As the senior living sector evolves, much of the discussion has centered on two visible trends: older adults choosing to remain in their own homes (aging in place) and the rise of active adult communities that appeal to younger retirees. A quieter but potentially disruptive shift is also underway across the country: the growing adoption of accessory dwelling units (ADUs).
Why ADUs are gaining ground
Often called “granny flats,” “in-law units,” or backyard cottages, ADUs are small, secondary homes built on the same lot as a single-family residence. Far from a passing fad, they are becoming a mainstream housing option for older adults and may significantly influence retirement living choices in the coming years.
Several forces are converging to make ADUs more attractive and accessible to older adults.
Legal and regulatory shifts
In recent years numerous states and cities have relaxed zoning rules to encourage ADU construction. California, for example, legalized ADUs statewide in 2017 and adopted additional measures in 2019 and 2020 to streamline permitting and reduce barriers. Those changes contributed to a dramatic rise in ADU permits. Other states such as Oregon, Vermont, New Hampshire, Washington, and Colorado have passed legislation that makes ADU-friendly zoning more common.
An aging population’s housing needs
Demographic trends are increasing demand for flexible, safe, and affordable housing for older adults. By 2034, adults 65 and older will outnumber children under 18 in the U.S., and roughly 10,000 Americans turn 65 each day. The vast majority express a desire to remain in their homes as they age. Yet most U.S. housing lacks the universal design features—like no-step entries, single-floor living, wider doorways and hallways, accessible controls, and lever-style handles—that make aging in place feasible and safe.
ADUs present a straightforward solution. As small, customizable, age-friendly homes located near family members, they support informal caregiving and social connection without requiring a move to a congregate living environment.
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Cost and flexibility factors
Traditional assisted living can be expensive—average annual costs are substantial and vary widely by location. By contrast, an ADU can be custom-built to meet an older adult’s needs for a one-time construction cost that often represents a more affordable long-term option. Typical ADU sizes and budgets vary by market and design, and the investment often adds to property value.
Beyond serving as housing for aging family members, ADUs offer flexibility: they can be used as rental units, guest houses, or temporary housing for caregivers, giving families multiple ways to recoup value or adapt the space over time.
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Why the senior living industry should pay attention to ADUs
While aging in place and 55+ communities are often cited as competitors to traditional retirement communities, ADUs represent a hybrid model that blends independence, affordability, proximity to family, tailored accessibility, and long-term flexibility. As such, ADUs challenge the conventional senior living value proposition in several important ways.
| Common senior living community feature | ADU alternative |
| Onsite care services | Family caregivers and home-based services |
| Sense of community | Proximity to loved ones and neighborhood integration |
| Accessibility features | Highly customizable single-story design |
| Resident safety and oversight | Technology-enabled remote monitoring options |
| Sometimes-high entrance and/or monthly fees | No monthly rent if family-owned |
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A strategic imperative for the senior living industry
As more prospective residents consider a wider set of housing choices—including building or moving into an ADU—senior living providers need to rethink their roles. Instead of positioning solely as housing operators, organizations can expand into service and technology hubs that support older adults wherever they choose to live.
Strategic responses might include partnerships with municipalities or developers to offer age-friendly design templates, consultation services, or lease-to-own ADU models. Retirement communities can also extend off-site services—often called “continuing care at home” or a “CCRC without walls”—by providing subscription-based care coordination, wellness programs, or technology-enabled support to residents living outside their campus, including those in ADUs.
Some providers may explore developing small ADU-style clusters or villages, which requires attention to local zoning and legislation but could create a new revenue stream and broaden an organization’s continuum of care.
>> Related: Continuing Care at Home Gives Older Adults the Best of Both Worlds
A new kind of senior living competition
ADUs are becoming a mainstream housing option as state and local governments embrace them to address housing shortages and families seek affordable, flexible aging-in-place solutions. This shift could profoundly reshape the senior living industry.
The challenge for traditional retirement communities is not that older adults will stop seeking supportive housing, but that those adults now have more viable alternatives. ADUs reflect a demand for personalized, flexible, family-focused housing with strong social ties—preferences that many baby boomers hold as they retire.
Rather than simply competing with ADUs, the most successful senior living organizations will find ways to complement and adapt to this growing model by offering services, partnerships, and technology that meet older adults wherever they choose to call home.