An accessory dwelling unit (ADU) can give homeowners more space and a new income stream. - CNBC

Accessory dwelling units are gaining traction among California homeowners as a viable solution for generating additional income while addressing the state's ongoing housing shortage.

These secondary residential structures, commonly referred to as granny flats or in-law suites, can be built either attached to or detached from the primary residence on the same property lot.

Construction costs for ADUs typically range from $40,000 to $400,000, with most projects averaging around $200,000.

The units are generally limited to two bedrooms, though some jurisdictions restrict development to single-bedroom or studio configurations.

For California property owners, ADUs represent a dual opportunity to maximize their real estate investment while contributing to local housing inventory.

The rental income potential from these units can help homeowners offset mortgage payments or fund property improvements, while simultaneously providing affordable housing options in high-demand markets.

California's regulatory environment has become increasingly favorable toward ADU development in recent years, with streamlined permitting processes and reduced restrictions making these projects more accessible to homeowners.

For property developers and investors, the ADU market presents opportunities in both new construction and retrofit projects, particularly as housing costs continue to rise statewide.

The growing acceptance of ADUs reflects a broader shift toward creative housing solutions that can help address California's estimated housing deficit while generating returns for property owners.