R.O.I. Real State – Residential Newsletter – May 2026

In the past two years, Arizona laws have broadened the ability of homeowners to build auxiliary dwelling units (also called accessory dwelling units or ADUs) on lots zoned for single-family homes in cities with more than 75,000 people. While the state has streamlined the overall guidelines, there are still specific size, setback, and zoning rules to follow, and individual cities handle details such as permitting, inspections, and certificates of occupancy. Colloquially known as casitas, guest houses, or backyard rental units, ADUs can be a route to more affordable housing. In some cases, they make it easier to accommodate a multigenerational living situation. In others, they can provide a pure rental guest house concept. Because many cities allow one attached and one detached ADU, that can help generate an income stream and/or create options for a new homeowner or someone who would not otherwise be able to afford a home. For investors, the opportunity can be in properties with existing ADUs or the space to add them, given strong demand and relatively little current supply. Considering adding an ADU to your property to take advantage of the new laws? Before you break ground, there are several cautionary notes to keep in mind:

• Make sure you are in compliance with the ADU requirements of your city, such as architectural plans, building permits and construction standards.
• HOAs technically cannot ban ADUs, but there may be private covenants or deed restrictions to be aware of.
• The rise of ADUs has been controversial in many neighborhoods, particularly historic ones, because of their impact on the character of the neighborhood.
• Finally, be on the lookout for unethical contractors capitalizing on the trend. in April, Arizona Attorney General Kris Mayes warned citizens about an emerging scam targeting homeowners seeking to build ADUs. She cited examples of people losing tens or even hundreds of thousands of dollars after making upfront payments to construction companies that did not obtain needed permits and never even started on the projects. For protection, it is recommended to get multiple estimates, hire contractors in good standing with the Arizona Registrar of Contractors, and never pay the full amount up front.