Today, they live in a 1,200-square-foot, three-bedroom, two-bathroom ADU in San Ramon, a city neighboring Danville. The home cost $500,000 to build, which the couple paid with their parents' help.

These backyard homes, called accessory dwelling units, or ADUs, are small housing units ranging from 150 square feet to 1,200 square feet, depending on where you live. The average cost of a unit ...