A growing focus on sustainability and affordability has led to tiny houses becoming increasingly popular in the United States.
For environmentally conscious Americans, they represent a concrete opportunity to reduce their ecological footprint.
Many others see them as a cost-effective alternative to traditional housing and a way to expand the housing supply, while some homeowners build them on their property to generate additional income and reduce debt.
If you’ve ever thought about building a tiny house in your backyard, you’ve probably experienced the same thing as many others: While it can save you money in the long run, it can be expensive to build.
These backyard houses, called additional residential unitsor ADUs, are small living units that can range in size from 150 to about 1,200 square feet, depending on where you live.
The average The cost of one unit can range from $100,000 to $300,000. Then there are the costs of permitting. In California, where most backyard homes are built, a building permit for ADUs costs between $450 and $15,000 — even before construction begins, according to Backyard Unlimited, a company that builds ADUs. There may also be other costs, such as site preparation, which includes everything from inspections to running utilities. Additionally, it can be difficult to get a loan to build an ADU.
All of this means that if you don’t have spare cash or a way to get financing, the cost of the project can be prohibitive. Studies have shown that this makes it even more difficult for middle- and low-income homeowners to actually build a home.
To combat this inequality, promote equity, and ultimately spur the construction of much-needed housing, some states—and in some cities, nonprofit organizations—have created grant programs.
Deadlines for these programs vary from state to state. Those interested in building an ADU should be prepared for next year’s application periods, as they are often at a high demand.
Here are the ADU programs available nationwide.
California: Up to $40,000 per fellow
Funds for this year have already been allocated and program details have been updated from previous iterations. The state will continue to provide Californians with $40,000 for pre-construction costs of ADUs, such as design, permitting and soil inspections. Several Changes in the law were made regarding ADU size, owner occupancy requirements, and more.
An ADU in San Jose, California. Courtesy of Abodu
Who can apply: Californians who fall into the low to middle income range.
Total available funding: In 2021, an offer of $100 million was made.
When is the application period open: The program is no longer accepting applications for 2024 and applications for 2025 have not yet been announced.
Requirements:
- Homeowners are no longer required to live in their primary residence or the ADU they constructed.
- For single-family lots, you can be approved for an ADU (townhome or detached house) up to 1,200 square feet and a junior ADU up to 500 square feet.
- On multifamily lots, you can build multiple ADUs attached to existing buildings and up to two detached ADUs on the lot.
- Homeowners can build an ADU with a minimum of 800 square feet of floor space and up to 16 feet in height, which must be set back 4 feet from the side and rear yards.
Agency or department responsible for distribution: California Housing Finance Agency
Source: California Housing Finance Agency
Julie Fornasero and her husband Tim Logan. Courtesy of Julie Fornasero
Thanks to a grant from California, Julie Fornasero and her husband Tim Logan were able to build an ADU in their backyard for $170,000.
In 2019, they downsized, moved into an ADU, and began renting out their primary residence to make extra money.
“This arrangement has allowed my husband and I to save $5,000 every month,” Fornasero previously told Business Insider. “I’ve also been able to retire to some extent, and my husband no longer works in an office.”
New York: Up to $395,000 per fellow
This program offers qualified New Yorkers up to $395,000 to build or remodel an ADU on their property.
A residential neighborhood in Monroe, New York, in the Hudson Valley. Kelsey Neubauer/Insider
Who can apply: Eligible homeowners are those earning up to 165% of the area median income – $186,450 for a two-person household. Preference is given to those earning 100% or less of the median income – $113,000 for a two-person household.
Total available funding: The 2022-2023 NYS capital budget allocates $85 million over the next five years, with an additional $4 million in grants issued in 2024.
When are applications possible: The application deadline for 2024 has passed and the application period for 2025 will be announced soon.
Requirements:
- The ADU can be located within the existing home, such as in a basement or attic apartment, a granny flat, or a completely independent and detached building.
Agency or department responsible for distribution: Housing and Community Renewal in New York State
Source: New York State Homes and Community Renewal and the City of New York
A welcome sign to Boxwill’s town. Courtesy of Helen Boxwill
Helen Boxwill, a retired educator in her late 70s who runs a nonprofit educational organization, refinanced her home in 2003 to build an accessory dwelling unit on her property in Huntington, New York, before the federal ADU grant was introduced.
She has had three tenants over the past 20 years, and the rental income has helped her fund her retirement and pay taxes and other bills.
“The cost of living has continued to rise since I retired 20 years ago, so my ADU has been a blessing,” Boxwill previously told BI. “I have something that helps me with the costs, and I also provide a home for people who need affordable housing – it’s a win-win.”
Vermont: Up to $50,000 per fellow
This program allows Vermonters to receive up to $50,000 to build an ADU on their property. Both landlords and homeowners with rental intentions are eligible.
A residential neighborhood in Burlington, Vermont. Kelsey Neubauer/Insider
Who can apply: Any homeowner in Vermont can apply to these five regional organizations: RuralEdge, Champlain Housing Trust, NeighborWorks of Western Vermont, Downstreet Housing and Community Development, and Windham and Windsor Housing Trust. Application review and project monitoring are handled by these organizations.
Total available funding: Starting in 2023, Vermont will have a budget of $15 million.
When are applications possible: Now open, ongoing.
Requirements:
- Those who receive a grant must meet certain requirements, such as complying with local ordinances, maintaining fair market rent through HUD, and contributing at least 20% of the grant funds.
- The project must be completed within 18 months of the signature of the grant agreement.
- Anyone renting out their ADU must sign a lease or loan agreement with waived repayments and agree to charge rent that is equal to or less than the market rent for the entire term of the agreement.
Agency or department responsible for distribution: Vermont Housing Improvement Program
Source: Ministry of Housing and Community Development
Marni Leiken and the apartment she built above her carriage barn in the backyard, seen on the far right of this photo. Courtesy of Marni Leiken
Marni Leiken used a $20,000 grant from the Vermont State Housing Authority and a $10,000 interest-free loan to build a home above the carriage barn in her backyard.
The single mother, who works in university administration, rents out the apartment to help pay off her mortgage.
“For Vermont, a very expensive state, it made staying here financially possible,” Leiken previously told BI.
Have you built an ADU on your property? We want to hear from you. Email reporter Alcynna Lloyd at [email protected] to share your story.
