Build Smart: Everything You Need to Know About Custom ADUs in the Denver Metro Area

Accessory Dwelling Units (ADUs) are rapidly becoming one of the smartest investments a homeowner can make in the Denver metro area. Known by names like in-law suites, carriage houses, backyard cottages, or granny flats, these small, secondary homes sit on the same lot as a primary residence—and they’re reshaping the way Denver residents think about space, family, and income.

Driven by the region’s ongoing housing shortage, rising property values, and a growing need for flexible living arrangements, ADUs have gained significant popularity throughout Colorado. More homeowners than ever are exploring how to maximize their properties for multigenerational living, passive rental income, and long-term value.

For those ready to take the next step, MIHI Construction—a trusted name in custom home additions and remodels—offers turnkey ADU construction in the Denver metro area. From initial consultation to permitting and final walk-through, their team guides you through the process with deep knowledge of local zoning and unmatched craftsmanship.

Why Build an ADU in the Denver Metro Area?

There are plenty of reasons why ADUs are surging in popularity across Denver, Aurora, Lakewood, Arvada, and surrounding communities. As housing costs continue to climb and space becomes more limited, homeowners are looking for creative, cost-effective ways to add usable square footage—and ADUs deliver on every front.

Address the Housing Shortage

Denver’s housing market is notoriously tight. ADUs help fill the “missing middle” in residential neighborhoods, offering compact, livable homes that don’t require large-scale land development. These dwellings are perfect for adult children, aging parents, caregivers, or renters—all while keeping the family or tenant close.

Generate Passive Income

One of the most attractive aspects of building an ADU is the ability to earn rental income. Whether used for long-term tenants or as a licensed short-term rental (depending on zoning and licensing), ADUs can provide a steady revenue stream that helps offset construction costs or mortgage payments.

In neighborhoods with strong demand, such as Highlands, Baker, or Berkeley, monthly rental income from a well-designed ADU can range from $1,200 to $2,000 or more, depending on size, location, and features.

Increase Property Value

Beyond short-term benefits, ADUs significantly increase resale value. A study by Porch.com found that homes with ADUs in major urban areas like Denver often sell for 20%–35% more than those without. This added value stems from greater versatility, livability, and future potential for buyers.

Support Multigenerational Living

As families evolve, so do their housing needs. ADUs provide an ideal solution for those looking to house aging parents, returning college students, or even live-in childcare providers. They offer privacy and independence while keeping loved ones close and cared for.

Denver Zoning Laws & ADU Regulations: What You Need to Know

Navigating the legal landscape for ADU construction in Denver used to be a hurdle for many homeowners. But in recent years, the city and state have made huge strides to simplify the process and open up ADU construction to a wider audience.

Key Denver Regulation Changes

In December 2024, Denver passed a citywide legalization of ADUs, making it easier than ever to build on residential properties that previously weren’t zoned for secondary dwellings. The new rules now allow ADUs in more than 70% of residential areas—up from just 36% before the law passed.

This change gives homeowners across much of Denver—including neighborhoods like Westwood, Montbello, and Park Hill—the green light to add an ADU without pursuing a rezoning application.

Statewide Mandate (HB24-1152)

Even bigger changes are on the horizon. Colorado’s House Bill 24-1152, passed in 2024, requires all jurisdictions statewide to permit ADUs on lots where single-family homes are allowed. By June 30, 2025, cities and counties across Colorado will need to comply with this mandate—making ADU construction more accessible than ever, even in suburbs like Littleton, Wheat Ridge, or Thornton.

Key Requirements for Denver ADUs

While the zoning path has been cleared, there are still specific requirements homeowners must meet when building an ADU in the Denver metro area:

• Owner-Occupancy Requirement: The property owner must live in either the main home or the ADU at the time of application. This ensures that ADUs are integrated responsibly into communities.
• One Unit Per Lot: Only one ADU is allowed per single-family lot.
• Address & Utilities: The ADU must have a separate address and can share utilities with the main home (preferred for cost savings).
• Setbacks & Size Limits: ADUs must comply with local setback requirements (typically 5 ft. from rear and side property lines) and are usually capped at 650–1,000 sq ft, depending on lot size and location.
• Parking: Some neighborhoods still require an additional parking space for the ADU, though recent reforms have made this less common.

Not Allowed: Tiny Homes on Wheels

Denver’s ADU rules do not allow movable tiny homes or trailers. Only permanent, site-built or modular structures that meet building codes can be permitted as ADUs.

MIHI Construction’s Custom ADU Process

When it comes to building an ADU in the Denver metro area, the process can feel overwhelming—especially with zoning rules, design requirements, and permitting timelines. That’s why working with a knowledgeable local contractor like MIHI Construction is so important. Their end-to-end process ensures every detail is handled, from your first site walk-through to final city inspection.

Step 1: Initial Consultation & Feasibility Study

MIHI begins every ADU project with a free consultation and feasibility study. They visit your property to evaluate:

• Lot size and shape
• Existing home footprint
• Setbacks and access points
• Zoning regulations for your parcel
• Potential challenges such as utility lines, slopes, or tree coverage

This critical step ensures you understand what’s possible—and what’s not—before design work begins.

Step 2: Custom Design Development

Unlike cookie-cutter builders, MIHI Construction creates custom floorplans and elevations based on your lifestyle, needs, and design preferences. Whether you’re envisioning a minimalist studio for rental income or a two-bedroom in-law suite for multigenerational living, they’ll guide you through key design decisions:

• Layout (open-concept vs. segmented)
• Kitchen & bathroom placement
• Windows and natural light optimization
• Exterior materials to match your home or neighborhood style
• Energy-efficient features and green upgrades

Step 3: Permitting & City Coordination

Denver’s permitting process can be complex, but MIHI navigates it for you. Their team prepares detailed construction documents, applies for all necessary permits, and works with local departments on your behalf.

You’ll never have to stand in line at the city’s planning office—they take care of:

• Zoning and building permit submittals
• Utility coordination (water, sewer, electric, gas)
• Address requests and 911-compliant signage
• Inspections and scheduling with Denver Development Services

Step 4: Construction & Project Management

Once permitted, MIHI’s experienced crews break ground. You’ll have a dedicated project manager who keeps you informed throughout the build, oversees timelines and subcontractors, and ensures your ADU is completed to exacting standards. The company’s track record for quality, transparency, and communication makes the experience as smooth and stress-free as possible.

Design & Construction Details: What to Expect

Designing an ADU isn’t just about code compliance—it’s about creating a space that’s livable, functional, and beautiful. MIHI Construction helps you craft an ADU that maximizes every inch of space while blending seamlessly with your main home and neighborhood surroundings.

Types of ADUs Offered by MIHI

There are several structural types of ADUs, and MIHI builds all of them to suit your property layout and goals:

Detached ADUs

• Built as a standalone structure in your backyard or side yard
• Great for rental income or full separation from main home
• Typically 400–1,000 sq ft depending on your lot

Attached ADUs

• Shares a wall with the main home, often added onto the side or rear
• Allows for easy internal access if needed
• Ideal for family or caregiver use

Garage Conversions

• Transforms an existing garage into a livable space
• Lower construction costs if the structure is sound
• Can retain some garage space depending on layout

Basement ADUs

• Finished basement units with separate entrance
• Cost-effective and low-impact
• Excellent choice for multigenerational households

Layout Features and Custom Options

MIHI’s in-house design team creates floorplans that feel larger than they are, with high ceilings, open-concept living areas, and natural light as priorities. Popular upgrades include:

• Vaulted ceilings for a spacious feel
• Full kitchens or kitchenettes with quartz counters
• Stackable washer/dryers
• Smart home systems
• Built-in storage to save space
• Covered patios or decks for indoor-outdoor living

Exterior and Neighborhood Integration

To comply with Denver’s ADU rules, the unit must match or complement the existing home’s exterior finishes. MIHI ensures your new ADU feels like a natural part of your property, not an afterthought. From craftsman-style bungalows to modern stucco finishes, they tailor the design to your aesthetic preferences and neighborhood guidelines.

Cost Estimates & Financing Tips

Understanding the cost of building an ADU is crucial for planning and long-term ROI. While prices can vary widely depending on the size, style, and location of your build, MIHI Construction offers clear, transparent estimates so there are no surprises.

What’s the Cost to Build an ADU in Denver?

On average, you can expect to spend between $236,000 and $350,000 for a complete, turnkey ADU in the Denver metro area. Several factors influence this range:

• Type of unit (detached vs. conversion)
• Square footage
• Foundation type
• Material finishes and upgrades
• Utility connections

MIHI provides a line-by-line breakdown during the estimating phase and works with you to prioritize features based on your budget.

Financing Options for Denver Homeowners

If you don’t have the full amount saved, don’t worry—there are multiple financing options available for ADU projects:

• Home Equity Line of Credit (HELOC): Tap into your home’s equity for low-interest funding.
• Cash-Out Refinance: Refinance your existing mortgage with a higher loan amount to cover the build.
• Personal Loans or Construction Loans: MIHI can connect you with lenders familiar with ADU construction.
• Green Building Incentives: Adding solar panels, heat pumps, or energy-efficient systems may qualify for local rebates or tax incentives.

Colorado ADU Grant Program (NEW in 2025!)

Thanks to Colorado’s HB24-1152, a $5 million state grant program is being rolled out for low- to moderate-income homeowners looking to build ADUs. Local cities like Denver and Boulder are setting up their own application processes, and MIHI stays on top of these developments to help you take full advantage of available incentives.

Rental ROI: What’s the Payoff?

If you plan to rent your ADU, the long-term return can be significant. A well-located 1-bedroom ADU in Denver can bring in \$1,500–\$2,000 per month, depending on the neighborhood. That’s \$18,000–\$24,000 annually—enough to cover a loan payment, build equity, or fund future upgrades.

Tips & Considerations for Homeowners in the Denver Metro Area

Before diving into an ADU project, there are several key things to consider to ensure a smooth process and long-term success. From verifying zoning to planning for utilities and rental usage, these tips will help you make informed decisions that maximize both function and value.

Check Your Zoning and Neighborhood Restrictions

Even though Denver now broadly allows ADUs across the city, it’s still important to verify your specific parcel’s zoning designation and any overlay rules that may affect design, height, or location. Surrounding communities like Englewood, Wheat Ridge, Lakewood, and Aurora may have slightly different regulations or permitting processes.

If you’re in an HOA, be sure to check your covenants and restrictions—some homeowner associations limit secondary units or impose architectural guidelines that affect exterior design and materials.

Pro tip: MIHI Construction includes zoning research in their feasibility studies to confirm what’s allowed on your property before any design work begins.

Plan for Utilities and Site Access

• Water and Sewer: Denver typically requires a tap fee or use of a shared line with backflow preventers. MIHI handles these connections efficiently during the permitting phase.
• Electricity and Gas: You can opt for sub-metering (separate billing) or shared service from the main home.
• Trash and Addressing: Your ADU will need a separate address and mailbox. Trash pickup is typically shared with the main home but must comply with city guidelines.
• Emergency Access: Clear pathways and proper signage are required to ensure emergency services can locate and reach your ADU.

Understand Short-Term Rental Rules

If you’re thinking about listing your ADU on Airbnb or VRBO, Denver requires:

• The ADU to be your primary residence or located on the same property.
• A short-term rental license, which includes inspections and fees.
• Compliance with guest limits, noise ordinances, and safety requirements.

Many surrounding cities—including Boulder, Arvada, and Lakewood—have their own STR ordinances, so be sure to review local rules or consult MIHI for up-to-date guidance.

Success Stories & Local Relevance

ADUs aren’t just a hot trend—they’re working right now for real homeowners across the Denver metro area. From rental income to multigenerational living, the versatility of these small homes is reshaping how families live, invest, and plan for the future.

Neighborhoods Embracing ADUs

Denver neighborhoods like Chaffee Park, East Colfax, Sunnyside, Westwood, and Athmar Park were among the first to benefit from early rezoning for ADUs—and they’ve seen tremendous adoption. Many of these areas have larger lots, alleys for access, and forward-thinking residents who’ve embraced ADUs as a long-term solution to housing and income needs.

Generational Living Made Easy

In areas like Lakewood and Wheat Ridge, MIHI has helped families build ADUs for aging parents or adult children—providing independence and privacy while staying close. These projects are often tailored with accessibility features like ramps, step-free entrances, and walk-in showers.

Real Rental Income, Real ROI

One MIHI client in Arvada built a 650 sq ft detached ADU to rent on a long-term basis. With a modern kitchen, full bath, and private entrance, the unit was leased within 10 days of completion for $1,850/month—completely covering their loan payment and generating $300+ in positive monthly cash flow.

🧰 MIHI Makes It Happen

From starter projects in Aurora to full-scale detached units in Golden, MIHI Construction has built ADUs that reflect the diversity of Denver’s housing needs. Their clients consistently praise their transparent process, problem-solving mindset, and ability to turn a backyard into something truly valuable.

Build Smart, Live Better with a Custom ADU

In a growing city like Denver, a custom ADU isn’t just an upgrade—it’s a strategy. Whether you’re building for family, for income, or for future resale value, these flexible, beautiful homes are one of the best investments you can make.

With major zoning reforms now in place—and state laws continuing to expand access—there’s never been a better time to start planning your ADU project.

MIHI Construction is here to guide you every step of the way. From design to permits to keys in hand, their expert team brings local insight, custom craftsmanship, and personalized service to every project.

Ready to explore your ADU possibilities?

Schedule your free consultation with MIHI Construction today and take the first step toward unlocking the full potential of your Denver-area property.