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Can You Really Afford an ADU? The Subsidized Grant Program in California

Your family could be one of the over two million California households who has considered adding an ADU, or Accessory Dwelling Unit, to their property, but you’re struggling to find a way to afford it. Luckily, there’s help available in the form of the subsidized grant program that offers financial assistance to low-income families so they can build this addition onto their homes and increase the living space at no cost out of pocket. Let’s take a closer look at this program and how it works.

What is an ADU?
An ADU is an accessory dwelling unit, which is a secondary living space on your property. In order to build an ADU, you must first obtain a permit from your city. The state of California offers a subsidized grant program to help offset the costs of building an ADU. To be eligible for the grant, you must use an approved ADU contractor. The grant program offers up to $10,000 for a single-family home and $20,000 for a multi-family home.

Understanding the Law (AB 2178)
To be eligible for the ADU grant program, you must work with an ADU contractor who is registered with the state of California. Furthermore, your property must be located within a participating city and you must meet the income requirements.
The law also requires that the property’s primary residence be owner-occupied to qualify for the grant. An ADU contractor will help you determine if your home qualifies. To verify that your property is eligible for an ADU, try our completely FREE PROPERTY CHECK.

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Getting Started
So you’re thinking about building an accessory dwelling unit (ADU) on your property. But can you really afford it? In California, there is a subsidized grant program that can help offset the costs of construction. Here’s what you need to know to get started.
The first step is to contact your local city or county planning department to find out if ADUs are allowed in your zoning district. If they are, great! If not, you’ll need to get a variance or change the zoning of your property. Next, make sure your parcel size is large enough for an ADU and that you meet minimum lot size requirements. Then, check with your lender to see if you qualify for a mortgage loan. Once all of these pieces are in place, hire an architect and/or contractor who has experience designing and constructing single-family homes with ADUs attached to them.

How Much Can I Borrow?
You may be able to borrow up to $50,000 from the state of California for your Accessory Dwelling Unit (ADU). This money comes in the form of a grant, which you will not have to repay. However, the amount you can borrow depends on your income and the value of your property. If you make less than 80% of the area median income ($47,200), then your loan is capped at 40% of your annual gross income or 60% of the appraised value of your home. If you make more than 80% AMI ($94,800), then you can borrow 100% of the appraised value but only up to 75% of your annual gross income. For example, if you earn $110,000 per year as a single person, then you could get up to a $75,000 loan through this program.
If your home is worth more than the program’s maximum threshold (currently set at 1 million dollars) but your income is below the limit set by law, then you are eligible for assistance with interest rates set by law.

Am I Qualified?
To qualify for a subsidized grant, you must own your home and it must be your primary residence. The property must also be located within the state of California. In addition, you must have a household income that does not exceed 80% of the area’s median income. Lastly, the property must be zoned for an ADU. If you meet all these qualifications, you may be eligible for a subsidized grant to help with the costs of constructing an ADU on your property.

How Do I Apply for a Loan?
Applying for a loan is a process that can be confusing and frustrating, especially if you don’t know where to start. But don’t worry–we’re here to help. Just follow these simple steps and you’ll be on your way to getting the money you need to finance your project! -Find out which type of financing best suits your needs: If you want an equity line of credit, read about that option. If you want to use a traditional mortgage with monthly payments, learn more about those types of loans. -Figure out how much home equity you have: Equity is the amount of value your home has minus what’s owed on it; this number will determine what type of financing might work best for you. For example, if you only have $5,000 worth of equity but are looking for a mortgage with monthly payments, then a traditional mortgage would be your best bet. Conversely, if you have $100,000 worth of equity but want to take out an equity line of credit without interest rates or fees attached, then an equity line of credit would make sense.

What if I don’t qualify for a loan?
The ADU grant program in California offers a great opportunity for those who want to build an accessory dwelling unit (ADU) on their property but don’t have the financial means to do so. This program provides subsidies of up to $50,000 for the construction of an ADU, which can help make the dream of owning an ADU a reality for many people. To qualify for this subsidy, applicants must be residents of California and occupy the main house as their primary residence; they also need to be eligible for some form of government assistance like Section 8 or SSI. Residents of the unincorporated areas of Los Angeles County are not eligible for these grants. It is important to note that these grants are not loans, and recipients will not be required to repay them with interest. In addition, there are restrictions on how much money you can make each year in order to receive this kind of assistance: you cannot exceed an annual income of $24,090 if you live alone or $30,720 if you live with someone else. But even if your annual income exceeds these limits by a small amount, you may still be able to get funding for your project through other sources such as LIFT programs or homeownership workshops.

To apply for the California ADU Grant Program:

Contact one of the CalHFA ADU Grant Program Lenders listed here.


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