Can You Rent Out An ADU?

By Buz Artiano, BuildX | January 2026

One of the first questions we hear from families visiting one of our ADU Home Tours is "Can we rent this out?" It makes sense. You are investing hundreds of thousands of dollars in building a second home, and you want to know exactly what you can do with it. Some families are thinking about building an ADU and renting it out as an investment immediately. Others just want the peace of mind knowing that if they build for their family now and the situation changes, they can rent it out then.

At BuildX, we've built dozens of ADUs in Massachusetts and walked hundreds of homeowners through the rental rules. The Massachusetts Affordable Homes Act, which went into effect on February 2, 2025, created statewide rules for ADUs that finally give homeowners clear answers. We know this law inside and out because we deal with it on every single project.

What Does Massachusetts Law Say About Short-Term vs. Long-Term Rentals for ADUs?

Under Massachusetts law, a "short-term rental" means any rental of 31 consecutive days or less. This is the same definition as the one that is used for the state's Room Occupancy Excise tax, which applies to things like hotels, motels, and vacation rentals.

Here's what this means for your ADU:

• Long-term rentals (32+ days) are protected under the new state law and towns can no longer prohibit them
• Short-term rentals (31 days or less) CAN be restricted or even prohibited by your individual town rules
• But be aware that most Massachusetts communities ARE choosing to prohibit short-term ADU rentals at this time.

Lieutenant Governor Kim Driscoll, who helped write and put this legislation in place, explained her reasoning on the BuildX Podcast: "We wanted accessory dwelling units to actually get built in Massachusetts. How do we craft something that enables individuals and homeowners who are thinking about ADUs to actually get it done?"

The main focus of this law is to help create long-term housing, it is not intended to add additional vacation rentals. As we can see on mass.gov, towns may impose "restrictions or prohibitions on short-term rentals". This is one of the reasonable regulations they're allowed to enforce under the new law.

Am I Allowed To Airbnb an ADU?

If you were planning to recoup some of your ADU costs with Airbnb income, that could be an unlikely expectation. The Affordable Homes Act specifically allows towns to ban short-term rentals in ADUs, which is what the majority of towns ARE currently doing.

This was actually intentional. Lawmakers understood that by allowing Airbnb-style rentals in ADUs, it would defeat the purpose of the new law, which was creating more long-term housing for Massachusetts residents.

Andrew Mikula, Senior Housing Fellow at Pioneer Institute, talked about this on our podcast: "ADUs are a good incremental and minimally disruptive typology that can help neighborhoods adapt, especially for downsizing seniors or folks who want to gain a foothold in communities when they start forming families."

The goal with this new law is clear: ADUs should house teachers, nurses, caregivers, adult children, and aging parents. They are not intended for tourists.

Quick Reference: What's Allowed vs. What's Not

Do I Have To Live in an ADU to Rent It Out?

Here's something that might surprise you. Under the Affordable Homes Act, towns can't require owner occupancy anymore.

Well, what that means is, before the new law, many towns were still requiring that the property owner live in either the main house or the ADU. This prevented investors from buying a home, adding an ADU, and then renting out both units at the same time. Now, you can legally build an ADU and rent it while you're still living in the main house. You can also move into your ADU and then rent out the main house. You can even rent out both at the same time and live elsewhere.

But you should know that if you want to waive the owner occupancy requirement, the law requires an additional parking space for each ADU (unless you're within half a mile of public transportation).

Lieutenant Governor Driscoll talked about all these options on the BuildX Podcast. Saying "When they're not in it, their daughter will rent it out, and it'll be a source of income. We see a real win-win in creating the housing that we need in Massachusetts."

What Type of Influence Will Local Town Regulations Have?

Well, the state law creates somewhat of a baseline, but your town still has the right to impose some "reasonable restrictions". Attorney Bill Sims explained to us on our podcast that the rules "were drawn pretty narrowly so that municipalities can't really over-regulate the construction of an ADU on the property."

What towns CAN regulate:

• Short-term rental restrictions, such as banning Airbnb and VRBO
• Certain Setback requirements
• Height restrictions
• Permitting processes
• Title V septic requirements

What towns CANNOT restrict:

• Your right to build a ADU that is within the size requirements
• Renting out ADUs long-term
• Owner occupancy requirements
• Requiring special permits

Currently about 90% of the towns in southeastern Massachusetts have accepted the law as written with only very small changes.

Rental Income Reality Check

Let's discuss the actual costs. At first, a lot of people were concerned that ADUs were going to flood the neighborhoods with new rental properties. But in reality, only about 2% of the ADUs being built are being used as rentals.

That's because you're going to spend anywhere from $250,000 to $350,000 to build a decent ADU. At current mortgage rates, which are around 6-7%, the monthly cost can be significant. Most long-term rental rates in Massachusetts won't cover the mortgage payment and make a profit.

Jeff Mancovsky, Branch Manager at Mortgage Equity Partners with 33 years in financial services, talked about this with us on the BuildX Podcast. He explained that most homeowners are using their home equity to fund their ADU projects, and the rental income usually "can be offset if you've got equity in your home."

This method works better when:

• You have a lot of equity in your home and can finance at a lower interest rate
• The ADU serves more than one purpose such as family housing now and rental later
• If you live in an area where rental rates are high and can support your mortgage payment.
• You consider increases in property values, not just rental income

Who's Actually Building ADUs (And Why)

From over 260 consultations with families since the law passed, here's what we found out:

• 60% of the people we visited were parents who are planning to sell the family home and build an ADU, OR adult children who plan to buy the family home and build an ADU for their aging parents
• 15-20% were people who have a family member with a disability who needs support, but also want independent housing
• 20% are young adults looking for their first home, located on the family property

There's only a small percentage of families who are looking to build an ADU purely for investment purposes. Most families are building ADUs to solve a housing problem for family or loved ones. This means that the potential for rental income down the road is just a bonus, not really the driving factor.

Frequently Asked Questions