Side by side photos of an ADU and a tiny house with versus in the middle for ADUs vs. tiny homes.

As the tiny house movement continues to gain popularity, there has been loads written about tiny homes and accessory dwelling units (ADUs). There are similarities and differences between the two as well as advantages and disadvantages to ADUs vs. tiny homes.

It is a well-established fact that smaller doesn’t necessarily equal cheaper. So, while contemplating the main differences between the typical ADU and tiny house models, I’ve looked closely at which will give me a better return on investment (ROI). But there’s a conundrum!

For starters, an ADU could be a tiny home, but a tiny home may not qualify as an ADU, especially if it’s a tiny house on wheels (THOW). The other major issue is that building codes for ADUs and the various types of tiny homes differ in various U.S. states. This introduces legal issues.

So, let’s dive in and ascertain what an ADU is vs. a tiny home, and what kind of ROI you can expect from one or the other. 

What Are Accessory Dwelling Units?

Accessory dwelling units (ADUs) are fully functional, small (sometimes tiny) secondary dwellings that add value to a property. But we don’t always call them ADUs. More commonly, we call them granny flats, garage apartments, garden/backyard cottages, carriage houses, alley apartments, and laneway houses. In Vancouver, they are officially known as secondary suites

Often, we build them to provide a home for older (or younger) members of our families. Sometimes property owners build ADUs as rental units.

They are always built on the same property as an existing house. While ADUs are sometimes used for other purposes, a studio or workspace, for example, they provide a complete and permanent home for at least one person. Because they must be built according to building codes and standards, they invariably add value to the property.  

Photo of a cabin-style ADU surrounded by trees with checkered curtains in the windows.
An ADU allows someone to live on your property without sharing your living space.

A Bit Of History About ADUs

I tracked down a really old case study of ADUs published by the U.S. Department of Housing and Urban Development Office of Policy Development and Research that was published in 2008. It shows just how old and established the concept of ADUs really is in North America, essentially going back to the hugely increased demand for housing after World War II.

The problem was that at the time, this kind of solution wasn’t acceptable in most areas, and local jurisdictions throughout the U.S. prohibited ADU construction. This didn’t stop the demand, and huge numbers of ADUs were built illegally. But because they didn’t conform to set standards, they were often not safe, either. By 1960, there were as many as 30,000 ADUs in San Francisco alone, 90 percent of which were illegal.

By the late 1970s-1990s, a handful of U.S. and Canadian municipalities started to adopt programs that allow the construction and use of ADUs. Since then, cities across North America have been updating local codes to enable homeowners to build ADUs legally. But in some parts of the country, there are still quite severe restrictions, and many municipalities limit what they allow.   

Different Types Of ADUs

The Department of Housing case study shows that from the start, there were three types of ADUs:

  1. Interior ADU
  2. Attached ADU
  3. Detached ADU

Today, ADUs come in many shapes and forms, though they still conform to the original definitions. Some are built as new freestanding units (detached), while others are attached to an existing home (attached), usually either alongside it or built above a garage. Often ADUs are built by converting garages, storage rooms, attics, basements, and other parts of the house that are considered to be non-living spaces (categorized interior).

In some areas, junior accessory dwelling units (JADUs) are defined separately from the standard types of ADU.

Some companies manufacture build-ready ADUs that are pre-approved for construction. They are delivered in kit form with plans as well as engineering designs and specifications. Generally, their floor plans and size are minimal.

Whatever the type, typically ADUs include a bathroom, small kitchen or kitchenette, a living area, and a separate entrance. They are always a separate entity and never mobile (on wheels).

Photo of a white kitchenette with blue cabinets looking into a small living area.
An ADU is a self-contained dwelling, even if its elements are smaller.

Pros & Cons Of ADUs

ADUs have many advantages, especially for people who need additional living quarters that are affordable.

  • ADUs are a great housing solution for a second dwelling on a property.
  • They cost a lot less to build than a new single-family home. 
  • They make use of land that isn’t utilized on your property, which immediately adds value and creates a long-term investment.
  • Interior conversions take the form of remodeling projects that are quick and affordable to complete.
  • They are ideal for older and younger family members to live independently, in a familiar environment.
  • It’s a great alternative to assisted living.
  • Homeowners can downgrade their living space and live in the ADU when they retire.
  • They can be used to bring in additional income from rentals.
  • You can design any type of ADU in the architectural style of your existing home.
  • ADUs can be linked to the plumbing and electrical utilities of the existing house.
  • You don’t need a special permit to build an ADU, as long as it conforms to the city’s codes and regulations. But you will need the usual building permits.

Although affordable, ADUs are generally more expensive to build than so-called tiny homes. But there is no doubt that the potential investment is worth a lot more.

Legal Issues

ADU homes are legal in many, but not all, parts of the U.S. Also, codes and zoning rules differ, even within states. So before you opt to build an ADU, it is essential that you check your city’s rules and regulations to make sure it is both feasible and viable.

In Seattle, Washington, for example, the maximum size ADU allowed is 1,000 square feet on a single-family property. If it’s built within a townhouse or rowhouse, it can only be up to 650 square feet in size. All ADU homes must meet the same standards as other homes in all areas including building, electrical, energy, and land use.

In Tigard, Oregon, you can have two ADUs on one property, but only one can be detached. Those that are detached can’t be bigger than 800 square feet, and those that are attached must be smaller than the house they are attached to. They can’t be higher than 25 feet, and setbacks depend on zoning regulations. If you have more than one ADU, you cannot use it for a business, but you can rent them out.

In the Duluth, Minnesota, ADUs may not be any larger than 800 square feet and they cannot be larger than the existing main house on the property. Both tiny homes and ADUs must meet the same setbacks that are established in the zoning code, and if any parts of these are within five feet of the property line, firewalls may be required.

In California, which is a leading state for ADU and tiny homes, JADUs no bigger than 500 square feet in size are allowed within existing houses. What makes them different is that they can share central systems, including a bathroom, and have a very basic kitchen with small, plug-in appliances. In most other places, an ADU must at least have a shower!

What Are Tiny Homes?

The tiny homes market is growing exponentially, and a recent market research report from Technavio shows that it has the potential to grow by $3.33 billion from 2021 to 2025. The report states that the key factor driving the growth of the tiny homes market is affordability. It also cites the U.S., Canada, the U.K., Germany, and France as the key markets.

States that lead the trend of tiny homes in the U.S. are, in alphabetical order, California, Colorado, Florida, Texas, and Wisconsin. But what are tiny homes, and how are they different from ADU homes?

Photo of a gray tiny home with a deck with table and chairs outside surrounded by grass and trees.
While an ADU is always on the property of another house, a tiny home can be anywhere.

Tiny homes are very small dwellings, usually 400-500 square feet in size. There are two basic types:

  1. Mobile or tiny homes on wheels (THOW)
  2. Tiny homes built on foundations (THOF)

Some cities allow manufactured tiny homes, but these are generally of a lower standard than those built onsite and not recommended for areas that experience high winds.

Prefab component build (PCB) flat-pack homes made from structural insulated panels (SIPs) are also quite common. Available in a range of sizes from 400-1,400 square feet, they can also meet the specs in some places for ADUs. According to Green Builder Magazine, they can last for more than 50 years if built to specifications.

The other option is the park model recreational vehicle (RV). But these are classified country-wide as vehicles for loans and building codes, and can generally only be parked in RV parks. 

Different Types Of Tiny Homes

Like ADUs, tiny homes come in different shapes and forms, as you can see from the variables mentioned above. But unlike the different types of ADUs, which are built according to local codes and regulations, the type of tiny home you choose will dictate the legislation that governs them.

Additionally, when tiny homes aren’t mobile (in other words, they don’t have wheels), they are often parked on small tracts of land where there aren’t other buildings. Again, California has been a game-changer in the industry, and if you want a THOW in your Californian backyard, there are several cities that allow them.

According to a Californian company that specializes in modular construction, manufacturing movable tiny homes built to park model standards and building ADUs, these include California CIty, Fresno, Los Angeles, Humboldt County, San Diego, San Jose, San Luis Obispo, and Santa Clara. 

A CNBC real estate article published in August 2021 shows that the demand for tiny homes, in general, has risen significantly since COVID-19. It also states that the average size of a tiny home in the U.S. right now is really, really tiny–just 225 square feet. 

It isn’t rocket science to realize that a tiny (really tiny) home will cost less. But the CNBC article gives clarity when it states that the average cost of a tiny home is 87 percent cheaper, but you’re going to be paying 62 percent more per square foot for your home!

Then there’s another factor. When you invest in a tiny home, it can depreciate in value. This stands to reason if it is a house on wheels. But even if you opt for a THOF, you are entering a very niche market, and if you want to sell, it will probably be a lot harder than selling an ADU.

ADUs vs. tiny homes- photo of a tiny home on wheels (THOW) with a temporary deck in a trailer park.
A tiny home on wheels is ready for your next adventure.

Legal Issues

While you don’t have to submit plans for a mobile tiny home, there are permits that you will need to get.

THOW don’t have to be RV-certified, but they must be built to National Fire Protection Association (NFPA) 1192 or American National Standards Institute (ANSI) 119.5 standards. Even so, they are commonly marketed as tiny homes. The best builders will increase these building standards beyond the minimum requirements and ensure insulation ratios and other ratings are higher than required.

If you are thinking of buying a mobile tiny home, your best bet is to ensure it has been certified by a third-party agency like ICC, NTA or RADCO, which is a commercial member of Tiny House Alliance USA. Some counties and cities allow the National Organization of Alternative Housing (NOAH) to certify tiny homes.

But zoning restrictions can be a killer for tiny homes (especially THOWs), simply because they are too small. Also, in many cities and counties, any tiny home must hook into the city’s utilities. Even if the home is mobile, there are often legal requirements that demand the wheels must be hidden.

The Tiny Home Industry Association has information on its website relating to regulations in different states.

Pros & Cons Of Tiny Homes

Generally cheaper to build than ADUs or any other type of home, tiny homes are very small. This may be an advantage or a disadvantage, depending on your needs. Some people find they are cramped, others find it’s invigorating to get rid of unnecessary personal possessions. 

A definite advantage is that if they are on wheels, they don’t need plans. But you will need a permit of some sort, depending on where you will be parking it.

While mobile tiny homes are clearly vulnerable to extreme weather conditions, they do have the advantage of being moveable. So, if you are aware of the dangers, you can move them to a place of safety relatively quickly.

The ultimate disadvantage, as mentioned above, is that a tiny home can depreciate in value.

ADUs vs. Tiny Homes: What Differences Matter?

Ultimately, you need to decide what your lifestyle demands and what you can afford. I’m convinced that in most cases an ADU will be a considerably better bet than a tiny house, certainly a tiny house on wheels. But if you are planning on moving along sometime soon, a THOW might be the answer to your housing needs.

While they both have advantages, I am convinced that my ROI will be better if I opt for an ADU.

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