Reno’s New ADU Ordinance Could Reshape Rental Investing — Here’s How

Reno’s upcoming ADU ordinance isn’t just a zoning update—it’s a strategic opportunity for investors who know where to look.

What’s the Deal?

In 2025, the Nevada State Legislature passed Assembly Bill 396 (AB396), a housing reform law that mandates cities and counties across the state—including Reno—to legalize Accessory Dwelling Units (ADUs) on residential parcels. If a city fails to adopt a compliant ordinance by July 1, 2026, ADUs will be allowed by default, with no local design or zoning restrictions on single-family lots. That’s a dramatic shift.

Reno is moving quickly to stay ahead of the deadline. The city is drafting a local ordinance now, with Planning Commission and City Council votes expected between August and September 2025. While the final language is still pending, the current proposal already outlines several key regulations that will shape how and where investors can take advantage of ADU development.

Key Provisions Investors Should Know

Under the draft ordinance, ADUs will only be allowed on residential parcels that are 5,000 square feet or larger. This sets a clear line for eligibility, effectively excluding many smaller inner-city parcels from participating. Additionally, ADUs must be shorter than the main residence, preventing multi-story builds from overpowering existing homes.

A parking requirement is also included. Each ADU must provide one off-street parking space on the lot—not in the public right-of-way—adding a constraint that could complicate some buildouts, especially in tighter neighborhoods.

Short-term rentals are explicitly prohibited. Investors won’t be able to list ADUs on Airbnb or similar platforms, as any rental period under 28 days is not allowed under the ordinance.

Design standards will apply, too. While the city hasn’t finalized the aesthetic and spacing requirements, the ordinance signals that ADUs must fit visually with the main residence and meet spatial layout criteria, which may affect construction costs or require professional design support.

Why This Matters

This ordinance presents a significant opportunity for investors. For years, Reno’s housing constraints have pushed prices up and kept rental inventory low. ADUs could offer a powerful way to unlock value—turning a single-family home into a two-unit income property without needing a full duplex zoning designation.

By developing or permitting ADUs ahead of the broader market, investors can increase their cash flow, build forced equity, and potentially flip to end buyers at a premium. And because Reno is proactively drafting its ordinance, early adopters can position themselves before the policy is widely understood or priced in.

The Numbers

While exact costs and rents will vary by neighborhood and unit type, there are strong preliminary returns for ADU development. For example, a single-family home on a 6,000 square foot lot in Old Northwest Reno could accommodate a detached 800 square foot ADU. That unit could reasonably rent for $1,400 to $1,700 per month depending on design, finishes, and location.

Construction and permitting costs could range from $120,000 to $180,000 depending on whether the investor chooses to convert existing space (such as a garage or basement) or build a new detached structure. Factoring in increased monthly income and an uplift in after-repair value (ARV) of $80,000 to $120,000, many of these projects can outperform traditional cosmetic flips or duplex rehabs on a return basis.

Neighborhood Insight

Some areas stand out as particularly promising under the proposed ADU framework. Old Northwest and University neighborhoods already feature larger lot sizes, high rental demand, and stable resale values, making them ideal for ADU development.

Donner Springs offers a blend of undervalued homes and flat parcels that could easily accommodate a second structure. Lemmon Valley presents land-rich options for budget-conscious investors, while Southwest Reno appeals to long-term appreciation buyers who want to stack rental income with premium resale values.

Investors should be cautious about older, denser neighborhoods where lots are often under 5,000 square feet or don’t have enough space to accommodate an off-street parking spot. Those parcels may fall outside the ordinance requirements even if the zoning is technically residential.

Investor Takeaways

This ordinance reshapes how investors should evaluate single-family properties in Reno. Parcels with more than 5,000 square feet now carry significantly more value—especially if they can accommodate an ADU without major layout changes. These lots offer a rare chance to add density in a low-supply market.

Given the restriction on short-term rentals, investors should plan for mid- or long-term tenants. Ideal renters include traveling nurses, graduate students at UNR, and remote tech workers who prefer standalone or semi-private living quarters.

Timing also matters. Investors who move quickly after the ordinance passes can beat the inevitable rush for permits and contractors. Once demand picks up, backlogs will form and build costs may rise—so speed-to-market is a key advantage.

Finally, there’s a strategic fallback. If the city fails to adopt its local ordinance by the state deadline in 2026, state law will allow ADUs by right on all single-family parcels. In that case, many previously excluded lots would suddenly become viable—even without local review or restrictions. That potential shift could create a second wave of opportunity, or at the very least, mitigate downside risk for those investing early.

Final Thoughts

Reno’s ADU ordinance isn’t just a zoning update—it’s a signal. The city is opening the door to new density, new income strategies, and new layers of value for investors who understand how to work within the constraints. It’s not a fit for every parcel, and it’s not without its challenges—but for the right lots in the right neighborhoods, ADUs could represent one of the most compelling returns in the market over the next two years.

Want help finding the best ADU-ready properties in Reno?

We’ve already mapped out eligible parcels, run rent comps, and identified the neighborhoods with the strongest ADU ROI potential. Reach out if you’d like a custom list.