A bipartisan effort in Congress could make it easier for homeowners to build accessory dwelling units (ADUs) by offering federally backed loans. The proposal, if approved, would lower borrowing barriers and expand access to financing for secondary units such as backyard cottages or garage conversions.
Representatives Sam Liccardo (D-California) and Andrew Garbarino (R-New York) jointly introduced H.R. 4479 on July 18. The bill would authorize the federal government to guarantee second mortgages for homeowners building ADUs. If a borrower defaults, the government would share the risk, helping private lenders reduce losses and approve more loans.
Liccardo said the legislation was designed to address soaring housing costs. “Housing costs for consumers have become a serious issue,” he said. “This bill offers a realistic solution we can implement immediately.”
The bill currently has backing from at least 16 Democratic and Republican House members and several industry groups, including the National Association of Home Builders.
Why ADU financing is difficult
While ADUs can generate rental income or provide housing for family members, financing remains a major barrier. Because ADUs are a relatively new form of housing, standardized appraisals are rare. Homeowners with existing mortgages must also qualify for a second loan, making approvals difficult.
The proposal would have the Federal Housing Administration (FHA) insure ADU-related loans. It would also allow Fannie Mae and Freddie Mac to buy and securitize these loans, reducing risk for lenders and potentially increasing approvals.
According to Chris Yi, president of the California Korean Construction Association, ADU construction typically costs around $150,000. “Right now, most demand is from higher-income homeowners who can afford these costs,” Lee said. “If the government guarantees these mortgages, more homeowners could start building ADUs. That could significantly increase supply in areas with housing supply-demand imbalances, such as Los Angeles.”
Potential impact on housing supply
Experts say the bill could not only widen access to loans but also push local governments to relax rules, accelerating ADU growth. As of 2020, roughly 1.4 million single-family homes nationwide had an ADU. These units are increasingly used as rental properties or housing for adult children and elderly parents.
California has led the way in promoting ADUs by loosening regulations. In 2023 alone, the state saw about 23,000 new ADUs built—over seven times the number built in 2018.
In fire-damaged areas such as Eaton and Pacific Palisades, displaced residents are also turning to ADUs as quick and cost-effective housing. According to county and city records, more than 250 residents who lost homes in the recent fires have already applied for ADU permits.
BY HOONSIK WOO [woo.hoonsik@koreadaily.com]
