U.S. Rep. Sam Liccardo, who represents Palo Alto and much of the Mid-Peninsula, has introduced a bill with bipartisan support that would help homeowners finance the construction of accessory dwelling units on their property, a move intended to ease the housing shortage.
The bill, co-sponsored by Rep. Andrew Garbarino, R-N.Y., would create a government-backed loan program for homeowners who want to build ADUs.
ADUs, small backyard houses, can be rented to provide the homeowner with an additional source of income. It could be a solution for Palo Alto’s “house rich, cash poor” residents who can’t afford to build an ADU without a loan.
Liccardo, a former mayor of San Jose who was elected last fall to replace the retiring Anna Eshoo in Congress, said there’s a strong appetite amongst homeowners to build ADUs.
“As mayor of San Jose, we proved that cutting the red tape made reluctant homeowners jump at the chance, and we saw nearly 1,000 permit applications in a year. After they got the permits, too many homeowners faced another barrier: a lack of financing options,” said Liccardo in a statement. “With access to capital, we can empower homeowners to become home providers for thousands of renters in every metropolitan area.”
National media attention
The legislation drew the attention of the Wall Street Journal on Saturday, which pointed out that the nation is short nearly 4 million homes, and that a third of all households spend more than a third of their income on rent or mortgage payments. The issue, the Journal said, is becoming a political one for elected officials.
The ADU bill has been endorsed by at least 16 Democratic and Republican House members, along with the National Association of Home Builders and other industry groups.
It aims to ease the risk for private lenders to offer second mortgages for ADU construction by providing a government backstop in case the homeowner defaults, the Journal reports.
“Financing is by far the No. 1 blocker for more ADUs,” Sean Roberts, chief executive of California-based home builder Villa Homes, told the Journal. Over the years, many of his company’s potential projects haven’t even moved forward to the contract stage because his clients can’t get a loan that works for them.
The various uses of ADUs make it difficult for appraisers to assess them on a standard basis, which in turn makes it hard to get a loan. “That’s where I think the federal government can really add something,” Roberts said.
Sensible idea that has a chance of happening due to Liccardo’s decision to make it bipartisan. This will be useful from those of us who are “house rich, cash poor.”