Accessory Dwelling Units or ADUs in Ann Arbor
The city of Ann Arbor and other local communities are trying to provide more housing and affordable housing options.
Disclaimer- No part of this was written a third party or a robot. We are not tax experts, this is for information purposes only, and each person’s situation is unique so always consult a tax professional before making any investment or tax planning decisions.
What is an Accessory Dwelling Unit or ADU?
An accessory dwelling unit or “mother-in-law” suite is nothing new. They were common 100 years ago but fell out of use in the 1900s.
They are smaller units in an existing dwelling or developed separately or as a part of a separate structure like a detached garage.
The City of Ann Arbor hopes more people will use and develop ADUs for the following reasons:
1. Increase housing options
2. Provide more affordable housing options
3. Support the use of public transportation already nearby
4. To help people age in place or live with family nearby
5. Reduces the need to add new hard surfaces like sidewalks and driveways as they are already a part of the existing structure
6. Gives property owners more flexibility on how they use their property or add additional rental income
Since the city adjusted its rules to encourage adding new ADUs in 2016, 43 applications for adding ADUs have been submitted at the time of writing.
One estimate puts the number of ADU eligible properties in the city at 22,000. If 1 or 2% opted to develop an ADU on their property, that would bring roughly 440 new housing units.
An ADU adds additional living space on a property that may only have been a single-family residence previously.
Why Consider Adding an ADU or Buying a Property with an Existing ADU in Ann Arbor?
There are many reasons why adding an ADU or buying a property with an existing ADU may make sense.
You personally believe in the mission of providing more housing or providing affordable housing options.
The idea of extra income from renting the ADU may help you afford to live in the City of Ann Arbor.
Your income has become fixed and you would like to age in place with someone nearby to help with expenses and perhaps some of the property maintenance.
You have family or friends that will need a place to live when they are in the area or as they age.
The relatively environmentally friendly nature of ADUs being built in spaces that have already been developed and can be built with environmentally friendly materials and energy use.
Adding an ADU to an existing property is another way to remodel and add value.
Regardless of your reason for buying a property with an existing ADU or developing a new ADU, the City of Ann Arbor is encouraging you to do it.
What Types of ADUs are Allowed in Ann Arbor?
There are essentially three types of Accessory Dwelling Unit styles allowed by the City of Ann Arbor
1. An ADU can be built as an attached addition to an existing property.
2. An ADU can be added into the structure of an existing home like in a basement.
3. AN ADU can be a detached accessory building or a part of detached structure like a garage.
Space limitations of the lot or structure would guide which style is best when considering your ADU development options.
What are the Requirements for an ADU in the City of Ann Arbor?
The city has updated the requirements to try to encourage more people to develop ADUs on their property.
The city has provided an Accessory Dwelling Unit Guidebook for your reference.
Here are the basic ADU requirements:
ADUs are permitted in R1, R2, R3, or R4 zoning areas. You can view the Ann Arbor Zoning map here. Interactive zoning map here.
ADUs are allowed only on a lot in single-family zoning districts with a single-family home. An ADU is not allowed on a lot with a duplex or other multifamily home.
Only one ADU is allowed on a lot with a single-family dwelling.
How big can an ADU be?
Lot area less than 7,200 sq. feet = ADU floor area can be up to 600 sq. feet
Lot area 7,200 sq. feet or more = ADU floor area can be up to 800 sq. feet
How tall can an ADU be?
The standard height restriction for the zoning district apply.
-An ADU within an accessory building cannot exceed 21 feet.
-An ADU that is a part of the main dwelling structure cannot exceed 30 feet.
What are the required ADU setbacks?
What are the occupancy requirements?
1. Occupancy in the accessory dwelling unit is limited to two persons and their offspring living as a single household except in the case of a special exception use—see city.
2. Additionally, the total number of people residing in the main dwelling and the ADU cannot exceed four persons plus their offspring. For example, if there are four people plus their offspring living in the main residence, they could not have an ADU.
An ADU or single-family residence that is not owner-occupied is subject to periodic housing inspection.
Leasing or renting an ADU for less than 30 days is prohibited.
More specific requirements can be found in the Accessory Dwelling Unit Guidebook.
“Regardless of your reason for buying a property with an existing ADU or developing a new ADU, the City of Ann Arbor is encouraging you to do it.”
Where are ADUs Permitted in Ann Arbor?
The city provides an interact map of existing ADUs and where ADUs are allowed.
You can access the interactive ADU map here.
The interactive map is also a great way to contact the existing properties with ADUs to see if they are interested in selling.
Now, understand that neighborhood associations deed covenants can restrict where you can develop a new ADU even if the property is in allowable zoned area.
Additionally, if the lot is located in a historic district, you must apply for and receive a Certificate of Appropriateness from the Historic District Commission before a building permit will be reviewed.
It is important to work with an experienced Realtor when considering buying one of these properties and to check the property for restrictions with the neighborhood association and for any restricting deed covenants with an attorney and/or title company.
What is the Application Process to Develop a New ADU in Ann Arbor?
There are seven steps to the ADU application process.
1. Determine if your property meets the requirements for an ADU.
2. If your lot is located in a historic district, you must apply for and receive a Certificate of Appropriateness from the Historic District Commission before your building permit will be reviewed.
3. Apply for a building permit. Submit building plans including plans for mechanical, plumbing, and electrical work as needed. New houses will require a Michigan Energy Code Compliance Form. Zoning compliance is also reviewed as a part of the building permit process.
Other potential required permits:
Trade Permit Application (plumbing, electrical, and mechanical)
Grading Application and Impervious Area Checklist
Demolition Permit if applicable
Fire Suppression and Alarm Permit
4. Start construction and building/trade inspections.
5. Housing inspection program registration if you intend for the ADU to be a rental. Contact Rental Housing Services for that.
6. Submit Address Request Form for a new address.
7. Apply for a Certificate of Occupancy.
Working with an experienced contractor that has developed other ADUs in the city can help with this process.
How Will Your Property Taxes Change After Adding an ADU to a Property in the City of Ann Arbor?
The Primary Residence Exemption is based on the percentage of the available living space occupied by the owner.
Therefore the unit would be assessed similar as a 2 family rental.
For example, if 2/3 the available living space was occupied by the owner and 1/3 by the ADU, 2/3 would be taxed homestead exempt and 1/3 non-homestead exempt or at a higher tax rate.
The assessment would also increase for extra finishes and kitchens.
What are the Requirements for ADUs in the Surrounding Communities of Ann Arbor?
Because ADUs have been around since houses were built there are properties with existing ADUs in the surrounding communities of Ann Arbor.
Additionally, adding an ADU to a property in a surrounding community of Ann Arbor would require working with the building and zoning departments of that community.
Working with an experienced Realtor, attorney, and contractor can help with this process.
Bottom Line, Why You Should Consider Adding an ADU or Buying a Property with an Existing ADU in Ann Arbor.
ADUs have been around for a long time and are not new. The City of Ann Arbor is encouraging the development of new ADUs and for owners to provide additional affordable housing options with ADUs.
There are many benefits to owning a property with an ADU in Ann Arbor.
An ADU can allow friends and family to live nearby.
An ADU can allow for a family member in need of care to to live nearby or for the homeowner to receive care from friends or family living nearby.
An ADU can provide extra income for the homeowner to continue to afford to live in the City of Ann Arbor.
An ADU increases the value of the property.
In conclusion, buying a property with an existing ADU or developing a new ADU can be a good investment.
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