California homeowners weigh ADU construction against multi-family investments

Homeowners in California are increasingly evaluating the potential of accessory dwelling units (ADUs) as a means to generate rental income, accommodate family, or increase property value. According to the California Department of Housing and Community Development, the state permitted 30,354 ADUs in 2024, accounting for over 26.6% of all homes permitted statewide.

Economic factors, including rising mortgage rates, are influencing the decision between building ADUs on existing land or purchasing multi-family properties. Freddie Mac reported the average 30-year fixed mortgage rate reached 7.40% in October 2026, its highest level since November 2023. In Riverside County, housing affordability remains a challenge, with only 28% of households able to afford the median-priced single-family home.

While multi-family investment in the Inland Empire has seen high volume, with sales totaling $762.4 million in the third quarter of 2026, much of this activity is concentrated in large-scale assets. Experts note that navigating the transition from building approval to occupancy can be complex due to the need to coordinate with various public works and utility providers.