Arizona and Hawaii Adopt Statewide ADU Reforms

This post will review the laws that were recently adopted in Arizona and Hawaii, and provide some insights and constructive criticisms of each law. 

First, the awesome news: Both Arizona and Hawaii have adopted statewide ADU reforms in the last two weeks. 

The accelerated pace at which these statewide reforms are enabling the development of ADUs, is incredible. Almost overnight, millions of homeowners in AZ and HI will be able to help solve the housing crisis for their community, and simultaneously solve their own housing needs.

Statewide ADU reforms are the hottest trend this year in housing laws. 

Here’s a summary of what Arizona’s laws do. 

Arizona’s HB 2720

• Allows an ADU in cities with a population of 75K or greater. 
• For each ADU that is designated as “restricted-affordable dwelling unit”, either through a deed restriction or a development agreement with the municipality, rented or sold to households making up to 80% of the area’s median income, the owner can build an additional ADU. 
• Drops owner occupancy requirements for ADUs
• Drops parking requirements 
• Cities may not impose rear or side setbacks greater than five feet from the side and rear property lines.
• ADUs may be up to 75% of the floor area of primary house or 1,000 sq ft, whichever is less
• No requirements for design matching of primary home, or any development standards more restrictive than for other single dwellings in the same zoning area
• Arizona will defer to restrictive covenants concerning ADUs entered into between private parties. 
• If municipalities do not adopt these regulations by January 1, 2025, ADUs will be permitted by default.

With the passage of this law, Arizona has made it to the elite cohort of states with strong ADU codes. Welcome to the ADU club, Arizona! 

The only major flaw with this bill is that it’s limited to cities of 75K or greater, which include the following cities.   

1. Phoenix (1,609,456)
2. Tucson (541,033)
3. Mesa (503,390)
4. Chandler (275,618)
5. Gilbert (267,267)
6. Glendale (248,083)
7. Scottsdale (240,537)
8. Peoria (191,292)
9. Tempe (181,005)
10. Surprise (145,591)
11. Goodyear (97,542)
12. Yuma (96,314)
13. Buckeye (95,042)
14. Avondale (89,214)
15. Flagstaff (76,177)

This 75K population threshold provision excludes 36% of the population of Arizona. I’d be so frustrated if I lived in a smaller town in Arizona like Prescott, Sedona, Bisbee, and was still subject to byzantine ADU rules because my city had fewer than 75K people in it.

ADUs without a kitchen are not ADUs

An oddity of the Arizona legislation is that it says explicitly that ADUs do not have to have kitchens. More precisely, it states that a municipality may not: “Require kitchen facilities in an accessory dwelling unit.”

It’s good to make codes as flexible as possible. But, it’s also good to keep things straightforward. And, this little quirk in the legislation definition of ADUs probably does not do any favors for amateur homeowner developers. I’ll explain.  

1. An ADU without a kitchen is actually not an ADU. Rather, ADU without a kitchen is called an “accessory structure”, or “detached living space”. Accessory structures are a real thing. They’re all over the place. You may have one on your property in the form of a garage, a shed, or a detached backyard office, or a detached bedroom. They’re actually legal in most places, and they are a great loophole to know about when codes otherwise preclude the development of “ADUs”. But, it’s incorrect to call an “accessory structure” or “detached living space” without a kitchen an “ADU”. 

2. This misappropriation of terminology is going to cause problems in fringe cases, because Arizona’s official ADU law now collides with the stated definitions used by GSE financing agencies such as Fannie Mae, Freddie Mac, and FHA. 

If a homeowner chooses to build an ‘Arizona-special ADU’ without a kitchen, their lender and appraiser may not agree that they’ve actually built an ADU, and may not wish to value the property as such. And, their lender would be correct! 

This kitchenless ADU would not rise to the occasion of being a “single family home with an ADU” in the eyes of most lenders, since it doesn’t conform to GSE standards for an ADU, and this will ultimately cause financial hardship for the homeowner when they attempt to refinance or sell the property. The homeowners won’t be able to get appraisals or find comps easily, and a future buyer won’t be able to obtain financing for the property as easily. 

The Fannie Mae definition of an ADU necessarily requires that it have ‘space for cooking’. ie. It MUST have a kitchen to be an ADU. 

3. Ultimately, this quirk is probably not really a large-scale flaw in the law. It’s only going to cause unnecessary confusion. And, as I mentioned earlier, it does provide more flexibility to an owner who really does not want a kitchen in their accessory structure for some reason. But, ADUs are a confusing and complicated topic already, and this perversion of ADU terminology will confuse lay people.

The distortion of ADU terminology is a trend that was launched in force via California’s statewide ADU legislation with “Junior ADUs” and “Bonus ADUs” and “Multifamily ADUs” and also jurisdictions classifying ‘tiny houses on wheels’ as a type of ADU. 

Distorting standardized terminology causes market confusion, especially in areas of the country that don’t have have many legal ADUs yet. My hope here is that States and jurisdictions would try to use standard terminology, rather than dilute the precision of the English language by calling more and more types of housing “ADUs” because it’s politically expedient. 

Alas, I continually lose linguistic, perfectionist pet-peeve battles like this one, and it’s probably better for my sanity if I simply let this issue slide. The important thing is that we allow more people to create more infill housing. 

…But, I still like to gripe about it. 

Hawaii’s ADU legislation – https://legiscan.com/HI/text/HB1630/2024 

Hawaii has also signed ADU legislation into law on May 28th, 2024. 

This bill requires cities to allow two ADUs and drops owner occupancy requirements. 

However, this law leaves the bulk of the ADU development regulations up to individual jurisdictions, such as off-street parking requirements, setback requirements, and size limits. Thus, I would not place Hawaii’s ADU legislation in the strong ADU legislation camp. It’s tepid ADU legislation that does not ensure that homeowners are allowed to build ADUs by right in practice. 

Here’s the hour-long press conference that announced the new ADU law. At minute 31 of the presser, there was a great back and forth that I wanted to highlight. The question posed was from KITV. “Critics are saying this would make the neighborhoods more crowded, increase profits for developers, and create you know, other issues. Can you address that?”

Hawaii’s Governor Green stepped up to the mic, and joked, “The Senator has a particular rage for this type of NIMBYism”, and beckoned US Senator Brian Schatz, who was in attendance, up to the mic. 

Senator Schatz reflected and then launched into a surprisingly insightful narrative about how restrictive ordinances for ADUs are unintentionally carrying the torch that was first lit by Jim Crow laws.  

“Look, we need more housing and we have to understand that when the Supreme Court outlawed Jim Crow segregation, that organizations wanted to continue to segregation, sat down with the then National Association of Realtors, and came up with restrictive covenants, minimum lot size, and they had specific language that they used protecting neighborhood character, protecting community integrity. 

And, even this year as this bill as this bill was being contemplated, individual legislators said that this was cause slums and violence and disease. Vectors for disease. 

And, we need to understand that that language is rooted in post Jim Crow America. 

And so those of us who are steeped in the Democratic Party’s traditions need to understand that when we oppose housing on the basis of neighborhood character, when we oppose housing on the basis that densification would cause disease, we are really the great, great grandchildren of Jim Crow. 

So, there needs to be a reckoning among Hawaii progressives about what it means to be progressive if you are for the nurse having housing,  if you are for the elderly having housing,  if you are for the disabled having housing, if you are for the UH or HBU students having housing, that housing has to go somewhere. 

And, some things matter more than the aesthetics of your neighborhood.”

Dang, Senator Schatz, I’m not Hawaiian, but I’ll totally vote for you. 

Despite Schatz’s bold statements addressing the common restrictive ordinances that housing development faces, Hawaii’s ADU bill does not actually addressing a number of the very common poison pill barriers to ADUs that he called out in his elegant disposition, such as off-street parking requirements, or minimum lot sizes. 

Before we say Aloha to Ohanas, I’ll mention that there’s an ADU financing bill in the works, but it has not yet passed. 

Some observations about current statewide ADU reform trends:

Two ADUs

These two bills in Arizona and Hawaii both allow two ADUs, similar to Washington and California. Washington’s policy is the most liberal and explicit of these, and therefore it has the best legislation of those four states for in terms of allowing two ADUs. 

Middle Housing Reforms Passed Simultaneously 

Arizona simultaneously passed a middle housing bill (HB 2721) when it passed its ADU bill. Like Washington, Oregon, and Colorado, the legislation simultaneously passed strong ADU reforms and strong middle housing bills. There’s a lot to say about these matters, but in order to keep this article more focused, I’m not going to stray too far down the middle housing road.

To Defer or Not to Defer to HOAs

There’s two different camps for how to contend with HOAs and ADUs. One approach defers to existing covenants commonly found in HOAs, and one that supersedes all existing covenants. Here’s examples of each: 

(b)  This section shall not apply to any private covenants recorded before the effective date of this Act.

From Hawaii’s new ADU law. 

4751. (a) Any covenant, restriction, or condition contained in any deed, contract, security instrument, or other instrument affecting the transfer or sale of any interest in a planned development, and any provision of a governing document, that either effectively prohibits or unreasonably restricts the construction or use of an accessory dwelling unit or junior accessory dwelling unit on a lot zoned for single-family residential use that meets the requirements of Section 65852.2 or 65852.22 of the Government Code, is void and unenforceable.

From one of CA’s 2019 ADU law

There are two distinctive legal approaches at play here, so it’s worth noting: 

One approach says, ‘People agreed to these HOA prohibitions of their own volition. It’s their right to have their own legally binding voluntary agreements and we will not intervene”. 

The other approach says, ‘HOAs have to abide by our statewide housing policy just like everyone else.’

For what its worth, I’m currently ambivalent on this matter. They’re both valid positions to me. 

First, there was Weak ADU Legislation. Then, there was Strong ADU Legislation. Now there’s Tepid ADU Legislation

Some states have ADU bills that continue to wind their way through the legislative process this year like in MA. I’ll sort these respective attempts out when they pass into law. 

Tepid ADU legislation are ADU laws that strongly deal with at least one of the poison pills for ADUs, but that do not address all of the major poison pills sufficiently necessary to actually foster an ADU movement. For reference, along with Hawaii’s new ADU legislation, I would place Connecticut’s 2021 ADU legislation into the tepid ADU legislation camp. CT’s model ADU codes were strong, but the law allowed jurisdictions to opt out, which many did. The bill’s original backers have reached the same conclusion in their own post mortem. 

A bunch of states have legacy weak ADU laws from a decade back before the ADU movement had become so dominant in the West coast. But to my confoundment, some states are actively working on enacting weak ADU legislation, such as Rhode Island’s feckless ADU law. Take a gander at how strict and retrograde this proposed ADU law in Rhode Island is. 

Pursuant to § 45-24-37(e), one accessory dwelling unit (ADU) shall be allowed per primary dwelling by right if any of the following circumstances apply: 

(1) On an owner-occupied property as a reasonable accommodation for family members with disabilities or for family members who are sixty-two (62) years old or older; or 

(2) On a lot containing a total lot area of at least six thousand square feet (6,000 sq. ft.) and meeting the minimum lot area for the residential zoning district in which it is located and which 27 minimum lot area is free from wetlands, flood plains or flood hazard areas; or 

(3) On a lot which has a minimum lot area of forty thousand square feet (40,000 sq. ft.) regardless of the zoning district in which it is located and which minimum lot area is free from wetlands, food plains or flood hazard areas; or

(4) Where the proposed ADU is located within the existing footprint of the primary dwelling or existing legally permitted or legally nonconforming attached or detached accessory structure and does not expand the footprint of the structure; provided that, the lot is zoned for residential use.

Rhode Island’s proposed law is an example of weak ADU legislation- as if written in the middle ages by some type of waspy King. 

“I declarath, if thou hast 40,000 sq ft and a wetland on thy lands, thou may hath an accessory mansion. for thy horse and its caretaker.”- Waspy King 

The current draft may represent progress for ADUs by Rhode Island’s standards, but it is weak in terms of its potential to encourage average people, or really any people, to build ADUs. 

At this point, we have ample data and research on what makes for a strong ADU code by bedfellows as strange as AARP and ALEC, from piles of housing policy journal articles, from multiple academic centers and from ADU practitioners and advocates. Everyone who studies and works on these issues in real life, is now singing from the same hymnal. 

From my perspective, there’s no reason to spend political capital on passing ADU laws that won’t produce any ADUs. I would actually encourage Rhode Island legislators to just come back to ADUs in a later session when the leadership and legislative member composition is ready to make meaningful progress on housing reforms.

Effective ADU policy requires not compromising to meet the whims of every NIMBY’s wish list–a painful bureaucratic death by a 1,000 papercuts. 

There is no mystery or debate about what makes for functional ADU regulatory reform. We definitively know what ADU legislation actually works to enable an ADU movement. 

I’d rather see strong ADU reforms fail again and again till one day, they pass, then weaker ADU reforms pass, but gain little traction. For example, Washington’s strong ADU legislation (HB 1337) finally passed in 2023 after several failed attempts beginning in 2019. Conversely, New Hampshire’s weak ADU legislation passed in 2017 but it has resulted in very few permitted ADUs.

When States are actually ready to take housing reforms more seriously, they can literally just copy the legislative approaches that have been used in Oregon, Washington, California, Colorado, Montana, and Arizona. Technocratically, these changes are not that hard. 

We just need a couple of brave state legislators to spearhead and enact these changes. (Talk to your colleagues from those 6 states above about how they did it). And ADU advocates should do their part to provide political support for strong legislation, when the opportunities arise.