Liccardo bill would create pathway to financing ADUs

Rep. Sam Liccardo introduced a bill last week that would create a new federal financing pathway for accessory dwelling units, or ADUs, to address the nation’s housing shortage.

The bill, H.R. 4479, also known as the SUPPLY Act, has 16 co-sponsors and was introduced on the House floor on July 18.

ADUs — sometimes referred to as backyard homes or granny units — are smaller units located on the same lot as a primary residence. They can include converted garages, basement apartments with private entrances, or newly built detached structures.

According to the Bipartisan Policy Center, nearly one in five new homes built in California in 2022 was an ADU. That year, the state issued almost 84,000 ADU permits.

“This bill will help homeowners who are struggling to get financing to get units like those built,” Liccardo said during a press conference and ADU tour in Redwood City.

As it stands, according to the bill, most banks don’t offer loans for ADUs. However, if passed, federal housing agencies could back these loans under the National Housing Act, making them less risky.

Rep. Andrew Garbarino Garbarino, R-New York, a co-sponsor of the bill, emphasized the bipartisan appeal of the legislation.

“On Long Island, families work hard to create economic opportunities for themselves and their communities,” he said in a press release. “This bipartisan bill gives families the chance to invest, grow equity and strengthen our local economy.”

Liccardo, whose district includes Palo Alto, Menlo Park, Mountain View and a portion of Redwood City, said the bill is designed to help individual homeowners while addressing the broader issue of housing affordability.

“Millions of homeowners want to have backyard homes — maybe to rent out and provide a naturally affordable supply of housing,” he said. “The big obstacle they all face is financing.”

The Casita Coalition, a California-based nonprofit that advocates for ADUs, praised the proposal.

“We’re thrilled that Representative Liccardo has introduced a bill that tackles one of the biggest remaining hurdles — access to practical, affordable ADU loans,” said CEO Noerena Limón. “This is a smart, targeted solution that brings ADUs within reach for the people who need them most.”

In Palo Alto, ADUs have become increasingly popular in recent years, thanks in large part to state laws that have relaxed development standards and streamlined the approval process for the backyard units. While the city has historically approved only a handful of ADU permits annually, that number has swelled to more than 120 in each of the last three years, according to city data.

In May, the council revised the zoning code to make it more consistent with the state regulations. Some council members also supported allowing property owners to sell ADUs as condominiums. Resident John Kelley, who often advocates for more housing, made a case at that meeting for further relaxing restrictions on backyard units.

“They’ve proven their worth to the community,” Kelley told the council.

This story originally appeared in Palo Alto Weekly. Joshua Picazor is a freelancer for Embarcadero Media. Editor Gennady Sheyner contributed to this report.