HB 1337 Washington: ADU Size, Parking, and Owner Occupancy

Washington’s HB 1337, signed in 2023 and codified mainly in RCW 36.70A.680 and 36.70A.681, requires every city and county planning under the Growth Management Act to allow at least two accessory dwelling units on single-family residential lots inside urban growth areas.¹ The Washington HB 1337 ADU rules strip away most of the local zoning levers that used to block ADU projects: owner-occupancy mandates, parking minimums near transit, restrictive setbacks, design review bottlenecks, and inflated impact fees. When the rules take effect in your area depends on your jurisdiction’s comprehensive plan update cycle, with deadlines running from mid-2024 through the end of 2026.

Two ADUs Per Lot, and the Three Allowed Layouts

If your lot sits in an urban growth area and is zoned for single-family housing, your city or county must allow two ADUs on it, provided the lot meets the minimum size required for the principal dwelling.¹ If local code requires 5,000 square feet for a single-family home, you need at least 5,000 square feet before the ADU rights attach.

You get to pick the configuration. The statute allows one attached and one detached ADU, two attached ADUs, or two detached ADUs, and the two detached units can share a single building or sit as two separate structures.¹ A finished basement plus a backyard cottage works. Two freestanding units behind the house works. The local government cannot push you toward one option over another.

How Big and How Tall

Cities cannot cap ADU floor area below 1,000 square feet.¹ That is enough for a real two-bedroom layout, which matters if you want to house family or hold a long-term tenant.

Height limits for detached ADUs cannot be set lower than 24 feet. The one exception: if the principal residence is already held to a lower height limit, the city can apply that same lower limit to the ADU.¹ At 24 feet you can build a two-story detached unit or living space over a garage.

Setbacks for an ADU cannot be more restrictive than those applied to the main house.² If your home sits five feet from the side property line, the city cannot demand ten feet from your ADU. On alley lots, a detached ADU can go right at the lot line where that line abuts a public alley, unless the local government routinely plows snow on that alley.¹

Parking Requirements

Parking used to be the quiet killer of small-lot ADU projects. HB 1337 handles it based on transit proximity and lot size.

If your property is within half a mile of a major transit stop, the local government cannot require any off-street parking for the ADU.³ “Major transit stop” is a defined term: stops on high-capacity transit systems like Link Light Rail, commuter rail, fixed guideway systems, or bus rapid transit, including stops still under construction.⁴ Standard local bus service does not count, even if the buses run often.

Outside that half-mile zone, caps depend on lot size. On lots smaller than 6,000 square feet, a city can require at most one off-street space per ADU. On lots of 6,000 square feet or larger, the cap is two.¹

Owner Occupancy and Short-Term Rentals

A city or county cannot require the property owner to live in either the ADU or the principal residence.¹ That change opens ADU construction to investors and absentee owners, and it ends the enforcement problems that came up every time an owner moved. You can rent both the main house and the ADU without living on-site.

One carveout matters. The owner-occupancy prohibition does not apply when the ADU is used as a short-term rental.⁵ If you plan to list the unit on Airbnb or a similar platform, your city can still make you live on the property. The law effectively favors long-term tenancy over vacation rental use, so anyone building for the short-term market should read the local ordinance closely.

Converting a Garage or Other Existing Structure

This provision saves many homeowners real money. Local governments must allow ADU conversions from existing structures, including detached garages, even if those structures violate current setback or lot coverage rules.¹ Older garages often sit right at or near the property line. Before HB 1337, converting one triggered a nonconformity review, and some cities required the structure to be moved or torn down to meet current setbacks. Now the conversion goes forward as-is if the structure is sound.

Fees and Street Improvements

Impact fees for an ADU cannot exceed 50 percent of what the jurisdiction charges for the principal dwelling.¹ Impact fees generally fund parks, schools, roads, and fire service, and even at half rate they can still add up to several thousand dollars.

Cities and counties also cannot require public street improvements as a condition of permitting an ADU.¹ Before the law, some permit applications triggered sidewalk or curb-cut mandates that added tens of thousands of dollars to otherwise modest projects. That lever is gone.

Design Review

Local governments cannot impose aesthetic requirements or design review processes on ADUs that are more restrictive than what applies to the main house.¹ Some jurisdictions used to run ADU plans through design review boards that demanded a match to the primary home’s style or the surrounding neighborhood, adding months and real design costs.

The same rule extends to yard coverage, tree retention, and entry door placement.¹ Entry door rules were a particular problem: codes requiring ADU doors to face away from the street or a neighbor quietly killed workable floor plans. Those restrictions cannot apply to an ADU unless they apply to the primary residence.

Selling the ADU as a Condominium

A city or county cannot prohibit the sale of a condominium unit solely because it was originally built as an ADU.¹ You can build an ADU, create a condominium plat, and sell the ADU to a separate buyer while keeping the principal residence. The surveying, legal setup, and buyer financing still have to happen, but the city cannot block the transaction on the basis that the unit started as an accessory dwelling.

When the Rules Take Effect in Your City

HB 1337 does not set a single statewide switch-on date. Compliance ties to each jurisdiction’s next periodic comprehensive plan update under the Growth Management Act,⁶ and local code updates must take effect within six months of that review.⁷

King, Pierce, Snohomish, and Kitsap counties and the cities inside them had a June 30, 2024 comprehensive plan deadline, so their ADU codes should already be updated. Clark, Island, Skagit, Thurston, and several others have a December 31, 2025 deadline. A third group, including Benton, Chelan, Spokane, and Yakima counties, has until December 31, 2026.⁸ If your city has not updated its ADU ordinance yet, finding which cycle it falls under will tell you when the new rules bind locally.

The Mortgage Financing Catch

Here is the gap worth planning around. HB 1337 allows two ADUs per lot. Fannie Mae allows only one. The Fannie Mae Selling Guide limits a primary one-unit dwelling to a single ADU for the loan to be eligible for conventional financing.⁹ If you build both units the state permits, a future buyer relying on a Fannie Mae-backed mortgage will not qualify to purchase the property.

Fannie Mae also requires that when an ADU is present, the primary dwelling be site-built or modular. A manufactured home cannot serve as the principal residence on a lot with an ADU, though the ADU itself can be a manufactured home if it meets HUD construction standards and is permanently affixed.⁹

FHA treats the rental income more generously. Lenders can count 75 percent of estimated rental income from an existing ADU toward borrower qualifying income, or 50 percent for an ADU being built through the FHA 203(k) rehabilitation program. The general one-ADU constraint still applies.

Taxes If You Rent the ADU Out

Rental income from the ADU is reportable on your federal return. You can deduct ordinary and necessary expenses: property management, repairs, insurance, and the share of property taxes allocable to the rental unit.

The construction cost of a rental ADU, excluding land, is depreciable over 27.5 years under MACRS. Depreciation starts when the unit is placed in service, meaning ready and available for rent, not when construction begins. Separate the land value from the building value, because land is not depreciable.¹⁰ An appraiser’s work or the county assessor’s allocation can support that split.

One trap: when you sell, any depreciation you claimed (or should have claimed) on the ADU is subject to recapture at a rate of up to 25 percent, even if the rest of your home sale qualifies for the primary residence capital gains exclusion. The ADU portion used for rental does not qualify for that exclusion. Running the numbers before you break ground is far easier than meeting them at closing.

1
Washington State Legislature. RCW 36.70A.681 – Accessory Dwelling Units Limitations on Local Regulation
2
Washington State Legislature. RCW 36.70A.680 – Accessory Dwelling Units Local Regulation
3
Washington State Legislature. RCW 36.70A.698 – Accessory Dwelling Units Off-Street Parking When Prohibited
4
Washington State Legislature. RCW 36.70A.030 – Definitions
5
Washington State Department of Commerce. Accessory Dwelling Units
6
Washington State Legislature. RCW 36.70A.682 – Accessory Dwelling Units
7
Washington State Legislature. EHB 1337 – House Bill Report
8
Municipal Research and Services Center. Comprehensive Planning
9
Fannie Mae. Special Property Eligibility Considerations
10
Internal Revenue Service. Publication 527, Residential Rental Property