Here at WheelPad, we build what many local zoning offices call Accessory Dwelling Units (ADUs). Think of what is commonly called in-law apartments or secondary suites — separate living quarters attached to a single-family home. While ADUs can be stand-alone units, they can also be carved out of existing living space or take on the form of an addition. Let’s look at what’s behind the trend to encourage more ADUs by offering free grants and special loan financing.
The trend to offer free ADU grants
We’ve written in the past about the benefits of ADUs, and now many cities and states are incentivizing private citizens to build one on their property. The thinking goes that if more people build an ADU, more people will have a place to live in the communities they want to be in, which will be one solution to tackling the housing shortage. ADUs are a fantastic way to drive private financing towards building more housing. Lately, we’ve come across a few great examples of communities that are doing just that. But ADU financing is evolving quickly so if you don’t see a program in your area, we encourage you to ask your state or local planning and zoning officials.
Examples of states and communities offering grants
California Housing Finance Agency (CalHFA) ADU Grant Program
In recent years the state of California has taken big steps towards promoting ADUs. In past years, CalHFA offered up to $40K in grant funding to cover pre-development or non-recurring closing costs towards the building of an ADU on your property (but it could even be used for innovative things like an interest-rate buy down). It had to be used on an owner-occupied property. In June 2023, $50 million was allocated for the 2023-2024 budget year though the details have not yet been announced. The program is limited to low- to moderate-income California homeowners.
Napa County’s Investment in ADU Housing
Napa County announced in 2022 that they would be supporting ADU development in their communities and would provide homebuyer’s down payment assistance to low- to middle-income homeowners to buy or build ADUs on their property through the Proximity Housing Program. In March 2023, Napa County built on its long-standing support through previous programs that have no-interest and forgivable loans in exchange for a 10-year deed restriction to rent the unit to individuals or families earning low or very low income by announcing a new forgivable loan program. For more information, visit the Napa County Affordable ADU Program: Forgivable Loan Opportunities.
New York State ADU Program
The New York program allows low- to moderate-income New Yorkers to receive up to $125,000 to build an ADU or bring an existing ADU up to code. Eligibility is based on the median income in your area. Over the next five years, $85 million has been allocated to the program. More information is available at New York State Homes and Community Renewal
Vermont Housing Improvement Program (VHIP)
The state of Vermont recently announced VHIP which offers rental property owners up to $30,000 per unit to cover the cost of bringing vacant and blighted rental units back online. The program is based on the state’s highly successful Re-Housing Recovery Program in 2020. New for 2022, VHIP is including the building of new ADUs in the funding. Property owners are required to match at least 20% of the grant funds but have the option of doing so with an in-kind match for unbilled services or owned materials. What is the state asking in return for this support? VHIP participants must agree to rent units at or below HUD Fair Market Rents for the county and work with one of the five state Housing Organizations to find suitable renters for at least five years. You can read more about VHIP on the State’s website
A WheelPad™ accessible ADU attached to a single-family home.
Fast-moving shift in thinking
While California and Vermont are taking the lead in ADU grants and programs, other states such as Texas, Colorado, and Massachusetts, Oregon, and Washington also have programs and are developing more to help fund and facilitate ADU construction. Non-profit organizations are working with housing authorities to provide current and future homeowners with the tools they need, including financing in some instances, to build an ADU on their property. The examples above are just a few of the opportunities that are out there. States and cities are getting creative to address the housing shortage, so reach out to your town, county, or state, to see what opportunities exist for you.