I Started an ADU Company to Test Colorado's Housing Promise: $350K Later, the Reality Is Clear
Key Takeaway: As a transactional real estate attorney, I launched Nookhaus to test whether Colorado's housing reforms actually work. After investing $350,000 with best-in-class partners, the result was clear: ADUs can deliver premium products but remain economically out of reach for middle-income homeowners due to financing barriers, utility delays, and construction costs—despite successful zoning reform.
Why I Started Nookhaus
Accessory dwelling units are often promoted as Colorado’s answer to the housing affordability crisis. They’re supposed to unlock density, create options for families, and fill the “missing middle.”
But in my practice, I kept seeing the same story: projects that looked viable on paper fell apart in execution.
That’s when I decided to step out from behind the desk. I launched Nookhaus, a side business dedicated to ADUs, both to serve homeowners directly and to put myself in the shoes of my clients. I wanted to see what really happens when Denver’s December 2024 zoning reforms and Colorado’s building codes collide with real budgets, real financing, and real timelines.
To give the idea its best chance, I assembled a best-in-class team, mapped every code change, and structured the project to avoid the pitfalls that derail most ADU efforts. If ADUs could succeed anywhere, they should succeed in this model.
The $350K Test Run
The ADU we delivered was about 1,150 square feet: a two-car garage below with a one-bedroom unit above. We added triple-glazed European windows, an all-electric system with heat pump technology, and a solar-optimized roofline. It exceeded Colorado’s energy codes and was built for long-term durability.
On paper, it was everything zoning reform was supposed to enable. In practice, it told a different story.
Even with vertical integration and a fixed-price contract, the all-in cost reached $350,000. The timeline stretched by eight months, not because of construction but because of Xcel Energy utility coordination.
The rental numbers looked fine for cash investors: about $2,100 per month, or roughly a 6.3% annual return after expenses. But for homeowners trying to finance an ADU, interest rates of 8–14% flipped the math into negative cash flow.
“Regulatory permission does not equal economic feasibility.”
What This Reveals About Colorado’s Housing Promise
Denver’s 2024 zoning reforms were genuine progress. Minimum lot sizes were eliminated. Bulk plane restrictions were eased. ADUs became permitted by right across most single-family lots.
But zoning reform is only the beginning. My experience showed that the real obstacles lie elsewhere:
Costs ran 30–60% higher than industry estimates once demolition, engineering, and energy code compliance were factored in.
Infrastructure bottlenecks — especially unpredictable utility approvals — added months to the process.
Financing constraints left most middle-income homeowners without viable loan options.
These are not execution problems. They are structural barriers. And unless they are addressed, ADUs will remain a premium product for cash-available households rather than a mainstream affordability solution.
What Colorado Needs Next
If policymakers want ADUs to deliver on their promise, zoning reform must be paired with financing innovation, infrastructure accountability, and cost reduction strategies.
Colorado could establish state-backed ADU loan programs modeled on solar financing. Utilities could be bound by service-level agreements to make timelines predictable. Cities could adopt pre-approved designs and streamlined inspections to reduce soft costs.
And perhaps most impactful: a state income tax credit or property tax rebate for ADU construction. Just as solar panels became mainstream with public incentives, ADUs could follow the same path. The principle is simple: if ADUs create long-term community value, policy should help offset their short-term cost.
Closing Thoughts
ADUs hold real promise, and my experiment with Nookhaus proved what’s possible when they’re executed at the highest level. The product was excellent. The construction was efficient. The regulatory boxes were checked.
But the economics told a harder truth. For now, ADUs only work for cash-available homeowners and investors. For middle-income households, they remain out of reach.
That’s not failure. It’s insight. And it’s a reminder that good policy must go beyond permission and grapple with market reality.
About the Author
Nick Larson is the founder of Bear Peak Law, PLLC, a transactional real estate firm serving developers, investors, and municipalities across Colorado. Recognized in Best Lawyers “Ones to Watch” (2023–2025), he advises on acquisitions, dispositions, entitlements, and joint ventures. His entrepreneurial work with Nookhaus provides rare, hands-on insight into how zoning reforms and housing policies play out in practice.
Contact: bearpeaklaw.com
