Accessory Dwelling Units (ADUs) have become an important topic in residential zoning, community planning, and housing policy across the United States. In New Hampshire, the legislative framework has changed significantly in recent years. The main laws governing ADUs are found in RSA 674:71-73. Recently, House Bill 577 (HB 577) expanded and clarified the rights associated with ADUs. This article examines what ADUs are, why they are important, how New Hampshire's laws have changed, what HB 577 entails, its impact on homeowners and municipalities, potential benefits and concerns, and how property owners can use this new law to plan for an ADU.

By law, an accessory dwelling unit is defined as a residential living space that accompanies a principal single-family home on the same lot and provides independent living facilities, which include sleeping, eating, cooking, and sanitation. Under the law before HB 577, RSA 674:71 defined an “accessory dwelling unit” as a residential living unit located within or attached to a single-family home and that offers independent living facilities for one or more people, including provisions for sleeping, eating, cooking, and sanitation on the same property as the principal dwelling.

The statute also required (in RSA 674:72) that a municipality adopting a zoning ordinance must allow one ADU in all zoning districts that permit single-family homes. This could be by right or through a conditional use or special exception, without additional lot size, frontage, space limits, or other controls beyond what is needed for a single-family house. The statute also stated that municipalities cannot require a separate septic or water system for the ADU compared to the main unit.

The goal behind these statutes was to increase housing opportunities using existing housing stock, make better use of land and infrastructure, and expand affordable housing options without large new developments. According to the New Hampshire Housing Finance Authority, this law “became law in 2017” to increase the housing supply in New Hampshire communities without further land development. It encourages more efficient use of existing housing and infrastructure.

Before HB 577, while the statute required municipalities to permit “internal or attached” ADUs (those within or connected to the main dwelling), it did not require them to allow detached accessory dwelling units by right. Many municipalities chose to prohibit detached units, such as a separate cottage or a garage conversion, or they enforced lot size or other restrictions on them. 

Many towns made local zoning changes to comply with the statute. A recent survey found that 206 jurisdictions had enacted ADU provisions under RSA 674:71-73. However, only 109 of these allowed detached ADUs, and many still required conditional use permits or special exceptions instead of granting full as-of-right status. Therefore, while the earlier law was a step forward, local rules and hurdles limited adoption, especially for detached ADUs.

Enter HB 577. This bill was introduced during the 2025 regular session of the New Hampshire legislature and was signed into law, effective July 1, 2025, to modify the ADU statutes.

Some of its key features include:

- It broadens the definition of “accessory dwelling unit” to allow the unit to be “located on a lot containing a single-family dwelling” instead of strictly needing to be “within or attached to” the main dwelling. 

- It defines “attached unit” as one within or physically connected to the principal dwelling or entirely contained within a preexisting detached structure. It defines “detached unit” as one not within or physically connected to the main unit or contained within a preexisting detached structure.

- In RSA 674:72 (which was repealed and reenacted by HB 577), the law now mandates a municipality to allow one accessory dwelling unit (attached or detached) as a matter of right in all zoning districts that permit single-family homes. The municipality must allow one ADU without additional requirements for lot size, setbacks, frontage, or other restrictions beyond what is applicable for a single-family dwelling without an ADU. 

- The law prohibits municipalities from enforcing stricter septic system requirements for a home with an ADU than what is required by the state’s department of environmental services. 

- Additionally, the law limits the total living area of the ADU to not exceed 950 square feet unless authorized by the municipality, which has the discretion to allow larger units.

- The law specifies that municipalities cannot require a familial relationship between the occupants of the ADU and the principal dwelling. 

- It also states that if a zoning ordinance has no provisions for ADUs, one accessory dwelling unit is considered a permitted accessory use as a matter of right for any single-family dwelling, requiring no municipal permits or conditions beyond a necessary building permit.

- Municipalities may require owner occupancy of one of the units (though it does not specify which unit) and may ask the owner to show that one of the units is the principal residence according to earlier law. However, the text in HB 577 may change or remove some past requirements, which has raised concerns among municipal associations.

The aim of HB 577, therefore, is to reduce regulatory hurdles that have limited ADU production—especially detached ones—and to ensure homeowners have a clearer right to build either attached or detached accessory dwelling units on single-family lots in areas designated for single-family homes.

Why does this matter? Housing supply in New Hampshire, like in many regions, has faced limitations. Building new subdivisions or multi-family buildings often comes with high costs, infrastructure challenges, and local opposition. ADUs offer a less intrusive method to add housing units within existing neighborhoods, properly utilize existing infrastructure, support multigenerational living (such as parents living nearby), and present rental income opportunities for homeowners. According to New Hampshire Housing’s overview, ADUs “offer an affordable housing option” and aim to grow the supply “without further land development.”

A policy brief from Mercatus Center indicated that in areas where both attached and detached ADUs are permitted, detached units frequently account for two-thirds to three-quarters of built ADUs. Thus, allowing detached units is important for encouraging adoption. The inclusion of detached units in HB 577 could significantly increase the housing supply.

For municipalities in New Hampshire, HB 577 changes the landscape in several ways. First, local zoning ordinances will need to be reviewed and possibly amended to align with the new state law. Previously, municipalities could allow or prohibit detached ADUs or impose lot size minimums, stricter septic requirements, or other obstacles. Many municipalities enacted such measures. 

Under the new law, municipalities must allow one ADU (attached or detached) as a matter of right in areas designated for single-family homes. They cannot impose requirements for lot size, frontage, space limitations, or other controls beyond what pertains to a single-family dwelling without an ADU. They also cannot require separate septic or water systems. They must apply the same municipal regulations (like lot coverage or occupancy standards) to the combination of the principal dwelling and ADU as they do to the main home alone. They may still impose aesthetic or design standards, but only if these apply to the main dwelling unit as well. They cannot require the ADU to be smaller than 750 square feet, and the law now permits up to 950 square feet unless otherwise authorized.

Municipalities must also ensure that local zoning does not necessitate a familial relationship between the occupants of the main dwelling and the ADU. Some local ordinances had such requirements and need to be updated. 

The new law may also limit the ability of municipalities to refuse to permit ADUs on properties with leased or rented land, although earlier text allowed prohibitions associated with leased land; HB 577 might clarify or alter that.

That said, municipalities still have some local controls. They may impose parking requirements (up to one additional space per ADU) if they have parking rules for the principal dwelling. They can impose aesthetic standards as long as they apply uniformly and can still require owner occupancy of one of the units in certain cases (depending on local ordinances). Overall, the trend is toward greater standardization of rights for homeowners and fewer barriers to ADU construction.

For homeowners and property owners in New Hampshire, especially those with single-family homes in zones allowing single-family houses, HB 577 creates new opportunities. If your municipality has not updated its zoning to comply or if your property has existing conditions that would allow an ADU, you now have a clearer route to build either an attached or detached ADU as a matter of right, following building codes and without needing extraordinary lot size or frontage expansions. Detached ADUs, which may have required special exceptions or faced prohibitions, are now explicitly allowed. This means you could convert a detached garage, build a small cottage in your backyard, or add a unit above your barn (depending on local zoning) and use it as an independent dwelling unit with sleeping, eating, cooking, and sanitation facilities. You could rent it out for extra income, house family members, create options for aging parents, or develop home office and living space combinations. 

From a financial perspective, ADU construction costs in New Hampshire vary widely, but typical residential or conversion costs usually run in the tens to low hundreds of thousands of dollars, depending on size, amenities, and site conditions. Moreover, creating an ADU can boost property value, generate more rental income, and help meet broader community housing needs. However, homeowners should consider costs, taxes, maintenance, and compliance with local regulations.

For practical steps, a homeowner interested in building an ADU under the new law should start by checking their property's zoning and reviewing the local ordinance to see if their municipality has updated its language to align with HB 577. They should verify whether the zoning district allows single-family homes, if ADUs are permitted as of right (or still require special exceptions), whether detached ADUs are allowed, if there are owner-occupancy requirements, and what the regulations are regarding parking, setback, septic/water, and design review. Consulting with the local planning or building department can help confirm what is required.

Next, homeowners should assess the lot size and existing structures (like a garage, barn, basement, or attic) for potential conversion. They should estimate construction costs, including building permit fees, utility upgrades, septic or well evaluations, architectural plans, renovations, and compliance with codes. Homeowners should confirm with municipal officials that their proposed ADU plan fits local ordinances (now governed by the updated statute), building codes, fire and life safety codes, and septic/well rules. They should also check if financing or insurance adjustments will apply. Some lenders may have restrictions on ADUs or rental units, so homeowners should consult with their mortgage provider. They should anticipate how the ADU might impact property tax assessments, rental income, insurance, and ongoing maintenance.

If a homeowner plans to rent out the ADU, they should ensure compliance with local rental or short-term rental regulations, understand their responsibilities (like tenant screening, local rental registration, and life safety standards), and prepare accordingly. Homeowners should also consider how the ADU could affect neighborhood dynamics, such as increased occupancy, parking needs, utility usage, and whether the ADU fits the character of the neighborhood. Even though municipalities cannot impose stricter requirements than those applied to single-family homes, it’s still essential to be aware of these factors.

There are several key benefits and potential concerns related to the law and the broader use of accessory dwelling units (ADUs). On the positive side, ADUs can increase housing supply in a cost-effective way. They provide additional housing units without large new subdivisions, infrastructure expansion, or significant land use changes. They help families stay close, such as older parents living nearby, allow homeowners to earn rental income, and support homeownership costs. ADUs also provide more “missing middle” housing types, foster neighborhood vitality, and make better use of existing infrastructure like roads and utilities. They assist municipalities in achieving housing policy goals, especially for workforce housing, by allowing smaller, independent living units. According to one summary of HB 577, agencies believe it will provide more affordable, appropriately sized housing options for Granite Staters at every stage of life.

On the other hand, some concerns persist. Municipalities and neighborhood stakeholders often worry about increased density, parking congestion, changes in neighborhood character, higher demand on utilities and septic systems, and potential loss of local control over land use. The New Hampshire Municipal Association opposed HB 577, citing fears that the bill would impose more mandates on municipalities, reduce local flexibility, and remove some owner-occupancy requirements. This change could lead to more short-term rentals instead of long-term housing.

Some homeowners might find that the costs of construction, permits, and ongoing maintenance outweigh the potential rental income or property value increase. Additionally, some lenders might set limits on financing ADUs. While the state law establishes a minimum requirement, actual implementation depends on local zoning and building codes. Municipalities can still impose valid regulations, as long as they do not exceed those that apply to single-family homes, which may lead to friction or confusion.

Although HB 577 requires at least one ADU as a matter of right, it does not automatically remove all municipal restrictions. Property owners will still need to consider site-specific factors, such as lot size, setbacks, existing septic or well capacity, and connections to utilities. While the statute prevents municipalities from requiring separate septic systems, the unit must still comply with state rules for sewage disposal.

A homeowner who wants to build a detached cottage ADU may still face limitations due to site conditions or environmental challenges.

In terms of expected impact, policy analysts believe that the HB 577 reform could lead to an increase in ADU construction, especially where detached units become easier to build. Detached ADUs have shown to play a significant role in ADU production when allowed. One article predicted an “initial surge in ADU developments, followed by an eventual leveling off.” Over time, increased ADU activity may help ease housing cost pressures, particularly in smaller towns and near existing infrastructure. Municipalities could see gradual increases in housing supply without drastic changes to land use or infrastructure. For homeowners, adding an ADU can provide diverse living options and income streams.

The passage of HB 577 in New Hampshire represents an important shift in the state’s approach to accessory dwelling units. By broadening the definition to include detached units, requiring municipalities to allow one ADU (attached or detached) as a matter of right in single-family zones, and simplifying many regulatory barriers, the law opens new possibilities for homeowners, municipalities, and communities. However, to fully realize the potential of ADUs, it is important to understand building codes, local zoning compliance, site feasibility, financing, and community context. For many homeowners, creating a unit within a unit or a backyard cottage may now move from a theoretical idea to a practical project. For municipalities, this change presents both opportunities, like increased housing supply, and challenges, such as maintaining neighborhood character, infrastructure, and regulations. As more homeowners take advantage of these rights, ADUs may become a more common and accepted part of New Hampshire’s housing landscape, offering flexibility, additional income, and contributing to wider housing policy goals.

Whether you are a homeowner thinking about building an ADU, a municipal official reviewing zoning ordinances, or a real estate professional advising clients, the changes from HB 577 warrant careful attention. The time for simpler, more flexible accessory dwelling units in New Hampshire has come, and now property owners and communities must collaborate to make it work.