Home and Family

What Is ADU Loan Forgiveness

Developing an ADU can be expensive, especially if you want a big one with nice designs. However, many states are facing a growing homelessness problem due to the housing crisis, so they are taking action to make ADUs more affordable for everyday people to build. As a result, ADU loan forgiveness has come about.

Freddie Mac Changes

Changes in Freddie Mac guidelines have paved the way for ADU loan forgiveness. With new changes, you can now use future rental income as a qualifying factor for receiving a loan to build your ADU. As a result, you can take out more money to build the ADU of your dreams and more people can now afford to build an ADU.

There are a few stipulations to be aware of though. For starters, qualifying rental income must not exceed 30% of the total income used to qualify. Also, rental income that is documented with a lease cannot exceed 75% of the lease amount.

You should also be aware of ADU rent control factors in your area of living. These factors will affect how much you can rent your ADU out for since the goal is to keep housing affordable.

Loan Forgiveness Programs

Across the U.S., ADU aid programs have made it possible for individuals to build affordable ADUs. The most progressive one comes from L.A. county. Still a pilot program, this program provides a subsidy of up to $75,000 per ADU in the form of a forgivable loan to homeowners who agree to rent to a homeless family or someone with a housing choice voucher.

The average ADU costs anywhere from $90,000 to $202,000. Therefore, having a loan that can be forgiven for up to $75,000 means you won’t have to pay for a majority of your ADU as long as you follow the program rules.

Santa Cruz city and county also offer loan forgiveness programs as long as you agree to rent your unit out. We expect to see many more forgiveness programs pop up around the U.S. as states continue to battle homelessness.

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