Can You Rent Out a Basement Apartment in Salt Lake City?

Can you rent out a basement apartment in Salt Lake City?

Yes. Salt Lake City allows one accessory dwelling unit (ADU) per single-family lot, and that includes an internal unit carved out of a basement. Two conditions do most of the work: the unit has to be permitted and built to code, and you have to live on the property—in either the main house or the apartment. Long-term rentals of 30 days or more are allowed under a standard ADU approval, short-term rentals are not, and you'll need a city business license before a tenant moves in.

This is one of the most common questions we get from buyers right now, and the reason is simple math. The median sale price in Salt Lake City hit roughly $650,000 in July 2026, and the 30-year fixed mortgage averaged 6.65% as of August 20 according to Freddie Mac. A one-bedroom in the Salt Lake valley rents for somewhere around $1,200 to $1,600 a month. That's $14,000 to $19,000 a year against a payment that otherwise feels out of reach.

So buyers tour a house with a finished basement, a separate entrance, and a second kitchen, and they start doing the arithmetic in the driveway.

Before you do, there are four things worth knowing—because a basement apartment that isn't permitted is worth far less than the listing implies, and in some cases it's a liability.

The Two Rules That Decide Everything

Utah state law is genuinely favorable here. Under Utah Code 10-9a-530, a municipality generally can't restrict the construction or use of one internal ADU inside a primary dwelling. That's the statute that made basement apartments a protected use across most of the state.

But the protection comes with carve-outs that matter. A city can still prohibit an internal ADU if the lot is 6,000 square feet or smaller, if the home is on a failing septic tank, if the rental term is shorter than 30 consecutive days, or—this is the big one—if the home isn't occupied as the owner's primary residence. Cities can also exclude up to 25% of their residentially zoned area from the protection entirely.

Salt Lake City's own ordinance (21A.40.200) layers on the specifics:

• One ADU per lot. Internal, attached, or detached. You don't get two.

• Owner occupancy is required. You can live in the main house and rent the basement, or live in the basement and rent the house. You can't own the property as a pure investment and rent out both sides under a standard ADU approval.

• Long-term only. Thirty days or more. Airbnb-style stays require a separate short-term rental license, which is a different approval entirely.

• Detached units cap at 1,000 square feet and 17 feet in height, with room to go taller if you increase the side and rear setbacks. Internal conversions don't face the same footprint math.

• Parking. Most residential zones want one off-street space for the ADU, though properties near TRAX and frequent bus routes may qualify for a waiver.

• A business license. Every residential rental inside city limits needs one, and ADU owners enroll in the landlord/tenant program before the zoning certificate issues.

The city relaxed the process meaningfully in April 2023, when the Council removed the Planning Commission conditional-use step for detached ADUs. It kept the owner-occupancy requirement in that same vote, with a stated plan to revisit the question roughly three years out—which puts it back on the table around now. Worth watching if you're planning several years ahead.

Your City Matters More Than Your Address Suggests

"Salt Lake" is shorthand for about two dozen jurisdictions, and the ADU rules are not the same across them. This trips up more buyers than any other part of the topic.

A few examples of how much the ground shifts:

• Millcreek permits ADUs only in R-1 and agricultural zones, and a property with an existing guest house doesn't qualify for a second detached unit. The guest house itself can't be rented.

• Murray allows one ADU per lot across zones that permit single-family homes, but doesn't allow owner-builds—you have to hire a licensed contractor.

• Holladay treats internal and attached units differently from external ADUs and has been actively reworking its approach as requests for detached units and garage conversions have climbed.

• Unincorporated Salt Lake County loosened up in mid-2024, dropping the minimum lot size from 12,000 square feet to 7,000, cutting required parking from two spaces to one, and allowing units up to 20 feet tall.

If you're comparing a bungalow in Sugar House against a rambler in Holladay against a home in unincorporated Cottonwood Heights, you are comparing three different regulatory environments. Verify the parcel, not the region. The city planning counter will tell you in one phone call what a listing description never will.

What a Lender Will Actually Count

Here's where the driveway math usually falls apart—or holds up better than people expect.

Both FHA and Fannie Mae now let you use ADU rental income to qualify, which was not true a few years ago. The rules are similar in shape:

• You can count 75% of the market rent, not the full amount. The 25% haircut covers vacancy and maintenance.

• The income is capped at 30% of your total qualifying income for a one-unit home with an ADU.

• The rent has to be supported by the appraiser, not by the seller's claim or a screenshot of a Zillow rental estimate.

• FHA will consider projected rent even when the ADU doesn't exist yet, in certain scenarios.

Run that on a real number. If the basement unit appraises at $1,600 a month in market rent, you're adding $1,200 a month to qualifying income, not $1,600. That's still meaningful—it can be the difference between qualifying at $650,000 and qualifying at $580,000. But budget from the $1,200, not the $1,600, and confirm the specifics with your loan officer before you write the offer. Guidelines shift, overlays vary by lender, and we're not lenders.

One more piece people miss: renting a basement unit long-term does not cost you Utah's 45% primary residential exemption on the home, because you still live there. That's a different outcome than converting the whole house to a rental, and it's a real part of the property tax math in Salt Lake County.

The Unpermitted Unit Problem

Plenty of Salt Lake valley homes have a basement apartment that was never permitted. Separate entrance, second kitchen, tenant already in place, rent collected in cash for a decade. The listing calls it a mother-in-law apartment and quotes an income figure.

Treat that figure as unverified until you've checked the permit history.

An unpermitted unit creates four separate problems:

1. The appraisal. Unpermitted finished space often doesn't count as living area, and an appraiser who flags an illegal or unsafe unit can affect your financing. A basement that adds 700 square feet on the listing may add nothing to the appraised value.

2. The insurance. Carriers can deny claims tied to unpermitted electrical or plumbing work, or exclude the space from coverage.

3. Enforcement. When Utah code enforcement learns of an illegal ADU, the owner gets a notice of violation. If it isn't corrected, fines follow and the tenant may have to be removed.

4. Legalization cost. Bringing a unit up to code means egress windows, ceiling heights, fire separation, and inspections. Permit packages in Salt Lake City commonly run $3,000 to $8,000, and a basement conversion itself typically runs $50,000 to $100,000 depending on what's already there. One piece of good news: under Utah Code 11-36a-202, impact fees are prohibited on internal ADUs created inside an existing primary dwelling.

None of that means walk away. It means the due diligence period is where you pull permit records, call planning, and either confirm the income or renegotiate the price to reflect a basement that's storage until you legalize it. We've written that conversation into offers many times, and the leverage is real when the seller's own listing leaned on the rental income.

Sellers, the mirror image applies. Utah's Seller's Property Condition Disclosure asks you to tell the truth about what you know, and an unpermitted rental unit is material. Keep your approved plans, permit sign-offs, and current business license together in one folder—documentation is what turns a claimed income stream into a priced one. Nationally, homes with permitted ADUs have been shown to sell faster and at a premium, but that premium attaches to the paperwork, not to the drywall.

Frequently Asked Questions

Do I have to live in the house to rent out the basement in Salt Lake City?

Yes, under Salt Lake City's current ADU ordinance. You must occupy either the primary residence or the ADU as your primary home. Utah state law also permits cities to prohibit the rental of an internal ADU when the owner doesn't live on the property, so this is common across the valley—but the exact requirement varies by city, so confirm with your municipality.

Can I put my basement apartment on Airbnb?

Not under a standard ADU approval. Salt Lake City permits long-term tenancies of 30 days or more for ADUs. Short-term rentals require a separate license from the city, and Utah's internal ADU statute specifically allows municipalities to prohibit rentals shorter than 30 consecutive days.

How much rent can a basement apartment bring in around Salt Lake City?

Typical figures in 2026 run roughly $1,200 to $1,600 a month for a one-bedroom ADU and $1,600 to $2,200 for a two-bedroom, depending on the submarket, finish level, parking, and whether utilities are separated. Rental demand is strongest in the urban submarkets like Sugar House and Millcreek and along the Silicon Slopes corridor.

Does a basement apartment add value when I sell?

A permitted, code-compliant unit generally does—it widens the buyer pool to anyone who wants the income to help carry the payment, and it gives the appraiser something to work with. An unpermitted unit usually doesn't get credited and can complicate a buyer's financing. The gap between the two is documentation.

What if the house I'm buying already has a tenant in the basement?

You'll want the lease, the payment history, the deposit accounting, and the permit and license records before your due diligence deadline. Inheriting a tenant is workable, but inheriting an unpermitted tenancy transfers the enforcement risk to you at closing.

The Short Version

A basement apartment can be a legitimate affordability tool in Salt Lake City—one of the few left in a market where the median price runs near $650,000. The rules favor you more than they did five years ago. But the value lives entirely in whether the unit is permitted, whether your city allows it on that specific parcel, and how much of the rent your lender will actually count.

Those three answers are property-specific, and they're worth getting before you write an offer rather than after. This is exactly the kind of question we walk buyers through when a listing mentions rental income, and it's part of the same calculation as deciding whether to sell a home or hold it as a rental.

If you're buying or selling in Salt Lake City or anywhere across the Wasatch Front, we're happy to consult on the market and help you assess your options. Reach out to schedule a private consultation with our team.

About David Lawson

David Lawson is the founder of the Lawson Real Estate Team, a real estate group serving Salt Lake City and the greater Wasatch Front, including Sugar House, Holladay, Cottonwood Heights, Draper, and the fast-growing southwest valley and northern Utah County. He leads a team that has closed more than 3,920 transactions and earned recognition as the #1 eXp Realty team in Utah (2022–2025) and previously the #1 Engel & Völkers team worldwide (2019, 2021). David and his team work with buyers and sellers across the full market—from first-time buyers and move-up family homes to multifamily investments and luxury real estate—guiding clients through one of the fastest-growing housing markets in the country.