A bipartisan bill designed to address the national housing shortage by expanding financing access for accessory dwelling units (ADUs) was introduced July 18 by Rep. Sam Liccardo, D-Calif., and Rep. Andrew Garbarino, R-N.Y.

Known as the Supporting Upgraded Property Projects and Lending for Yards (SUPPLY) Act, the bill would direct the Department of Housing and Urban Development (HUD) to establish a program that would insure second liens against a home for the purpose of financing ADUs, also known as backyard cottages or in-law suites.

“Most ADUs today are financed through savings or home equity lines of credit by relatively affluent homeowners, because modest-income and younger homeowners cannot get second loans on their homes where they lack the equity,” a press release from Rep. Liccardo’s office stated. “The SUPPLY Act will provide government-backed, flexible financing options to help homeowners of modest means overcome what is often the last hurdle to breaking ground on an ADU.” 

Introducing the legislation on the House floor, Liccardo noted that he made inroads in cutting red tape to obtain building permits for ADUs when he served as mayor of San Jose, Calif., before becoming a member of Congress. But one hurdle remained: obtaining financing.

Liccardo said the proposed legislation would remove that final roadblock for many homeowners who want to build rental properties by offering a pathway to receive funding from a government-backed loan.

“America faces a housing crisis. One part of the solution to that crisis, though, lies right in our backyards,” he said. “The bipartisan SUPPLY Act will empower homeowners to become home providers.”

Endorsers of the bill include the Mortgage Bankers Association, the National Association of Home Builders (NAHB) and the California and Nevada Credit Union Leagues.

NAHB Chairman Buddy Hughes said in a statement that the legislation “will address our nation’s housing supply shortage by making it easier to finance accessory dwelling units.”

“By allowing HUD to insure second mortgages for homeowners seeking to finance ADU construction, this bill will ensure that property owners have access to ADU financing, which will ease housing shortages and improve affordability,” Hughes stated.

Scott Simpson, who serves as president and CEO of the California Credit Union League, also praised the proposed legislation.

“As California’s housing crisis evolves, more residents are turning to ADUs as a practical solution to rising costs and limited housing options,” Simpson said in a statement. “The SUPPLY Act is a meaningful step in creating flexible lending opportunities for ADUs and expanding access to affordable housing.”

Noerena Limon, CEO of Casita Coalition, a California-based nonprofit that advocates for the broader availability of ADUs and other affordable housing options, said that allowing second-position financing that preserves a homeowner’s existing mortgage rate “makes it possible for more families to build the ADUs they need.”

“The bill will also mean that more lower-income and multi-generational households will qualify for loans to build ADUs, helping them stay housed, support loved ones or generate income,” Limon stated. “This is a smart, targeted solution that brings ADUs within reach for the people who need them most.”