Accessory Dwelling Units (ADUs) are many state’s solution to affordable housing.  Appraisers should note the changes in state and local zoning regulations that are taking place around the country to address affordable housing and looming shortages in more densely populated areas, according to The Columbia Institute.

These changes in law are having tremendous impacts on the highest and best use of properties in these neighborhoods. Appraisers need to be aware of and understand the implications these zoning changes are having on the valuation process and ensure competent completion of appraisal assignment in these markets.  

For instance, on June 1, 2020, the Minnesota Department of Commerce sent a reminder Notice of New Zoning Laws to appraisers and appraisal management companies about laws that went into effect in the City of Minneapolis on Jan. 1, 2020.

Since the enactment, the Minnesota Department of Commerce has reviewed 135 appraisal reports of Minneapolis properties. Of the 135 appraisals, only 117 had the correct specific zoning classification, only 15 included the correct zoning description, only three had a highest and best use analysis that conformed to USPAP, and zero had data in the work file supporting the highest and best use analysis or conclusion.