Louisville’s Move for More Housing: ADU’s Could be the Answer

In order to improve the availability of housing in Louisville, Metro Council has approved ADUs in certain zoning areas and under certain conditions.

An ADU, or “Accessory Dwelling Unit”, is additional living area, self-contained, on an existing single-unit (fka single-family) lot. While ADUs are very popular in other states, Kentucky generally has not seen demand for this type of housing. However, with a housing shortage of 18,500+ homes for sale and 21,500+ aparments available for rent, as of September 2024, ADUs could help solve a small part of this problem. Only time will tell.

The housing shortage is due to a host of problems, including difficulty with development approval at the Metro Planning & Design level, cost of construction materials, higher interest rates, and general inflation. The problem began in the subprime meltdown of 2006, the following recession, and then COVID put the final nail in the housing coffin. In addition, the median housing price in Louisville is over $275,000 and average rents are $1,200 to $1,300 per month, even for 1-bedroom units. This is unaffordable for many families, especially young families starting out.

One bright spot is that Metro and AARP have selected three pre-approved ADU designs, so each homeowner can skip hiring an architect, which can be costly. This is a positive, well-thought-out move to help spur ADU applications.

For the appraisal profession, 2020 marked a time when Fannie Mae loosened restrictions on financing that made it easier to obtain financing that can be sold on the secondary market. Prior, it was nearly impossible to produce an appraisal for a property with an ADU that met the guidelines.

Louisville appraisers are going to have to obtain more education and experience appraising properties with ADUs as they become part of our market. 

If you are interested in learning more about ADUs, or you need an appraisal for any real estate in the Louisville market, please contact us.