Derry NH ADU Guide: 2026 Rules & Costs

ADU law update (fall 2026): Two state changes landed in the last few weeks. As of August 31, 2026, HB 1079 lets you convert an existing structure into an ADU even if it sits where today's setbacks wouldn't allow it, without a variance and without losing its grandfathered status. As of September 13, 2026, New Hampshire also treats code-compliant tiny homes and yurts of 600 square feet or less as permanent dwellings that can serve as an ADU. Both sit on top of HB 577, which has required every town to allow one ADU by right since July 1, 2025.

The short version for Derry

Derry did its homework. The town rewrote its ADU section, §165-25 of the zoning ordinance, twice in 2025 (February and November) to line up with HB 577, and the current ordinance was reissued September 3, 2026. The result is one of the cleaner ADU rulebooks in Southern NH: one accessory unit per lot, attached or detached, up to 950 square feet, with protection for garage conversions already written in. If you own a home anywhere in Derry NH real estate, from the neighborhoods around downtown to the bigger lots in East Derry, a Derry NH ADU is now a realistic project, not a Zoning Board gamble.

What Derry's ordinance says (§165-25)

• One ADU per parcel, and it can be attached or detached.
• Size: up to 950 square feet of living space, which is the state default ceiling.
• Layout: a kitchen, living room, bathroom, and no more than two bedrooms. Room sizes must meet the International Residential Code.
• Parking: one additional off-street space.
• Owner-occupancy: you must live in either the main house or the ADU. The town can't dictate which one.
• Interior door: allowed, not required, for attached units.
• Design: any addition built for the ADU has to keep continuity with the look of the main house.
• Sewer and septic: disposal must meet state law. Much of Derry outside the core runs on private septic, so expect an NHDES design review if you're adding bedrooms.
• No condo split: the ADU stays under the same ownership as the house, and once it's built you can't convert further to add another unit.

Where state law does the heavy lifting

Here's what sets Derry apart. Subsection A already says an ADU can be converted from an existing structure, "including but not limited to detached garages," even if that structure violates current setback or lot coverage rules. HB 1079 now backs that up statewide. So if you've got an old detached garage or barn sitting a few feet off the property line, which is common on Derry's older lots along Route 102 and in East Derry, that building may be your cheapest path to a legal rental unit.

HB 577 also means Derry can't set the size cap below 750 square feet, can't pile ADU-only setbacks on top of what a single-family home faces, and can't require more than one extra parking space. Derry's text already complies on all three, which is exactly why you should expect a smoother permit than in towns still running pre-2025 ordinances.

Do the numbers work in Derry?

As of late September 2026, Zumper puts Derry's median rent at about $1,995, with one-bedrooms around $1,725 and two-bedrooms around $2,160. A well-finished Derry ADU realistically rents for $1,600 to $2,100 a month depending on size, bedrooms, and whether it's a true detached cottage with its own entrance and yard.

On cost, converting existing space (a garage, walk-out basement, or barn) usually runs $80K to $150K because you reuse the foundation, walls, and roof. A new detached ADU lands in the $150K to $300K+ range once you add site work and septic. A code-compliant tiny home is now a third option under the new state law. At $1,850 a month, a $120K garage conversion grosses about $22,000 a year, which is an 18% gross yield before taxes, insurance, and maintenance. That's why we tell investors and multigenerational families alike to look hard at existing outbuildings first.

One caution: Derry's ADU section doesn't address short-term rentals, and New Hampshire's meals and rooms tax applies to stays under 185 days. Underwrite it as a long-term rental and confirm any Airbnb plans with the town before you count on that income.

Shopping for a Derry home with ADU potential? Our guides to living in Derry and East Derry point to where larger lots and detached garages are common. Comparing next door? The Londonderry NH ADU guide shows how a town with an older ordinance handles the same state rules.

Quick answers: Derry NH ADUs

Can I build a detached ADU in Derry? Yes. §165-25 allows one ADU per parcel, attached or detached, and HB 577 guarantees it by right wherever single-family homes are allowed.

How big can a Derry ADU be? Up to 950 square feet of living space, with no more than two bedrooms.

Can I convert my old garage if it's too close to the lot line? Yes. Derry's ordinance explicitly allows conversions of existing structures that don't meet current setbacks or lot coverage, and HB 1079 reinforces that statewide.

Do I have to live on the property? Yes. The owner must live in either the main house or the ADU.

Do I need extra parking? One additional off-street space.

Want to know what your Derry lot can handle?

Every lot is different: septic capacity, where the garage sits, how the addition will look from the street, and whether the rent justifies the build. The Phinney Team will give you a free property feasibility read. Send us your address and what you're picturing, and we'll tell you what's realistic and what the property is likely worth when it's done. Want to scope it yourself first? Grab our ADU Feasibility Checklist and walk through it in ten minutes. Reach out anytime at teamphinney.com. Aaron Phinney, The Phinney Team at Keller Williams Realty Metropolitan, Bedford, NH.

This guide is general information, not legal advice. ADU rules, HB 577, HB 1079, and the new tiny-home law are still being interpreted town by town. Always confirm current requirements with the Town of Derry Planning Department (603-432-6110) and Code Enforcement before you design or build.

Sources: Town of Derry Zoning Ordinance, Article III, §165-25 Accessory dwelling unit · Town of Derry Planning, Ordinances and Regulations (Zoning Ordinance eff. September 3, 2026) · NH Municipal Association, The Revised Law on Accessory Dwelling Units 2025 · HB 1079 (2026) bill text · NHPR on HB 1079 (July 2026) · NHPR on the NH tiny-home law (August 2026) · Zumper Derry NH rent report (September 2026)