In this article by Edward Erfurt, published in Strong Towns on December 2, 2025, the author breaks down the reasons why building infill housing like ADUs is so difficult. The complexities and risk profiles for individual homeowners building an ADU are vastly different than they are for large developers. This article provides a great explanation of why.

Link to full article HERE.

Across the country, state legislatures are taking bold steps to make more housing possible. Parking mandates are being rolled back. Accessory dwelling units (ADUs) are being legalized. Entire housing types that were prohibited for decades are now being allowed by right.

For many communities, these changes feel like long-overdue progress. Yet even in the most supportive communities, almost nothing is getting built.

After all the effort, all the hearings, all the debate and negotiation, the number of new units emerging from these reforms is at best a trickle. As I travel across the country talking to communities, these local governments are asking the same question: Why?

The answer reveals something deeper than zoning.

The Paradox of Legalizing Something You Can’t Actually Do

Legalization is the first step, but it is not the ecosystem. I was in Flagstaff, Arizona when the local city council had declared a housing emergency. City staff shared how they wanted to see ADUs built as an option to address the housing crisis. The community was on board politically, because they expanded the applicability of ADU to cover the entire city. But “allowed by right” didn’t translate into “possible in practice.” Builders still couldn’t make the projects work. They could not make these work not because the idea was wrong, but because there’s no broader system to support small-scale development in place.

Our approach to zoning and adoption of codes have left communities with an inability to take action. Over the years, permitting processes grew more complicated, layers of review multiplied, and neighbor veto points cemented themselves into procedure. On top of it all, the procedures in place aren’t proportional to the project. The smallest of projects must navigate systems designed for the largest of developments. A 600-square-foot backyard cottage must comply with the same development standards, permitting submission requirements, and timelines as a 2,500-square-foot house on a one-acre lot.

This tangle of requirements occurs all before we reach the financing system, where nearly every available tool is designed for one thing: standardized, federally backed, single-family houses on large lots. These are the mortgages that banks can bundle and sell on secondary markets, at very low risk. Builders must stack more complicated, and expensive financing that is not readily accessible to all. 

State law can declare that small backyard cottages are legal. But unless cities can review them, permit them, and builders can finance them, legalization will remain largely symbolic.

When State Reform Crashes Into Local Capacity

This gap between the state’s mandate and the city’s ability to carry it out is where the real struggle begins. Cities often default to their only familiar process, so what we’ve seen is that they’ll apply the same permit process for a small ADU as they would a multifamily building. Cities use the permits and processes they know because they have no other smaller template, or worse, they create an even more complicated process. What should be the lowest risk investment, quickly becomes overly complicated and far more risky. That shift in risk matters. Small builders or homeowners are working in the thinnest of margins and uncertainty and risk increases costs.

What looks like a simple option for affordable housing on paper quickly becomes quite unintentionally the most expensive housing to deliver in the city.

Imagine a homeowner walks in, hoping to build a cottage no larger than a shed in their backyard, or convert their garage into an apartment. They’re handed the thick binder of requirements to address all of the unknowns that could occur. The natural reaction of municipal staff when they face uncertainty is to demand more. So an exhaustive and detailed process is initiated to root out and eliminate every possible failure or conflict. The result is a tangle of forms and submittals that imply that perhaps the applicant shouldn’t attempt this after all.

A builder deciding between a modest cottage in an established neighborhood and a large single-family home on the edge of town will likely choose the easier path. When both projects offer the same financial return, people understandably choose the one with fewer headaches. Cities unintentionally push small-scale builders away, not through policy, but through friction.

A Case Study in What Works: Tallahassee’s Breakthrough

We’ve seen the opposite, too. Tallahassee, Florida, had very few ADU permits. Only a handful of persistent builders attempted them. Rather than defending their process, city staff sat down with those builders and listened to learn where there were tangles and friction. They asked where the bottlenecks were. They investigated every confusion point, every unnecessary submittal, every erroneous requirement, and sought out conflicting requirements. Then they made small adjustments: clarifying intent, adjusting standards to align with existing zoning, and making procedures proportional to the scale of the application.

The result? An exponential increase in permits.

This wasn’t a statewide mandate. It wasn’t a massive rewrite. It was staff learning the scale of the work and responding proportionally. They built the local ecosystem necessary for incremental housing to succeed.

What State Mandates Can’t Do

A mandate can change the zoning, but it cannot:

• Teach staff how to right-size their review.
• Build trust between cities and local builders.
• Reform decades of overengineered building codes designed for the biggest projects.
• Create financing tools that fit the scale of a backyard cottage rather than a cookie cutter suburban home.
• Form local partnerships between small banks and small developers.
• Reduce the cultural fear of neighborhoods evolving again.

These changes must be made locally. They are the “ecosystem” of incremental developers, contractors, plan reviewers, lenders, and neighbors. This is why state reforms so often underdeliver: the structure changed, the permissions changed, but the systems never adapted.

What Cities Can Do Right Now

Cities have more control in this process than they think. And small steps matter because ADUs are the lowest-risk housing type a city can allow. They can start by asking three questions:

1. How can we reduce risk for the smallest projects?

Lowering risk lowers cost. That may mean creating a simplified permit, a predictable review timeline, or a small-housing checklist.

2. Are our fees and standards proportionate to the scale of the work?

Many cities charge permit fees for new construction. Waivers or scaled fees can make incremental housing feasible.

3. What local financing tools already exist—and who can we partner with?

Small banks understand local risk better than national lenders. Cities can convene them, share case studies like California’s ADU financing programs, and begin adapting those models.

This is how we localize financing: not through subsidies, but through relationships.

A Call for a More Human Approach

We also need to demystify these units for our communities. At Strong Towns, we’ve learned that people respond far more to stories than policy.

When we talk about who actually lives in back yard cottages we share stories of grandparents staying close, adult children returning home, caregivers helping a senior in place. We also do not use planning acronyms because ADU sounds more like a disease than a home. These are familiar stories that are relatable. Incremental housing is not a radical transformation. It’s a return to the adaptable neighborhoods we built for generations.

But helping people rediscover that truth starts with listening, and this conversation starts best at the most local level at city hall.