Arizona ADU Laws: HB 2720 Baseline and City Rules

Arizona ADU laws require every city with a population over 75,000 to allow accessory dwelling units on any lot zoned for a single-family home, under House Bill 2720, which Governor Katie Hobbs signed in May 2024. That statewide floor guarantees you can build at least one attached and one detached ADU, but each city layers its own setbacks, height limits, and design standards on top, and private HOA covenants can still block the project entirely. Knowing where the state rules end and the local ones begin is what keeps a permit application on track.

The Statewide Baseline Under HB 2720

HB 2720 covers Phoenix, Tucson, Mesa, Scottsdale, Chandler, Tempe, Gilbert, Glendale, and every other Arizona municipality above the 75,000-resident threshold. Smaller cities can adopt their own ADU ordinances but are not required to meet these minimums.

Qualifying cities must permit at least one attached ADU and one detached ADU on any lot where a single-family home is allowed. Lots of one acre or more can hold a third detached ADU if at least one unit is restricted-affordable housing. The maximum ADU size under state law is 75% of the primary home’s gross floor area or 1,000 square feet, whichever is less.

The law also removes several tools cities used to discourage ADUs. Municipalities cannot require additional parking spaces or charge in-lieu parking fees. They cannot require any family, marriage, or employment relationship between the homeowner and the ADU occupant. And they cannot prohibit a homeowner from separately advertising or leasing the primary home or any ADU as long-term rental housing.¹

Cities keep authority over one meaningful area: short-term rentals. If an ADU built after the law’s effective date is used as a vacation or short-term rental, the city can require the property owner to live on the premises. That condition applies only to short-term use, not to leases of 30 days or longer.

How Major Cities Add Their Own Rules

State minimums are only the starting point. Setback rules, height caps, and lot coverage limits vary by city and can significantly change what fits on your property.

Phoenix

Phoenix permits up to two ADUs per single-family lot, and a third on certain larger lots. On lots up to 10,000 square feet, ADUs are capped at 1,000 square feet or 75% of the primary home’s floor area, whichever is smaller. On lots over 10,000 square feet, the ceiling rises to 3,000 square feet, 10% of the net lot area, or 75% of the primary home, whichever is smallest.² Owners of larger properties have considerably more room to work with than the state minimum provides.

Phoenix’s local ordinance prohibits ADUs as short-term rentals, though the state law now requires the city to permit short-term use with an owner-occupancy requirement.³ If you plan to list an ADU on a vacation rental platform, confirm the city’s current enforcement posture before you build.

Tucson

Tucson caps ADU size at 10% of the lot area, with a hard maximum of 1,000 square feet and a guaranteed minimum of 650 square feet on any residential lot. Height is limited to 12 feet, though properties with two-story primary homes can match that taller roofline. Tucson also requires newly built ADUs to include a cool roof, a reflective roofing material that cuts heat absorption.⁴

Scottsdale

Scottsdale adopted its current ADU ordinance (Ordinance 4687) in September 2025. A detached ADU cannot sit in a required front or side yard. In the rear yard, a detached ADU can be built within five feet of the side or rear property line. The minimum separation between an ADU and the main home is 10 feet. Height follows the underlying zoning district rather than a fixed cap.⁵

Mesa

Mesa does not require additional parking for an ADU beyond the two off-street spaces already required for the primary home.⁶ The city aligns with the state law’s ban on extra parking mandates, removing a barrier that historically discouraged construction on smaller lots.

Flagstaff

Flagstaff defines long-term housing as a lease of 90 days or longer, or month-to-month tenancy. Any ADU used as a vacation or short-term rental triggers the owner-occupancy requirement.⁷ Owners who lease every unit long-term are not affected.

HOA Covenants Still Apply

HB 2720 has a carve-out that catches homeowners off guard: the law does not override private restrictive covenants. If your HOA’s CC&Rs prohibit accessory structures, guest houses, or rental activity, those restrictions still control even though your city must allow ADUs. The statute says its requirements “do not prohibit restrictive covenants concerning ADUs entered into between private parties.” Cities themselves, on the other hand, cannot require you to record a new restrictive covenant as a condition of building.¹

Pull your CC&Rs before you pay for architectural plans. Some HOAs have updated their rules in response to the state law; many have not. Written clarification from your board can save thousands of dollars on abandoned designs.

Building Codes and Climate Requirements

Arizona’s building standards are based on the International Residential Code, adopted city by city with local amendments. Phoenix’s amendments require every dwelling unit to have permanent heating and cooling capable of maintaining indoor temperatures between 68°F and 90°F, so portable space heaters and window AC units do not satisfy the requirement.⁸ Plan on a dedicated HVAC system.

Energy efficiency follows the International Energy Conservation Code, with details tied to your climate zone and the code version your city has adopted. Tucson’s cool-roof requirement is one example of a local response to desert heat. Foundation and drainage plans get close scrutiny during permit review because of soil expansion and monsoon rainfall.

The Permit Process

Every Arizona city requires a building permit before ADU construction begins. Steps look similar across municipalities even though timelines and fees differ. You will submit a site plan showing property boundaries, setbacks, drainage, and utility connections, plus architectural drawings covering the floor layout, structural framing, electrical, plumbing, and HVAC systems.

Phoenix specifically requires a site plan that addresses drainage, which matters in a region where flash flooding is a real concern. Tucson and some other cities offer pre-application meetings where a planner reviews your concept before you invest in full drawings. Those meetings flag setback problems, lot coverage issues, and utility conflicts early.

Fees vary by city and scale with the size and complexity of the ADU. Budget for separate permits covering electrical, plumbing, and mechanical work in addition to the primary building permit. Architectural plans for a detached ADU generally run between $3,000 and $30,000 depending on design complexity. After approval, inspections happen at multiple construction stages, covering the foundation, framing, rough electrical and plumbing, and a final walkthrough. Deviations from the approved plans require a formal amendment and additional review.

Leasing an ADU: Long-Term and Short-Term

Long-term leasing is straightforward. No city can prohibit you from separately leasing the primary home or any ADU on your lot for long-term tenancy.¹ You do not have to live on the property, and the city cannot require any personal or family connection between you and your tenant.

Short-term rentals are more complicated. State law permits ADUs to be used as vacation rentals, but cities can require the owner to live on the premises if the ADU was built after the law’s effective date. Flagstaff enforces that owner-occupancy rule, treating anything shorter than 90 days as short-term.⁷ Scottsdale requires ADUs and the main dwelling to be rented together and prohibits offering them independently, which effectively blocks listing just the ADU on a vacation rental platform.⁹

Property Tax and Rental Tax

Building an ADU will almost certainly raise your property tax bill. County assessors treat new construction as an improvement that increases assessed value. In Maricopa County, the assessor evaluates new structures using market conditions and comparable sales, so the tax bump depends on your ADU’s size, finishes, and the local market. Arizona has no separate property tax classification for ADUs; they roll into the overall residential assessment.

One savings on the state side: Arizona eliminated the transaction privilege tax on residential rental income at every level, including city taxes, effective December 31, 2024.¹⁰ You no longer register with the Arizona Department of Revenue or remit TPT on residential rent.

Federally, the IRS treats rental income from your ADU like any other residential rental. You report it on Schedule E and can deduct expenses including management fees, repairs, insurance, and depreciation over 27.5 years under MACRS.¹¹

Financing Options

A detached ADU commonly costs between $100,000 and $300,000 or more depending on size and finishes, so most homeowners finance the build. Two federal loan programs are designed to accommodate ADU construction.

FHA-insured mortgages let borrowers count projected ADU rental income toward loan qualification. The lender uses 75% of the lower of the appraiser’s fair market rent estimate or the lease amount. That rental income cannot exceed 30% of your total monthly qualifying income, and you need reserves equal to two months of mortgage payments after closing. ADU rental income cannot be used to qualify for a cash-out refinance.¹²

Fannie Mae’s HomeStyle Renovation loan covers ADU construction as an eligible renovation project. For purchase transactions, the total loan can reach 75% of the purchase price plus renovation costs or the as-completed appraised value, whichever is lower. The lender orders an as-completed appraisal before closing and a final inspection when construction finishes.¹³ Home equity lines of credit and construction loans from local lenders are also common options, generally at higher rates.

Penalties for Getting It Wrong

Building without permits or violating rental rules gets expensive fast. Arizona’s civil penalties for short-term rental violations escalate with each offense within a 12-month window:

First violation: up to $500 or one night’s advertised rent, whichever is greater
Second violation: up to $1,000 or two nights’ rent, whichever is greater
Third and subsequent violations: up to $3,500 or three nights’ rent, whichever is greater

A property owner who fails to provide required contact information to the city faces up to $1,000 for every 30 days of noncompliance. Failing to apply for a required regulatory permit after written notice carries a separate penalty of up to $1,000 per month.¹⁴

Phoenix mirrors the state penalty structure, with minimum fines of $500 for the first offense, $1,000 for the second, and $3,500 for the third.³ Unpermitted construction brings its own consequences: stop-work orders, daily fines, and potential demolition of structures that violate zoning or safety codes. Scottsdale and other cities actively monitor vacation rental platforms and issue citations.

1
Arizona Legislature. House Bill 2720 – Accessory Dwelling Units Requirements
2
City of Phoenix. Accessory Dwelling Units (ADU)
3
City of Phoenix. Short-Term Rental Registry
4
City of Tucson. Accessory Dwelling Units Code Amendment
5
City of Scottsdale. Accessory Dwelling Units (ADUs)
6
City of Mesa. Accessory Dwelling Units (ADUs)
7
City of Flagstaff. Flagstaff Code 10-40.60
8
City of Phoenix. Phoenix Building Construction Code Amendment to 2018 International Residential Code (IRC)
9
City of Scottsdale. Vacation and Short Term Rentals
10
Arizona Department of Revenue. Publication 645 – Transaction Privilege Tax – Residential Rental
11
Internal Revenue Service. Publication 527 (2025), Residential Rental Property
12
HUD. Mortgagee Letter 2023-17 – Revisions to Rental Income Policies, Property Eligibility, and Appraisal Protocols for Accessory Dwelling Units
13
Fannie Mae. HomeStyle Renovation
14
Arizona Legislature. Arizona Revised Statutes 9-500.39 – Limits on Regulation of Vacation Rentals and Short-Term Rentals