Residents of Vermont’s White River Valley knew that tackling local housing shortages had to be a top priority when they joined the Working Communities Challenge, a Federal Reserve Bank of Boston community development initiative.

Sarah Danly, a White River Valley Working Communities leader, said her region of 14 towns – none of which are big enough to need a stoplight – badly needs smaller homes and rental units that are accessible to younger people entering the workforce.

But companies aren’t “banging down the door” to develop local housing, she said. So, the team decided to consider a different strategy: promoting accessory dwelling units, or ADUs.

An ADU is an additional housing unit built to accompany an existing home, such as a backyard cottage, an apartment above a garage, or a basement apartment. These units require special permission to build in some places due to worries about impacts on things like density, neighborhood character, and property values.

But now some states are no longer requiring such permission as communities seek to increase housing options.

“ADUs felt like a more attainable lift for the community and the level of capacity that we have currently,” Danly said. “And the idea felt more comfortable to a lot of community members than trying to bring multi-unit developments into (their) downtowns.”

Danly spoke at a recent virtual event on the potential role of ADUs as one strategy for addressing New England’s housing crisis. The event was hosted by the Boston Fed’s Regional & Community Outreach department.

Tamar Kotelchuck, a vice president in the department, said her team frequently hears that New England employers are struggling to attract and retain new hires due to a lack of housing options.

“ADUs are of course just one strategy to address housing supply, … but they are one that we're hearing a lot about from our communities,” she said.

What role could ADUs play in New England’s housing market?

The Working Communities Challenge is part of the Working Places program, which focuses on building collaboration in communities to take on local barriers to economic opportunity and prosperity – like access to housing that is affordable for residents.

At the virtual event, Kol Peterson, an ADU expert based in Oregon, said these units have significant potential in expensive housing markets dominated by single-family zoning, like New England.

“As home values increase across the coastal U.S., ADUs are going to become a fundamental part of … being able to afford homes, as well as to rent in a residential neighborhood (where the opportunity) maybe doesn't currently exist,” he said.

Ryan Fecteau, the former speaker of Maine’s House of Representatives and an executive at the nonprofit Avesta Housing, cited a recent housing report that said Maine needs 84,000 housing units to meet current demand and accommodate workforce needs through 2030. Many Maine communities once prohibited ADUs, but Fecteau noted recent changes in state law allow an ADU to be built wherever a single-family home exists.

“It doesn't magically start happening overnight, but we're seeing some developers taking on projects that are including ADUs, and we're seeing individual homeowners build them,” he said.

Danly said it’s critical that ADUs in Vermont are affordable to low-and-moderate income households. She said that nearly a third of homeowners in the White River Valley are “cost-burdened,” meaning they spend more than 30% of their income on housing.

“We were really interested in the idea that ADUs could benefit two households, the one that lived in it, and the one that created it,” she said.

Danly added that the Working Communities team is making progress in building support for ADUs from local residents and businessowners.

“(It’s) helping people realize our communities are going to change, either way,” she said. “This way, we (can) be a little bit more proactive in which direction we would like them to change.”

Read more about the Working Places initiative on bostonfed.org.