Accessory Dwelling Units (ADUs) have become one of Colorado’s most sought-after housing solutions — and for good reason. They’re flexible, functional, and can provide a steady source of rental income. But before you list your new ADU on Airbnb or sign a tenant lease, it’s important to understand the laws that govern rentals in your area.
What Are ADUs and Why They’re Popular in Colorado
An ADU is a self-contained living space built on the same property as a primary residence. These small homes are often used for multigenerational living, guest housing, or long-term rentals. With rising home costs and limited inventory across cities like Denver, Colorado Springs, and Boulder, ADUs give homeowners a way to generate income while addressing local housing needs.
Colorado ADU Rental Laws Explained
ADU rental rules vary widely depending on local zoning laws. Some municipalities require the property owner to live on-site, while others allow the entire ADU to be rented out. In Denver, for example, owner occupancy is often required, whereas Colorado Springs has looser restrictions depending on neighborhood zoning. Always confirm with your local planning department before listing your ADU.
Short-term rentals (like Airbnb or VRBO) are more tightly regulated. Many cities limit the number of nights you can rent per year or require a separate short-term rental license. Long-term rentals, on the other hand, typically require compliance with local housing and safety codes.
Rental Type | Allowed In Most Cities? | Special Requirements |
Short-Term (under 30 days) | Sometimes | Rental license, occupancy limits |
Long-Term (30+ days) | Yes | Lease agreement, zoning compliance |
Steps to Legally Rent Your ADU
To rent your ADU in Colorado:
- Confirm your zoning and occupancy rules.
- Obtain necessary rental or business licenses.
- Ensure your ADU meets health, safety, and building codes.
- Draft a lease that clearly defines tenant responsibilities.
Urban ADU’s team can help you design a compliant, income-ready structure. Learn more about our process.
Benefits of Renting an ADU
Renting your ADU can help offset your mortgage, increase property value, and provide long-term financial flexibility. With energy-efficient materials and durable design, an Urban ADU is built to be a comfortable and profitable investment.
FAQs
Can I Airbnb my ADU in Colorado?
It depends on your city’s short-term rental ordinance.
Do I need a separate permit to rent?
Yes, most municipalities require a rental license or registration.
Is rental income from an ADU taxable?
Yes — consult a tax advisor to understand applicable deductions.
Building or renting an ADU doesn’t have to be complicated. Contact Urban ADU to create a smart, compliant rental that works for your property and goals.