Denver ADU Guide: Rules, Costs, ROI (2026)

Denver has some of the most favorable Accessory Dwelling Unit (ADU) zoning in the country. The Denver Group Living Code (2019) + Chapter 38 allows ADUs by-right on most single-family lots. That means a 400-1,000 sq ft secondary dwelling in your backyard, garage, or basement can be permitted without a variance — transforming your property into a dual-income home or multi-generational compound. This guide covers Denver ADU rules, construction costs, and realistic ROI.

Denver ADU Rules (2026)

Who Can Build One

Most single-family and multi-family zones allow ADUs. Check your specific zone:

• E-SU-B, E-SU-Bx, E-SU-B2, E-SU-B2x: ADU allowed
• U-SU-B, U-SU-B2, U-SU-B-Cx: ADU allowed
• S-SU-B2, S-SU-D, S-SU-Dx: ADU allowed

Find your zone via the Denver Online Zoning Map (maps.denvergov.org).

Types Allowed

Most Denver residential zones allow:

• Detached ADU (DADU): separate structure in backyard
• Attached ADU: new ADU built sharing wall with main house
• Garage conversion: existing garage → living space
• Basement ADU: legal basement apartment with separate entry + kitchen + bath

Some zones allow two ADUs (one detached + one basement for example).

Size Limits

• Detached ADU: up to 1,000 sq ft in most zones
• Attached: 650 sq ft or 35% of main house size, whichever is greater
• JADU / basement conversion: up to 500 sq ft typically

Check your zone's specific size limit.

Setbacks + Placement

• Rear setback: 5 ft minimum (detached ADU can be closer to lot line than main house in most zones)
• Side setback: 3-5 ft
• Height: 20-25 ft maximum depending on zone
• Distance from main house: typically 10 ft minimum

Parking

Denver waived parking requirements for most ADUs in 2019. You don't need to add a parking space when building an ADU in most zones. Some specific zones still require it — verify before quoting.

Short-Term Rental

Denver requires a Short-Term Rental (STR) license to rent any property <30 days. Key rule: you must live on the property as your primary residence. You can rent out your ADU (or your main house) short-term, but not both simultaneously unless you're the primary resident of one.

License cost: ~$250/year + annual renewal.

For long-term rental (30+ days), no license required.

Historic Overlay

Wash Park, parts of Capitol Hill, Cherry Creek, and Country Club have LPC review. Detached ADUs in historic districts need approval — adds 2-4 months to permit + may require exterior design matching.

Cost Breakdown by ADU Type

Detached ADU (New Build, 600-900 sq ft)

Typical cost: $200,000-$350,000 turnkey

Component	Cost (700 sq ft)
Design + engineering + permits	$20,000
Foundation + site prep	$28,000
Framing (floor, walls, roof)	$42,000
Windows + doors	$12,000
Roofing	$11,000
Exterior siding + paint	$16,000
HVAC (mini-split, high-altitude adjusted)	$14,000
Electrical (new sub-panel + rough + finish)	$22,000
Plumbing (water + sewer + gas to main)	$18,000
Insulation (R-21 walls, R-49 attic per Colorado code)	$9,000
Drywall + paint	$14,000
Flooring	$10,000
Kitchen (full: cabinets, counter, appliances)	$18,000
Bathroom (tub, shower, toilet, vanity)	$12,000
Interior doors + trim + hardware	$6,000
Labor + GC	$28,000
Total	$280,000

Garage Conversion ADU

Typical cost: $120,000-$220,000

• Insulation upgrade, drywall, new flooring: $20-30k
• New kitchen + bath: $30-45k
• Electrical/plumbing upgrades: $15-25k
• HVAC: $8-14k
• Exterior modification (new door/windows): $10-20k
• Labor + permits: $30-50k

Timeline: 4-7 months.

Basement ADU (Legal Basement Apartment)

Typical cost: $80,000-$180,000

• Framing + partition walls: $15-25k
• Egress windows (typically 2 for bedrooms): $12-18k
• New kitchen: $18-30k
• Bathroom: $12-18k
• Electrical/plumbing: $15-25k
• HVAC (separate zone or mini-split): $8-15k
• Labor + finish: $15-30k

Timeline: 4-8 months.

ROI Analysis

Rental Income Denver 2026

• Detached 700 sq ft ADU: $1,600-$2,200/month
• Garage conversion ADU: $1,400-$1,900/month
• Basement ADU: $1,200-$1,700/month

ROI Math (Detached ADU example)

• Construction cost: $260,000
• Monthly rental: $1,900
• Annual gross: $22,800
• Operating expenses (maintenance + insurance + property tax on added assessed value): ~$5,500/yr
• Net annual: $17,300
• Simple payback on rental: 15 years
• Appraised value added: $200,000-$260,000
• Equity add: $0-$50k depending on neighborhood

Bottom line: ADUs are NOT get-rich-quick investments. They're long-hold assets that pay back over 15+ years + add significant value + provide flexibility.

When ADU ROI Is Better

Basement ADU has the best ROI because construction cost is much lower ($100k) vs rental income is similar ($1,500/mo). Payback: 7-8 years.

Dual use — Living in the ADU yourself while renting the main house. Can be tax-advantaged.

Multi-generational — Adult kids, aging parents. ROI is lifestyle flexibility not rental income.

Pro Tips

1. Soil test before buying the land if you're shopping for ADU-ready lots. Denver soil varies — some Lakewood, Wheat Ridge, and Jefferson County pockets have Pierre Shale that requires engineered foundations (+$15-25k).

2. Run the rental pro forma with realistic numbers. Don't assume top-of-market rent; assume 90% occupancy.

3. Decide short-term vs long-term rental at design. Short-term has higher gross but different furniture, higher turnover cost, STR license rules. Long-term is lower gross but much less work.

4. Know the neighborhood appraisal ceiling. In very high-end neighborhoods (Cherry Creek North, Observatory Park), ADUs add less to appraised value because the neighborhood is already at market top.

5. Build for 10+ year hold. Short holds don't realize ADU ROI.

Getting Started

Free on-site feasibility consultation covers:

• Zone check
• Lot size + setback feasibility
• Utility connection assessment
• Preliminary design options (detached vs garage vs basement)
• Permit timeline + cost estimate
• ROI pro forma

Peak Builders Denver has built 25+ ADUs since 2019. Licensed Colorado GC, 5-year workmanship warranty, full Denver Ch. 38 permit handling. Call (720) 772-7567 for a free consultation.