Pricey accessory dwelling units are slow to take off in the Twin Cities

Retired teacher Janie Morissette was living alone in Montana when her St. Paul-based daughter suggested she move closer.

Morissette loved the idea of regular family dinners and impromptu visits from her granddaughters, but moving in with her daughter felt too close for comfort — so she built in the backyard instead.

Morissette now lives in a 796-square-foot home — formally called an accessory dwelling unit, or ADU — atop her daughter’s garage in the Lexington-Hamline neighborhood.

“I giggle when I talk about it because I just absolutely love it here,” Morissette said. “I live in a treehouse!”

Hers is one of 30 ADUs that have cropped up in the capital city in the five years since local leaders started allowing them. Though backyard cottages, carriage houses or “mother-in-law suites” have been around for centuries, the structures were edged out by restrictive single-family zoning decades ago.

The mini-homes are now back in fashion in the Twin Cities and across the country, as communities look for ways to expand housing options and add density to spacious and popular single-family neighborhoods. While residents of the small homes gush about the charm and lifestyle, the associated regulations and cost — which can exceed $300,000 per unit — have meant the concept has been slow to catch on.

Minneapolis greenlit the structures in 2014, and 176 building permits have been issued for them. Suburbs, including Stillwater, Eagan, Roseville and Bloomington, have also altered city code to allow ADUs in single-family neighborhoods, and have seen a smattering built. Minnetonka, which has permitted ADUs in some form since the 1980s, has 61 units.

“We are talking about building a brand new home with all the amenities and components that go into a single-family home, it’s just on a smaller scale,” said Minneapolis architect Christopher Strom, who specializes in ADUs. “The reality is new construction is expensive, whether it is a full-sized home or an ADU — it isn’t going to be a quick return on investment..”

Price, regulations are prohibitive

When homeowners do go for it, it’s a lifestyle choice, Strom said. Space for aging family or snowbird parents, a home office or a guest house that can generate income as a short-term rental are some of the most common reasons that prompt folks to invest.

John Shannon, owner of HyR Building LLC, said he gets lots of inquiries about ADUs but has had plans for them fall through three times in as many years in Minneapolis.

Like many cities, Minneapolis has restrictions on the books that can make ADUs a hard sell, Shannon said, including limitations on height and distance from the main residence.

Most Minneapolis ADUs must be built above garages because of the small size of city lots, but regular garages can’t typically support a structure above them, Shannon said. To make it work, a new garage with a supportive foundation often must be built, which can get expensive for a relatively small living space, he said.

“A lot of it comes down to price per square foot for construction,” he said.

Twin Cities leaders say it’s understood that ADUs will not solve the region’s housing shortage, but rather are one piece of a larger solution. Both Minneapolis and St. Paul planners say they have repeatedly eased regulations on ADUs to make the process easier, though interest in Minneapolis has waned since the city legalized duplexes and triplexes in the lowest-density residential areas in 2020.

“A centerpiece of our comprehensive plan is to expand the range of housing options in all neighborhoods,” said Jason Wittenberg,

Minneapolis manager of code development. “It’s nice to have a variety of tools in the toolbox, including ADUs.”

Versatile structures

According to city planners, ADUs fall into three categories: a detached guest house, often built over a garage; an attached structure built as an addition to the main home; or an internal unit, which includes basement or attic spaces transformed into separate living quarters.

Because zoning rules and definitions vary by city, it can be difficult to pinpoint the number of ADUs in the Twin Cities region.Metropolitan Council data based on a voluntary survey of cities show there were 146 building permits issued for ADUs between 2016 and 2021.

After losing their detached garage to a fire, Minneapolis couple Michael Graven and Kirsten Jaglo worked with architect Strom to build a new garage with a second-story ADU. The 650-square-foot home includes an elevator, solar panels and added insulation to reduce energy consumption.

They use the space as a guest house, yoga and meditation area and backyard escape for dinner and movies. Looking ahead, it’s a potential future home for an aging parent or young adult child moving toward independence.

Though the ADU isn’t necessarily a great financial investment, Graven said, it’s “a good investment for our family and our lifestyle.”

“Some of our friends joke we built our cabin in the backyard,” he said.

Slow start in the suburbs

ADUs have been slow to catch on in the suburbs, despite some communities’ relative abundance of land and financial resources compared to the central cities.

Some suburbs with a lot of new housing stock have seen ADUs built as new construction at the same time as the main home. Those units can cost closer to $100,000, according to Lakeville Planning Director Daryl Morey, who said the city has seen about 13 such units built in the last decade or so.

Blaine city officials began allowing ADUs in single-family zoning districts in 2021, but despite several inquiries, the city hasn’t issued any permits, said Elizabeth Showalter, the city’s community development specialist.

Cost is likely the reason, she said — and city requirements such as having a separate HVAC unit and a fire wall between the two housing units drive prices up.

Plenty of Bloomington residents have called the city to figure out how they could build an ADU, said planning manager Glen Markegard.

“Then they find out how expensive new construction is, and they change their plans,” he said. The city has allowed ADUs since 2009 but has seen only one built.

Markegard said most people are interested in more space for extended family, so they’ll opt instead for a home renovation that includes a second kitchen or extra bathroom — but perhaps less privacy than an ADU.

Dakota County recently issued a guide to ADUs that includes specific building requirements for the cities that allow them — Apple Valley, Lakeville, Eagan, Burnsville and Inver Grove Heights. The goal of the guide was to inform residents that ADUs are a housing option, specify where they’re allowed and give a snapshot of some of the rules, which are nuanced for each city, said Jess Luce, program manager for the county’s Communities for a Lifetime initiative.

Over the last eight years, about 30 ADUs have been built in the four cities for which data are available, Luce said.

“[The low number] makes sense with all these hurdles people have to jump through,” he said.

Luce said the idea that ADUs are an affordable housing option makes him nervous. The units may be comparable in cost only if a family is looking at the long-term price tag of a nursing home or assisted living facility for a relative, he said.

Luce said he hopes that, over time, cities will adopt less restrictive ADU policies as more residents want to build them.

“I just think [the number of regulations] is going to change,” he said.