Summary
California ADU costs have gone up in recent years, but that doesn’t mean your ADU dreams are out of reach. In this guide, Chris from Builders Now walks homeowners through the real reasons costs have increased, from energy regulations to design choices and market demand. He also shares practical, experience-backed tips to help you build smarter, save costs, and avoid the most common budget traps. If you’re planning an ADU, this is the inside scoop you won’t want to skip.
When most homeowners start thinking about building an ADU, one of the first questions that comes up, and rightfully so, is about cost. And yes, it’s true: over the last few years, prices for construction have gone up. Between changes in building codes, material costs, and overall demand, California ADU projects today can cost more than they did even just a few years back.
But here’s the good news: it’s completely manageable once you understand where those costs are coming from. In fact, a big part of what I do with my clients at Builders Now is help unpack these different factors upfront so you’re not walking into the process blind and you have a clear plan for how to build smart, avoid unnecessary costs, and still get the high-quality ADU you’re hoping for.
So let’s break it down together.
The Surge in ADU Demand — And What It’s Doing to Costs
If you’ve been even remotely looking into ADUs lately, you’ve probably seen that a lot of people are building them right now. And that’s true; there’s a reason for it. I’m seeing it every day in my own projects.
What’s happening is that a lot of folks would love to move into a bigger place, but with how high interest rates are right now, they’re realizing it makes more sense to stay put and build extra space on the property they already own. Families are growing, aging parents need space, or people just want rental income. Building an ADU solves all of that.
This huge wave of ADU construction has put a strain on the trades (electricians, framers, plumbers) because, like anything else, it’s simple supply and demand. When more people are building at the same time, the available labor pool gets stretched, prices go up, and schedules start backing up.
The Regulations: New Codes, New Costs (But Also Long-Term Benefits)
Another piece that plays a role in ADU costs, and honestly one that makes sense when you step back, is California’s push for better energy efficiency. The state has made a big effort over the past few years to build more energy-smart homes that are better for the environment, more resilient, and ultimately cheaper to operate long term. That’s a good thing. But like with anything in construction, many of these improvements do come with some upfront investment that’s important to plan for early in your ADU process.
For example, under California’s 2022 Energy Code, if you’re building a new detached ADU, you’re generally going to need to include solar panels as part of the build. This alone can add $5,000 to $10,000 or more to your upfront budget depending on the system size and your installer.
Then there’s the water heaters. This is where I get a lot of surprised looks from clients when we’re reviewing specs. California now heavily encourages the use of heat pump water heaters instead of the old gas tankless systems that used to be the go-to. Heat pumps are definitely more efficient long term, but they’re also a bit more expensive at install.
On top of that, switching to electric appliances like these can sometimes mean you’ll also need to either add a new meter, or in some cases upgrade your electrical panel to handle the additional load. A lot of older homes only have 100-amp panels or smaller, and these new systems often require you to bump that up. This can add thousands more, depending on your setup and utility provider.
Now to be fair, there’s a logic behind these regulations. The state wants homes to be more efficient and reduce gas dependency. Gas lines, especially for water heaters, have been a costly utility to pipe in. By going electric, and especially with a heat pump, you’re reducing that complexity. And down the line, many homeowners will save on monthly utilities.
But when you’re budgeting for your ADU build upfront, these code requirements can catch people off guard if you don’t plan for them early.
Design Choices: Where Small Decisions Can Have a Big Impact on Your Budget
One of the places where I see ADU budgets either stay on track or start to spiral is actually in the design phase. This is where early decisions, such as room sizes, layouts, and add-ons, start adding up, sometimes way more than people expect. And this is an area where you really can control your costs if you plan intentionally from the start.
Take bathrooms, for example. Everybody loves the idea of a big spa-like shower. But doubling the size of your shower doesn’t just mean buying a little more tile; it also means more labor, more waterproofing, more plumbing, and more framing. That extra space can easily add several thousand dollars without adding much real function.
For kitchens, people often want larger layouts, but in an ADU where square footage is limited, every extra cabinet and every foot of countertop drives up both material and labor costs. Custom cabinetry, tile backsplashes, and built-ins are all beautiful but can really blow out your budget if you’re not careful.
Even how you shape the structure itself matters. I was working with one client recently who wanted to overhang the second story a little further to create a covered patio below. It looked great on paper, but when we ran the numbers, that small overhang would’ve required extra foundation work and structural engineering that can add tens of thousands of dollars to the total cost. We ended up pulling that overhang back just a few feet and saved them a huge chunk of change with no real sacrifice to the livability of the space.
That’s why I always tell my clients: bigger isn’t always better. A well-designed smaller footprint will almost always serve you better in the long run, both for your budget and your day-to-day use of the space.
Alright — so how do we keep these costs under control?
This is the part I really try to emphasize with homeowners, because the good news is, there are actually a lot of things you can do early in the process to help minimize unnecessary expenses. You can’t control market inflation or regulations, but you can control how you approach your project.
Here are some of the key things I walk clients through:
1️⃣ Design Smart from the Start
Like I mentioned earlier, design choices have one of the biggest impacts on your budget. The goal is to design a space that works for your needs without adding square footage or features that don’t give you meaningful long-term value. A 100 sq ft difference may not sound like much, but when you multiply that by the cost of framing, foundation, roofing, drywall, insulation, flooring, electrical, and plumbing, it adds up quickly.
2️⃣ Prioritize Function Over Flash
Avoid the fancy bells and whistles that seem nice on paper but don’t really improve how you use the space. I’ve seen people add high-tech features like voice-controlled faucets, oversized custom showers, or smart appliances that add thousands of dollars but rarely make a huge difference in your daily life. Put your money where you’ll feel it most: good layout, proper insulation, solid fixtures, and quality materials that will hold up for years.
3️⃣ Plan Utility Loads Early
Many people don’t realize that adding just one or two extra plumbing fixtures could trigger costly utility upgrades like new water meters or sewer connections. We always evaluate this carefully during the design phase to avoid crossing thresholds that automatically bump up your required service capacity. Similarly, adding too many electric appliances could force a costly electrical panel upgrade. Planning this early saves a ton of headache later.
4️⃣ Bring Your Builder Into Design Conversations Early
This is a big one. One of the ways we do things a little differently at Builders Now is that I’ll work with clients and their designer together, right from the start. That way, we’re always keeping an eye on how design choices will translate to real construction costs. It’s much easier and cheaper to adjust drawings early than after permits are submitted.
5️⃣ Don’t Skip Quality Where It Matters
Sometimes saving money up front can cost you more in repairs or replacements later. I always recommend spending a little more for things like:
- Solid-core doors (quieter, more durable)
- Proper interior insulation (helps with noise and energy efficiency)
- Upgraded garbage disposals that won’t jam every year
- Good quality plumbing fixtures you won’t have to replace
We’ll cover these specific “worth-the-investment” items more fully in a separate guide, but it’s always better to invest in long-term reliability where you can.
6️⃣ Stay Flexible — But Build a Game Plan You Can Actually Stick To
One thing I always try to prepare homeowners for is that no matter how well you plan, there’s almost always some curveball along the way. Maybe it’s a permit delay or a small design change that unlocks unexpected savings or costs.
The key is to approach your ADU build with clear priorities upfront, but hold everything else with an open hand. Decide early on:
- What’s non-negotiable for you? (i.e. bedroom count, layout, accessibility, rental income goals)
- What’s nice to have but flexible? (i.e. higher-end tile, certain room sizes, specific appliances)
That way, when surprises happen, and they will, you’ve already built a roadmap for how to adjust while still protecting your bigger goals and budget.
And honestly, this is exactly why I encourage homeowners to bring builders in early. At Builders Now, our role is to sit on your side of the table and walk through all these moving parts together before you even break ground. The sooner builders are involved in your process, the easier it is to avoid costly mistakes and keep your budget working for you.
Ready to Build Smarter? Let’s Talk.
Building an ADU in California today absolutely can still make financial sense, if you build smart. The truth is, there’s no magic number or one-size-fits-all budget. Every property, every family, and every set of priorities is a little different. But with the right planning, the right design approach, and a builder who knows how to navigate both the costs and the codes, you’ll be in a much stronger position to build something you’re proud of.
If you’re starting to explore your ADU options, or even just want a gut check on your existing plans, feel free to reach out. We’d be happy to sit down, walk you through it, and help you make sure your ADU works for your property, your budget, and your long-term goals.
👉 Contact Builders Now to schedule a free consult.