Attorney Kathleen O’Neill Burgener

It is hard to avoid reading and hearing about the continuing housing crisis across the United States, including here in Massachusetts. An undersupply of housing, estimated to be anywhere of up to over seven million units nationwide, is making both home ownership and rental unaffordable and out of reach for an increasing number of Americans. Numerous factors have contributed to this housing shortage and affordability crisis, including an insufficient amount of new construction to meet demand, in part related to the recent economic environment of higher interest rates and increased construction costs. Correcting the adequacy of new construction supply is a long lead time issue, so in the interim, what other options might be leveraged to help with this problem?

While limited in scale, the accessory dwelling unit (“ADU”) has become an interesting option for those seeking additional flexibility and access to housing and income, especially in areas that do not typically permit multifamily properties. An ADU can create both an additional housing space for the rental market and additional income for homeowners, often in neighborhoods that are zoned solely for single family residences, and therefore would not otherwise allow such a use.

An ADU is a small residential unit built within or adjacent to an existing residence, permitting the owner of a residential property to build a stand-alone rental unit on the same property. Often thought of as an “in-law” suite (somewhere another family member might live on the property of your primary residence), there have been recent developments loosening some restrictions on ADUs to expand their use case. The Affordable Homes Act in Massachusetts (the “AHA”), enacted in August 2024, includes provisions to streamline the process of approving and building ADUs. Effective on February 2, 2025, the AHA provides that ADUs no larger than 900 square feet or ½ of the gross floor area of the principal dwelling (whichever is smaller) may be built as of right in single-family zoning districts. While certain design requirements remain (size limitation, separate entrance, setback requirements), municipalities in Massachusetts, generally, may no longer require owner occupancy of the principal dwelling. This allows for uses beyond an “in-law” suite and permits two rental structures to share the property. Under the AHA, in addition to design requirements, municipalities may also impose reasonable limitations on the use of an ADU as a short-term rental (“STR”).

In most jurisdictions, STRs are considered to be rentals for a period of under 30 days. In recent years, this market has become more popular with booking platforms such as Airbnb and VRBO that help connect owners with renters. The growing popularity of STRs has impacted both the housing market and the hotel industry, taking units that might have otherwise been available for long-term rentals and making them available for shorter stays as an alternative to booking a hotel room.

In Boston, where an STR is considered to be for a period of 28 days or less, there is an owner-occupancy requirement with respect to the operator of STRs. Since Boston has its own zoning authority and is not governed by the AHA, ADUs still have an owner-occupancy requirement. The Boston STR regulation limits the types of residences that may be used for the short-term rental market, and there are three types outlined in the applicable ordinance: (i) limited share (a residential unit that is the operator’s primary residence, a portion of which is offered as an STR while the owner is present), (ii) home share (a residential unit that is the operator’s primary residence with STR occupancy limited to a maximum number of bedrooms or guests and the owner is not present), and (iii) owner-adjacent (a residential unit offered as an STR that is not the operator’s primary residence but is one of two to three units located within the same dwelling as the operator’s primary residence).

The parameters around the STR market in part stem from a desire to make long-term rentals available to residents. Given the definitions of the various types of units in Boston that may be available for STRs, whether an ADU could qualify would be limited to the owner-adjacent category since that would satisfy the owner-occupancy requirement applicable to both STRs and ADUs. In Boston, examples of permitted ADUs may be internal, such as a converted basement, or external, such as a detached structure in a yard. Fitting the puzzle pieces together to determine when and if an ADU can be used as an STR is a question that may have varying answers depending on the municipality in question. The example in Boston illustrates both the desire to create flexibility in housing while maintaining access to long-term rentals. In navigating the complexities of various restrictions and limitations regulating ADUs and STRs, the assistance of a real estate attorney is recommended.

Kathleen O’Neill Burgener is a Real Estate attorney at Sheehan Phinney. She focuses on commercial real estate, advising clients on finance transactions, acquisitions and dispositions and leasing matters. She has extensive experience representing borrowers and lenders in acquisition, refinance, construction, and mezzanine loans.