If you renovate a garage so that it has an apartment built within its walls or on top of it, what you have is a garage apartment. This applies to both garages that are attached to the home, or even a completely separate building with a separate main entrance. Garage apartments are considered to be one of several types of ADUs, which are Accessory Dwelling Units. This term is used by urban planners, architects and in zoning ordinances in order to identify apartments that are smaller than the main dwelling on the same land parcel. There are other types of Accessory Dwelling Units, like granny flats, English basements, Auxiliary Units and Mother-In-Law Suites.

In the United States, these garage apartments are found more frequently in the older urban areas, especially in secondary buildings that were designed for this purpose, or that were converted into residential units from whatever their original use was. These homes were often called guest houses, or carriage houses. Many Accessory Dwelling Units are regulated by lot size, dwelling size, occupancy amount and included features such as bathrooms and kitchens, in addition to parking allotment and other building codes. New construction or occupancy of Accessory Dwelling Units is prohibited in many jurisdictions of the United States, except for when the occupants are relatives.

New Urbanism is an urban design movement which integrates garage apartments into urban planning. Accessory Dwelling Units like garage apartments are also commonly referred to as coach-houses, especially in Canada.

These garage apartments are especially popular as a method to provide affordable housing in neighborhoods designated as “single family neighborhoods”, which are essentially neighborhoods where only single-family houses can be found, instead of condominiums or apartment buildings. In these cases, they are often called in-law apartments or granny flats and are meant to provide a reliable source for affordable housing for many people. Cities which have permitted this type of housing tend to balance the need for it with a need to protect the character of the rest of the neighborhood. As a result, for as many communities as there are out there who encourage the use of Accessory Dwelling Units, there are an equal number of communities who regulate or completely ban this form of affordable, convenient housing.