Additional Opportunities to Make ADUs Affordable
Additional Opportunities
You can submit information about one or more of these opportunities as part of your Supportive Jurisdiction Certification Report, utilizing the Other Strategies section of that form. The eligibility of any “Other Strategy” submitted will be determined by the Department as part of its review of your submission. Other Strategies are generally expected to be as impactful and durable as the nine strategies listed in the statute. See the Certification Report form for details on required items for submission.
Funding an ADU project is an often cited hurdle faced by homeowners, and local governments across the country are seeking out creative solutions to support projects.
Potential Strategies
Opportunities for changes include but are not limited to:
Note: many strategies listed in other places affect overall ADU cost, including:
- Encouraging Factory-Built ADUs
- Providing Pre-Approved ADU Plans
- Waiving Requirements for Primary Home Updates
- Waiving Offsite Improvements
- Waiving or Reducing ADU-Related Fees for All Applicants
Partnering with Lenders to Provide Loans and Financing Opportunities
Examples: Denver (West Denver Renaissance Collaborative; see case study), Eagle County (Aid for ADUs loan program)
Complementary opportunities: Waiving or Reducing ADU-related fees for Low- and Moderate-Income Households, Waiving or Reducing ADU-Related Fees for All Applicants, Supporting Homeowners to Bring Pre-existing ADUs into Compliance (funding opportunities for legalizing an existing unit), Providing an ADU Cost Estimator Tool, Encouraging Factory-Built ADUs, Incentivizing Affordable ADU Rentals, ADU Technical Assistance for Homeowners, Providing a Vendor Registry or other Connections to Local ADU Professionals, Supporting the Development of an ADU Nonprofit, Incentivizing Climate-Resilient ADUs
Reducing the Tax Burden of ADUs
Adding an ADU will likely lead to an increase in property taxes, so it's important to understand how this is handled in your area. Being prepared with a general explanation can help homeowners better grasp the potential impact. In many cases, the financial benefits—such as increased resale value and rental income—outweigh the added tax cost and serve as a strong incentive to build. Generally, the main home is not reassessed; instead, property taxes typically rise only based on the added value of the new ADU. For example, if a homeowner builds an ADU that adds $150,000 to their property value, and the tax rate is 1%, their taxes will increase by 1% x $150,000, or $1,500 per year.
Offering a tax abatement or credit for building an ADU can further assist with reducing the tax burden to homeowners, such as no increase in property taxes for five years.
Complementary opportunities: Waiving or Reducing ADU-related fees for Low- and Moderate-Income Households, ADU Technical Assistance for Homeowners, Supporting Homeowners to Bring Pre-existing ADUs into Compliance