An accessory dwelling unit (ADU) is a smaller, independent living space on the same lot as a primary home, with its own kitchen, bathroom, and sleeping area. ADUs can be interior, attached, or detached and serve various purposes like housing family or generating rental income. Regulations vary by location, often controlling size, setbacks, and parking. Costs range from $25,000 to over $150,000. Financing options include renovation and construction loans. ADUs support affordable housing by adding gentle density without subdividing land.