Biden Administration to Scale ADU FinancingMay 16th, 2022
Accessory dwelling units (ADUs) are making nation-wide headlines today, as the Biden Administration released a statement discussing the various steps they intend to take to offset the current housing shortage. “President Biden is releasing a Housing Supply Action Plan to ease the burden of housing costs over time, by boosting the supply of quality housing in every community. His plan includes legislative and administrative actions that will help close America’s housing supply shortfall in 5 years, starting with the creation and preservation of hundreds of thousands of affordable housing units in the next three years.”
The statement went on to mention that state and local reforms for ADUs, alongside better financing options, could potentially create more than 1 million ADUs across the nation in the next five years.
The President’s focus on tackling America’s current housing shortage catalyzed this statement, and the plan will be rolled out over the next five years. This will make it easier for property owners to receive financing for any ADU projects they are looking to start, which will then offer more housing options to those searching. ADU builds can also provide a more affordable option for lower-income individuals.
Specifically, the action plan mentions that the Administration will “deploy new financing mechanisms to build and preserve more housing where financing gaps currently exist,” including ADUs. The statement clarifies that the “FHA and FHFA are exploring avenues to help lenders pilot and scale renovation and construction financing for ADUs—particularly for low- and moderate-income homeowners – in addition to new financing options for other single-family renovations and for 2-4-unit rehabilitation. FHA and FHFA will evaluate the credit performance of these loans to identify opportunities to add features and flexibilities to existing loan programs, expanding affordable financing options for homeowners and builders.”
As of June 2022, Freddie Mac is now offering a program for 1-3 unit properties that have an ADU. A refinance is possible factoring in the rental income from the ADU; there is no seasoning period required, meaning you can initiate the refinance as soon as you have a rental contract signed.
The President’s budget for the coming year includes a $25 billion dollar grant to expand financial help for projects like ADU builds, multigenerational property development, and more local housing efforts. Though there is not any action homeowners can take at the present moment, it is advisable to stay up-to-date on upcoming changes as these programs continue to roll out.
And indirectly, this increased awareness of ADUs on a national scale will likely contribute to increasing appraisal values for ADUs as they become a more common feature in homes being sold.