Recently introduced SUPPLY Act would take concrete steps to address the worsening housing crisis in the U.S. It would make it easier for homeowners to get financed for Accessory Dwelling Units (ADUs). Representatives Sam Liccardo and Andrew Garbarino championed this bipartisan effort. The bill’s stated purpose is to address the national housing deficit of approximately 4 million homes, as reported by Realtor.com.
Granny flats, backyard cottages, garage apartments, in-law suites and guesthouses—ADUs, as they’re sometimes called—have certainly become an issue du jour. They provide a particularly good opportunity for increasing the housing supply. The bill would let homeowners refinance their homes through newly-created government-backed second mortgages. This funding is exclusively for them to build ADUs on other people’s properties. This action would significantly accelerate housing access in heavily populated states such as California and New York. These places are in the midst of a serious housing crisis.
Jenna Stauffer, a broker at Sotheby’s International Realty, highlights that local zoning regulations often present substantial barriers to the development of more ADUs. There’s a lot of unnecessary red tape and a lot of upfront costs that make it not feasible to build. That keeps inventory low and prices high. We can’t solve this problem without addressing it at the local level. Regional cooperation among local, state, and federal leaders must be stronger,” she said.
Splitting that difference is new California data that highlights the state’s success in building ADUs. Just this year alone, the state achieved an annualized production of over 23,000 units—over seven times the units built in 2018! Recent reforms in California have led to this rapid growth. The amendments are intended to make it easier to construct and permit ADUs by removing owner-occupancy requirements and limiting permit fees. In many residential areas of California, ADUs are now permitted by right, allowing homeowners greater freedom in expanding their living spaces.
Challenges remain. According to the Urban Institute, lenders often are reluctant to issue second mortgages for ADU construction. They fear the reputational risks and the difficulty of resale, particularly without government guarantees. As a result, customized second mortgages for ADUs are almost entirely unavailable. SUPPLY Act’s proposal Homeowners would be able to qualified for larger loans. It achieves this by counting up to 50% of the expected rental income from the ADU, making financing more attainable.
The continuing housing crisis has driven up home prices across the country, and lack of affordability has become one of the largest crises facing Americans today. The SUPPLY Act would reduce housing stress by making it easier for homeowners to build ADUs through expanded access to government-backed financing. This program allows the state to engage homeowners in doing their part to solve California’s housing crisis.