Quick answer
A long-term rental ADU is an accessory dwelling unit leased to a tenant who lives in it as their home, usually for a month-to-month or fixed-term lease, rather than rented to short-stay guests.
Renting this way makes you a landlord: the lease, deposits, habitability and any tenant-protection law apply. In California, whether the statewide rent cap and just-cause rules reach your ADU depends on the unit’s age, who owns the property and whether you live there.
Quick facts
- Occupant
- A tenant under a lease
- California rent cap
- Over 12 months, 5% plus the cost-of-living change, or 10%, whichever is lower (Civ. Code § 1947.12(a)) 1
- Rent-cap exemption for new units
- Housing issued a certificate of occupancy within the previous 15 years (§ 1947.12(d)(4)) 1
- California just cause
- After 12 months of continuous, lawful occupancy, termination needs a stated just cause (Civ. Code § 1946.2(a)) 2
- Owner-occupied exemption
- Reaches a home where the owner lives and rents no more than two units or bedrooms, including an ADU or junior ADU (§ 1946.2) 2
- California security deposit
- Usually no more than one month’s rent; two months for some small landlords (Civ. Code § 1950.5(c)) 3
Key takeaways
- A long-term rental means a tenant lives in your ADU as their home. You become a landlord.
- In California, a new ADU is free of the statewide rent cap for its first 15 years 1.
- The rent cap and the just-cause rules are two separate tests. Passing one does not answer the other.
- If you live in the main house and rent out only the ADU, the just-cause rules may not apply. Check the conditions 2.
- Most California landlords may take a deposit of no more than one month’s rent 3.
- If the ADU shares a gas or power meter with your house, California law says you must tell the tenant and agree in writing on who pays 4.
- City rent and eviction rules can add more. This page covers state law only. It is education, not legal advice.
What a long-term rental ADU means, in plain English
You built a small home in your backyard, garage or house. Now someone else moves in and pays you rent each month. That is a long-term rental.
The key word is “home.” The tenant gets mail there, sleeps there and plans to stay. That is the line between a tenant and a hotel guest.
A short stay, like a weekend booking, is a different thing. The short-term rental ADU page covers that side.
Why it matters to you
Once a tenant moves in, the law gives them rights. You cannot just change the locks or raise the rent at will. You must keep the unit safe and livable.
Many ADU owners plan to rent for a few years, then move in a parent or a grown child. That plan can clash with tenant rules if you do not set things up well at the start.
Rent is also how many owners pay back the loan that built the unit. Knowing which rules cap that rent helps you test whether the numbers work before you build.
What changes when an ADU becomes someone’s home
Everywhere in the US, a long-term tenant has a lease, a security deposit held under state rules, the right to a habitable home, and a legal process before they can be removed.
Many cities add their own rent or eviction rules. Details vary by state; see ADU laws by state for the ADU side of that map.
California adds a statewide layer called the Tenant Protection Act. It caps rent increases in Civil Code § 1947.12. It sets just-cause rules for ending a tenancy in § 1946.2.
Neither treats every ADU the same way. That is why “is my ADU rent-controlled?” has more than one answer. The ADU rent control rules research page goes section by section.
How renting an ADU long term works, step by step
- Finish the unit and get its final sign-off from the building department. The date on the certificate of occupancy matters later for the rent cap.
- Check your approval papers for rental terms. Some ADUs must be rented for more than 30 days by law 6.
- Set the rent from local comparable homes of the same size and bedrooms.
- Decide who pays which utility, and write it down.
- Screen applicants the same way for everyone, under fair housing law.
- Sign a written lease and collect a deposit within your state’s limit.
- Do a move-in walk-through with photos, signed by both of you.
- Keep records of rent, repairs and notices for as long as the tenancy lasts and after.
California: how the Tenant Protection Act meets an ADU
| Situation | Rent cap (Civ. Code § 1947.12) | Just cause (Civ. Code § 1946.2) |
|---|---|---|
| ADU whose certificate of occupancy was issued within the previous 15 years | Exempt under (d)(4) while it is under 15 years old | Check § 1946.2 separately; the rent-cap exemption does not answer it |
| You live in the main house and rent no more than two units or bedrooms, including the ADU | Read § 1947.12’s exemptions | Owner-occupied exemption in § 1946.2 names ADUs and junior ADUs expressly |
| Owner-occupied duplex exemption | Applies only if neither unit is an ADU or junior ADU (§ 1947.12(d)(6)) | Same limit in § 1946.2 |
| Single-family property alienable separately from other units | Exempt under (d)(5) only if the section’s conditions on the owner and notice are met | Read § 1946.2’s own exemption list; do not assume it matches |
Safety and risk
The rent-cap exemption and the just-cause exemption are separate tests. An ADU can be free of the rent cap and still need a stated just cause to end a tenancy. Check both sections, and any local ordinance, before you serve a notice.
Just cause in California: the two kinds
| Kind | What it means | Examples the statute lists |
|---|---|---|
| At-fault | The tenant did something wrong | Not paying rent; breaking a key lease term after written notice; nuisance; damage (“waste”) 2 |
| No-fault | The tenant did nothing wrong, but the owner has a listed reason | The owner or a close family member will live in the unit as their main home for at least 12 months 2 |
Worked example: the rent-cap arithmetic
This applies only to a unit the cap covers. Rents and cost-of-living changes below are hypothetical, used only to show the formula; they are not typical ADU rents. The statute caps the increase over any 12-month period against the lowest rent charged in the prior 12 months 1.
| Scenario | Lowest rent in prior 12 months | Cost-of-living change | Cap | Highest new rent |
|---|---|---|---|---|
| A | 2,400 | 3% | 5% + 3% = 8% (below 10%) | 2,400 × 1.08 = 2,592 |
| B | 2,400 | 7% | 5% + 7% = 12%, so 10% applies | 2,400 × 1.10 = 2,640 |
Largest increase in 12 months = lower of (5% + CPI change) or 10%
5%- The fixed part set by the statute
CPI change- The regional cost-of-living change the statute names, as a percent
10%- The ceiling, whatever the cost of living does
Applied to the lowest rent charged in the prior 12 months. California only; units under 15 years old are exempt.
Source: [1]
For a new ADU under 15 years old, the cap does not apply under (d)(4). Then the lease and any local ordinance set the rent. To see what the market supports, use the ADU rent estimator and the sourced figures on ADU rental income.
Worked example: the largest deposit you may ask for
California limits a security deposit by how much rent is charged. The rent below is a hypothetical figure for arithmetic only 3.
| Landlord | Hypothetical monthly rent | Deposit limit | Largest deposit |
|---|---|---|---|
| Most landlords | 2,000 | One month’s rent (§ 1950.5(c)(1)) | 2,000, plus the first month’s rent |
| A person (or an LLC of only people) who owns no more than two rental properties with no more than four units in all | 2,000 | Two months’ rent (§ 1950.5(c)(5)) | 4,000, plus the first month’s rent |
A typical owner of one house plus one ADU may fit the small-landlord rule. Read the full section, because it has more conditions. The deposit must be handled and returned under the same section.
Real situations ADU owners face
- You live in front and rent the backyard ADU. The owner-occupied exemption in § 1946.2 may apply, so just cause may not be needed. The rent cap is a separate check 2.
- You rent out both the house and the ADU. The owner-occupied exemption does not fit. Expect the just-cause rules after 12 months, unless another exemption applies.
- Your mother may move in next year. Owner or family move-in is a listed no-fault reason, but it has conditions and a cost. A fixed-term lease that ends near her move date is simpler.
- The ADU shares your electric meter. You must tell the tenant and agree in writing on how power is paid for 4.
- Your ADU is 16 years old. The 15-year new-construction exemption from the rent cap has ended. Check the other exemptions 1.
Where you will see these terms
- Your approval letter or permit: it may state a minimum rental term, such as more than 30 days.
- A recorded covenant on your title: some cities record limits on use or rental.
- The lease: rent, deposit, utilities, parking, yard and any required exemption notice.
- A loan offer: if a lender counted future ADU rent to qualify you, it may ask for the lease.
- Your tax return: rent is reported as income, and costs are split if you also use the unit.
Rules: California first, then other states
California sets the rent cap, the just-cause rules and deposit limits statewide. Both Tenant Protection Act sections say they stay in force only until 1 January 2030 1 2. Watch for changes before then.
State ADU law also shapes renting. Under Gov. Code § 66315, a city may require that ADUs approved under § 66314 be rented for terms of 30 days or longer 5. Junior ADUs must be rented for terms longer than 30 days 6. A long-term lease meets both.
Other states use different rules. Some have statewide rent limits; many do not. Some ban local rent control. Check your own state and city. The ADU regulations hub is the starting point.
Costs and what drives them
HyreADU does not give typical landlord costs, because they depend on the city, the unit and the tenant. The cost drivers are clear, though.
Insurance usually changes when a unit is rented. See insuring an ADU. Property tax goes up when the ADU is added, for the new part; see ADU property taxes. Repairs, vacancy between tenants and any utilities you include in rent all cut into income.
On taxes, the IRS treats a rented unit as rental property. It lists costs such as repairs, insurance, taxes and interest as costs you can usually deduct from rent. It says residential rental property is depreciated over 27.5 years 7. Ask a tax preparer how this applies to you.
Benefits and limits of long-term renting
Long-term offers
- Allowed in places where short stays are not, including every California junior ADU 6.
- Steadier income and less turnover.
- Fewer local permit and lodging-tax duties than short-term letting.
- Adds a real home to the local housing supply, which is why ADU laws exist.
Long-term also means
- Tenant-protection rules can limit rent increases and how a tenancy ends.
- Less freedom to use the unit yourself.
- A tenancy can outlast a change in your plans.
- You carry landlord duties: repairs, notices and deposit rules.
Long-term rental compared with other ways to use an ADU
| Use | Who stays | Typical stay | Main rules |
|---|---|---|---|
| Long-term rental | A tenant | Months to years | Lease, deposit, tenant protections |
| Short-term rental | Guests | Nights or weeks | Local short-stay rules; often banned for ADUs |
| Family use, no rent | A relative | Any | Few landlord rules; check owner-occupancy terms |
| Home office or guest room | You | Any | Permit use rules only |
Common mistakes and myths
- Myth “My ADU is brand new, so no tenant rules apply.”
- Reality New units are exempt from the statewide rent cap for 15 years. Just-cause, deposit and habitability rules are separate 1 3.
- Myth “I live on the property, so I can end the lease any time.”
- Reality The owner-occupied exemption has conditions. A fixed-term lease still runs to its end date 2.
- Myth “A shared meter is fine if rent is a bit lower.”
- Reality California requires you to disclose a shared gas or power meter and agree in writing on payment 4.
- Myth “I can take three months’ deposit to be safe.”
- Reality California caps deposits at one or two months’ rent, depending on the landlord 3.
What to ask before you rent
- City planning: does my ADU approval set a minimum rental term?
- City housing office: does a local rent or eviction ordinance cover my ADU or my main house?
- Lender: does my loan have rules about renting the unit?
- Insurer: what policy covers a rented ADU, and what does it cost?
- Utility: can the ADU get its own meter, and what will that take?
- Tax preparer: how will rent and costs show on my return?
Checklist: before the first lease
- Find the certificate of occupancy date and note when the 15-year rent-cap exemption ends.
- Read your approval and any recorded covenant for rental limits.
- Settle utilities: separate meters, or a written split if shared 4.
- Decide on parking, yard, laundry and storage use.
- Get a landlord or dwelling policy that covers a rented unit.
- Set the rent from comparable homes, then test it against your loan payment.
- Write the lease, including any exemption notice the law requires.
- Collect a deposit within the legal limit and log the unit’s condition with photos.
Where the lease sits in the ADU path
- ADU approval and its rental terms
- certificate of occupancy date
- rent cap and just-cause check
- lease and deposit
- rental income
Related guides, tools and research
- ADU rental hub
- ADU rental income statistics
- ADU ROI calculatorDoes the rent cover the build?
- ADU owner-occupancy rules
- Who lives in ADUs
- ADU financing hub
Questions about long-term rental adu
Is a new ADU exempt from rent control in California?
From the statewide rent cap, yes, while it is new. Civil Code § 1947.12(d)(4) exempts housing issued a certificate of occupancy within the previous 15 years. That does not settle everything. Local rent ordinances and the just-cause rules in § 1946.2 are separate questions, so check those too.
How much can I raise the rent on an ADU in California?
If the statewide cap applies, no more than 5% plus the cost-of-living change, or 10%, whichever is lower, over any 12 months. The base is the lowest rent charged in the prior 12 months. If the unit is exempt, the lease and any local ordinance govern increases instead.
Do just-cause eviction rules apply to an ADU?
They can. Civil Code § 1946.2 requires just cause after 12 months of lawful occupancy. It exempts an owner-occupied home that rents no more than two units or bedrooms, including an ADU, subject to the section’s conditions. Read the conditions before relying on it.
How do I set the rent for an ADU?
Start from local rents for homes of similar size and bedrooms. Then adjust for utilities you include, parking, privacy and yard use. The HyreADU rent estimator and the ADU rental income research give sourced starting points. Check the result against your loan payment.
Do I need a written lease to rent my ADU?
A written lease is the practical way to record rent, deposit, utilities, parking and access. Some notices, like a shared-meter agreement or a rent-cap exemption notice, must be in writing. State law sets what a lease can and cannot require. This page is not legal advice.
How much security deposit can I charge for an ADU in California?
Usually no more than one month’s rent, plus the first month’s rent, under Civil Code § 1950.5(c)(1). A person or an all-person LLC that owns no more than two rental properties with four units or fewer in total may take up to two months’ rent, under (c)(5).
Can I rent my ADU for less than 30 days in California?
Often no. A junior ADU must be rented for more than 30 days by state law. Many other ADUs carry a 30-days-or-longer rule set by the city under Gov. Code § 66315. A long-term lease avoids that problem. The short-term rental ADU page covers the details.
Can I move back into my ADU after renting it out?
Yes, but the tenancy must end lawfully first. A fixed-term lease that ends on a set date is the simplest route. If § 1946.2 applies, an owner move-in is a listed no-fault reason, with conditions and a relocation payment or waived final month’s rent.
Who pays utilities in a rented ADU?
Whoever the lease says. With separate meters the tenant usually opens their own accounts. With a shared meter, California law says you must tell the tenant and agree in writing on how the shared service is paid. The separate utility meter page compares the options.
Is ADU rent taxable income?
Yes, rent is generally reported as income on a federal return. The IRS lets you deduct many rental costs, such as repairs, insurance and interest. It sets rules for splitting costs if you also use the unit yourself. Ask a tax preparer about your own case.
Does the California rent cap end in 2030?
As written, yes. Civil Code §§ 1947.12 and 1946.2 each say they remain in effect only until 1 January 2030 and are then repealed. The Legislature can extend them. Check leginfo for the current text before relying on the date.
Sources
- California Civil Code § 1947.12 (leginfo.legislature.ca.gov), retrieved .
- California Civil Code § 1946.2 (leginfo.legislature.ca.gov), retrieved .
- California Civil Code § 1950.5 (leginfo.legislature.ca.gov), retrieved .
- California Civil Code § 1940.9 (leginfo.legislature.ca.gov), retrieved .
- California Government Code § 66315 (leginfo.legislature.ca.gov), retrieved .
- California Government Code § 66333 (leginfo.legislature.ca.gov), retrieved .
- IRS, Publication 527 (2025), Residential Rental Property, retrieved .
Expert review
Written by the HyreADU Research team. Not yet reviewed by an outside expert. We say so rather than imply a review that has not happened; see our editorial policy.
How the numbers were checked: Civil Code §§ 1946.2, 1947.12, 1950.5 and 1940.9 and Gov. Code §§ 66315 and 66333 read on leginfo.legislature.ca.gov on 7–8 October 2026; IRS Publication 527 (2025) read on irs.gov on 8 October 2026.
Costa-Hawkins (§ 1954.52) and local ordinances not covered because not re-read for this page. Rent figures in the examples are hypothetical. Education, not legal advice.
Suggest a correction. We fix errors and say what changed.