Chicago Considers Legalizing Granny Flats

After years of debate and a successful pilot program, Chicago is on the verge of a significant zoning change that could transform residential neighborhoods across the city.

The proposed ordinance to legalize accessory dwelling units (ADUs) – commonly known as granny flats, coach houses, or in-law apartments – citywide has advanced through the Zoning Committee but faces a final hurdle before becoming law.

What’s Happening with Chicago’s ADU Ordinance?

On July 16, 2025, the Chicago City Council’s Zoning Committee voted 13-7 to approve an ordinance that would legalize ADUs or granny flats across the city, expanding on a pilot program that has been operating in five designated areas since 2020. However, opponents blocked a final vote, delaying consideration until at least September when the City Council reconvenes after summer recess.

The ordinance, introduced by 44th Ward Alderperson Bennett Lawson, would allow homeowners throughout Chicago to build or convert spaces into additional dwelling units without seeking special permission from city officials. Mayor Brandon Johnson supports the measure as part of his strategy to address Chicago’s severe affordable housing shortage.

What Are ADUs and Why Do They Matter?

Accessory dwelling units are secondary housing units located on the same property as a primary residence. They come in several forms:

• Coach houses/carriage houses: Standalone structures often built above garages or in backyards
• Basement apartments: Converted lower-level spaces in existing homes
• Attic conversions: Living spaces created in the upper portions of homes
• Garden apartments: Ground-level units with separate entrances

These units were once common in Chicago but were largely banned in the 1950s due to concerns about residential overcrowding. Since then, Chicago has lost hundreds of thousands of residents, making those concerns largely obsolete.

Benefits for Property Owners

The legalization of ADUs offers several potential advantages for property owners:

1. Additional Income Stream

Property owners can generate rental income from previously unused or underutilized spaces. As Brian Peterman, who built a coach house for his mother-in-law during the pilot program, explained to the Illinois Answers Project: “By having her there, we always have that backup plan in case something goes awry in our normal lives.” His mother-in-law pays rent that’s “much less than the cost of the mortgage at her previous home, but still a steady and meaningful source of income.”

2. Increased Property Value

Properties with legal ADUs typically command higher resale values due to their income-generating potential and flexibility for various living arrangements.

3. Multigenerational Living Options

ADUs provide space for aging parents, adult children, or other family members to live independently while remaining close by. This arrangement can help with childcare, elder care, and strengthening family bonds.

4. Flexibility for Changing Needs

As household sizes and needs change over time, ADUs offer adaptable living spaces that can serve different purposes throughout a property owner’s life.

Proposed Changes to Current Rules

The ordinance would make several key changes to Chicago’s zoning code:

• Eliminate geographic restrictions on ADU construction, allowing them citywide
• Allow property owners to build both conversion units and coach houses on the same property
• Enable property owners to request waivers for parking requirements
• Eliminate caps on the size and number of coach houses on a property
• Retain affordability requirements for properties with two or more units

In areas zoned for single-family homes (RS districts), the compromise version would limit construction to no more than three new ADUs per block each year and require owner occupancy. Local alderpersons would have the option to lift these restrictions in their wards.

Lessons from the Pilot Program

Chicago’s ADU pilot program, launched in 2020, has provided valuable insights. More than 300 units have been permitted across the five test zones, though the vast majority (over 90%) have been in the two North Side zones.

This disparity stems partly from higher demand in wealthier areas and partly from additional restrictions placed on South and West Side zones, such as owner-occupancy requirements. The pilot demonstrated that ADUs primarily add garden units below existing walk-up apartment buildings, creating naturally affordable housing options.

Legal Considerations and Next Steps

Property owners interested in potentially developing an ADU should be aware of several legal factors:

1. Current status: The ordinance has passed the Zoning Committee but still requires full City Council approval, which won’t happen until at least September 2025.
2. State legislation: If Chicago delays too long, state legislation may preempt local control. Rep. Kam Buckner (D-Chicago) has introduced a bill that would prohibit Illinois cities from banning ADUs.
3. Federal fair housing issues: The debate intersects with an ongoing legal challenge to “aldermanic prerogative” – the tradition giving alderpersons final say over development in their wards.

A federal investigation found this practice violates civil rights law by perpetuating segregation.

Looking Ahead

The potential legalization of ADUs across Chicago represents a significant opportunity for property owners and a meaningful step toward addressing the city’s housing shortage.

While the final vote has been delayed until at least September, property owners should begin considering how this change might benefit their specific situation.

For guidance on how these potential zoning changes could affect your property, contact Birchwood Law to speak with one of our experienced zoning attorneys.