California’s ADU Grant Program Funding in Flux

California’s popular state grant program for accessory dwelling units (ADUs) is facing uncertainty. Initially, the program offered up to $40,000 to qualified homeowners for pre-construction costs. However, the Assembly Budget Committee recently advanced a bill that could retract the previously approved $50 million for ADU financing. Chairman Phil Ting (D-San Francisco) stated that an amendment would reinstate half of the funding to restart the grants program. The disagreement centers around how to best utilize the funds for ADUs, with lawmakers and the California Housing Finance Agency (CalHFA) at odds. Ting mentioned that one of the hurdles for ADU construction has been the reluctance of California lenders to develop attractive ADU loans.

What’s the Impact of Uncertain Funding for ADU Grants on Investors?

For investors, the fluctuating state of ADU grant funding in California creates a volatile environment. The uncertainty could deter homeowners from building ADUs, thereby reducing potential rental properties for investors. However, if the grant program is reinstated, it could spur a surge in ADU construction, offering more rental opportunities.

According to Chairman Phil Ting, one of the hurdles for ADU construction has been the reluctance of California lenders, particularly major banks, to develop attractive ADU loans. He stated, “there was still a significant amount of hesitancy” at CalHFA to start a loan loss reserve program. This hesitancy among lenders could be a limiting factor for investors looking to finance ADU projects. Yet, “[m]any of these homeowners would not have been able to move forward with their ADU to build financial security for their families, if not for the support of the State Legislators and your support,” stated a joint letter from the California Community Economic Development Assn. and Homeplex.

The agency says a decision will come this fall.