Bipartisan legislation aims to expand ADU financing

A bipartisan bill introduced last week in the U.S. House of Representatives seeks to address the nation’s housing shortage by expanding financing options for accessory dwelling units (ADUs).

Reps. Sam Liccardo (D-Calif.) and Andrew Garbarino (R-N.Y.) unveiled H.R. 4568 — the Supporting Upgraded Property Projects and Lending for Yards (SUPPLY) Act.

The proposed legislation would allow homeowners to access federally backed, second-lien mortgages to help fund the construction of ADUs — commonly referred to as backyard cottages, in-law suites or granny flats.

Currently, most ADUs are financed through savings or home equity loans, a hurdle for many younger or lower-income homeowners who may not have sufficient equity to secure a second loan.

The SUPPLY Act aims to close that gap by providing more flexible loan options insured by the U.S. Department of Housing and Urban Development (HUD).

“As mayor of San Jose, we proved that cutting the red tape made reluctant homeowners jump at the chance, and we saw nearly 1,000 permit applications in a year,” Liccardo said. “After they got the permits, too many homeowners faced another barrier: a lack of financing options. With access to capital, we can empower homeowners to become home providers for thousands of renters in every metropolitan area.”

Garbarino emphasized the potential for ADUs to generate economic value for families.

“On Long Island, families work hard to create economic opportunities for themselves and their communities. Sometimes that opportunity is right in their own backyard, and they just need the tools to seize it,” he said. “The SUPPLY Act would help New Yorkers access financing and provide the flexibility to turn in-law suites, converted garages, and other Accessory Dwelling Units on their property into spaces that build long-term value.

“This bipartisan bill gives families the chance to invest, grow equity, and strengthen our local economy. I am proud to partner with Congressman Liccardo on this commonsense effort to empower homeowners across the country.”

Several housing and lending organizations have voiced support for the bill.

“For nearly a decade, Casita Coalition has worked to break down the barriers preventing homeowners from financing ADUs,” said Noerena Limon, CEO of Casita Coalition. “We’re thrilled that Representative Liccardo has introduced a bill that tackles one of the biggest remaining hurdles — access to practical, affordable ADU loans. By allowing second-position financing that preserves a homeowner’s low-interest first mortgage, this bill makes it possible for more families to build the ADUs they need.

“The bill will also mean that more lower-income and multi-generational households will qualify for loans to build ADUs, helping them stay housed, support loved ones, or generate income. This is a smart, targeted solution that brings ADUs within reach for the people who need them most.”

Buddy Hughes, chairman of the National Association of Home Builders, said the legislation could help ease supply shortages and improve housing affordability.

“The National Association of Home Builders applauds Reps. Sam Liccardo and Andrew Garbarino for introducing the SUPPLY Act, legislation that will address our nation’s housing supply shortage by making it easier to finance accessory dwelling units,” he said.

“By allowing HUD to insure second mortgages for homeowners seeking to finance ADU construction, this bill will ensure that property owners have access to ADU financing, which will ease housing shortages and improve affordability.”

Scott Simpson, president and CEO of the California Credit Union League, noted that credit unions are increasingly helping members finance ADUs amid the state’s ongoing housing crunch.

“Credit unions have helped families achieve the American dream of homeownership for generations,” Simpson said. “As California’s housing crisis evolves, more residents are turning to accessory dwelling units as a practical solution to rising costs and limited housing options. The SUPPLY Act is a meaningful step in creating flexible lending opportunities for ADUs and expanding access to affordable housing.”

In addition, the SUPPLY Act has garnered support from the Mortgage Bankers Association and the Nevada Credit Union League.