Can You Rent Out Your ADU in Southern California? Here’s What the Law Says

kayla5523
Dec 10, 2025
5 min read

Building an ADU is one of the smartest ways to create long-term wealth, flexibility, and passive income, but the rental rules in California can be confusing.

Can you rent out your ADU? For how long? What about Airbnb?

The good news is yes, you can rent out your ADU in Southern California, but how you rent it depends on local laws, the type of lease, and when your ADU permit was issued.

This guide breaks down everything you need to know about ADU rental laws in California, how the rules have evolved in 2025, and how Wealth Nest helps homeowners stay compliant while earning consistent income.

The Big Picture: Renting Out Your ADU Is Legal With Guidelines

California law allows homeowners to rent out their ADUs as long-term housing (30 days or more).

That means you can legally lease your ADU to a tenant, family member, or friend as long as the structure is fully permitted and meets housing standards.

What you can’t usually do is treat it like a hotel. Cities across Southern California continue to restrict short-term rentals under 30 days to prevent ADUs from being used solely for vacation stays.

Let’s look at the differences.

Long-Term Rentals: Fully Legal and State-Protected

Long-term leases (30 days +) are completely legal across California and are the most common way homeowners generate income from their ADUs.

California’s housing legislation actually encourages this use because it increases affordable housing options.

At Wealth Nest, many clients rent their ADUs to:

Adult children or aging parents
Local professionals and traveling nurses
Long-term tenants looking for stable housing

As long as your ADU includes a full kitchen and bathroom, a separate entrance, and a final Certificate of Occupancy, you’re free to lease it long-term with no special approvals required.

Average rents in SoCal: $2,500 – $6,000 per month depending on location and design.

Short-Term Rentals: Still Largely Restricted

Short-term rentals (under 30 days) remain heavily regulated or prohibited in most California cities.

Here’s a quick overview of 2025 rules in major SoCal markets:

Los Angeles: Only your primary residence may be rented short-term, and you must live on-site at least six months per year.
Pasadena & Ventura: Allow limited short-term stays with registration and transient-occupancy-tax collection.

If your goal is passive income, a 12-month lease will always be simpler, safer, and more profitable long-term.

Owner-Occupancy Rules: The 2025 Update

Before 2020, most cities required homeowners to live on-site to rent out an ADU. That rule was suspended statewide through January 1, 2025, but now, each city decides whether to reinstate it.

Here’s what’s happening as of October 2025:

Many SoCal cities such as Los Angeles, Ventura, Thousand Oaks, and most of Orange County have chosen not to bring back owner-occupancy requirements, keeping ADUs rental-friendly.
A few areas like Pasadena, Santa Barbara, and select unincorporated zones have reinstated a rule requiring the homeowner to live in either the main house or the ADU.
If your ADU was permitted before 2025, it remains exempt from any new owner-occupancy rules.

In other words, for most homeowners building today, you can still rent out your ADU freely, but confirming with your city during the design stage is essential.

Your ADU as an Income Property

Southern California’s rental market remains one of the strongest in the country, and ADUs have become powerful income generators.

In Los Angeles, the average 1-Bed ADU rent is between $2,600 - $3,200 with annual income potential of $31K - $38K. In Venture County, the average 1-Bed ADU rent is between $2,300 - $2,900 with annual income potential of $27K - $35K.

These rental estimates are based on verified 2025 listings from major housing platforms and the numbers show how an ADU can be one of the fastest ways to offset your mortgage or prepare for retirement, while adding long-term value to your property.

Checklist: What You Need Before Renting

Before listing your ADU, make sure you’ve completed these essentials:

1. Final Permits & Certificate of Occupancy

Only permitted ADUs can be rented legally.

2. Separate Address or Utility Setup

Many cities issue distinct unit numbers or meters for billing and mail delivery.

3. Written Lease Agreement

Follow California’s landlord-tenant laws for security deposits, rent increases, and notice periods.

4. Local Registration (if required)

Cities like Los Angeles require landlords to register long-term rental properties.

5. Proper Insurance & Tax Reporting

Rental income is taxable, but you may deduct maintenance, utilities, and depreciation.

Why California Prioritizes Long-Term Rentals

California’s ADU legislation was created to combat housing shortages, not to expand short-term lodging.

By focusing on long-term leases, cities ensure ADUs provide real housing solutions for families, students, and professionals.

That’s also why some local governments offer permit-fee discounts or fast-track approvals for homeowners who commit to long-term tenants.

So while the idea of Airbnb income can sound appealing, steady, year-round renters deliver the best financial and legal stability.

How Wealth Nest Keeps You Compliant

Understanding every regulation, statewide, countywide, and city-specific, can be overwhelming. That’s where we come in.

At Wealth Nest, we handle everything from design to permitting to ensure your ADU meets every rental requirement.

Our turnkey approach includes:

Design & Planning – We build to state ADU standards so your unit qualifies as a legal dwelling.
Permitting & Approvals – We manage submissions and communication with local departments.
Construction & Final Inspection – We deliver a code-compliant, move-in-ready ADU with your Certificate of Occupancy in hand.
Rental Readiness Guidance – We explain owner-occupancy rules, lease options, and any registration your city requires.

Because when your ADU is built right the first time, you rent confidently and profitably.

Common Mistakes to Avoid

Renting an unpermitted ADU – Cities issue steep fines and can halt rental activity.
Skipping city registration – Required in some areas even for long-term leases.
Assuming Airbnb is legal everywhere – It isn’t; always verify local codes.
Lacking proper insurance – Make sure your policy covers rental use.

A reputable ADU builder helps you avoid these issues from day one.

FAQ: Renting Out ADUs in California (2025 Edition)

Can I rent both my main home and my ADU?

Usually yes, as long as your city doesn’t enforce owner-occupancy. Always confirm during planning.

Are garage conversions treated differently?

No, if they meet code and receive a Certificate of Occupancy, they can be rented like any ADU.

What happens if my city reinstates owner-occupancy later?

If your ADU was permitted before the rule change, it remains exempt (“grandfathered in”).

Can I build a new ADU strictly as a rental property?

Yes. Most SoCal jurisdictions allow this in 2025 without requiring you to live on-site.

Build Smart, Rent Responsibly

Yes, you can rent out your ADU in California. The key is staying informed, compliant, and strategic about your rental approach.

Long-term ADU rentals remain one of the most reliable paths to building wealth in Southern California. They provide steady income, increase your property’s value, and help meet your community’s housing needs.

At Wealth Nest, we make the process seamless from your first consultation to your first tenant.

Book your free consultation at www.wealthnestadu.com to learn how to turn your ADU into a compliant, income-producing property today.