dated September 2, 2026):

• Rental income is allowed from "one-unit Accessory Dwelling Unit (ADU) allowed with a one-unit primary residence only."
• "Rental income is only allowed from one existing ADU."
• "Purchase or limited cash-out refinance transactions only."
• "The qualifying rental income amount from the ADU is limited to 30% of the total qualifying income."
• For a purchase, the lender multiplies monthly gross rent by 75 percent to get net rental income.

Freddie Mac (ADU fact sheet, February 2026), when ADU rent on a one-unit primary residence is used to qualify:

• Loan purpose: purchase or "no cash-out" refinance.
• "Rental income that is documented with a lease must not exceed 75% of the lease amount."
• "Qualifying rental income cannot exceed 30% of total income used to qualify."
• "Rental income from an illegal ADU may not be used to qualify." The ADU must be allowed by zoning.
• The appraisal needs at least three comparable rentals, at least one of them a rented ADU.
• For a purchase, at least one borrower must take landlord education unless a borrower has a year of investment property management experience or ADU rental management experience.

Your lender applies these rules. See ADU financing for loan types. [12][33]

Questions people ask