ADUs could remedy America's housing crisis, but obstacles remain

"Several housing organizations, like the National Association of Home Builders and Mortgage Bankers Association, have expressed support for the legislation, arguing that it will open doors for homeowners and would-be homeowners to build generational wealth and equity. The move would also address the nation's housing supply crisis. Still, industry leaders caution that federal backing alone won't solve all the obstacles. Challenges around valuation, underwriting and builder capacity remain barriers to scaling ADUs into a widespread affordability solution."

"According to Dallas, how to appraise and build an ADU are two nuances that could vary, adding to the overall risk of the product. If you let everybody on the planet build an ADU, they will all build it differently, right? That's an appraisal problem. In addition, Fannie and Freddie are in limbo, so they're not going to do anything that exacerbates the current challenges they haveyou have no established market for a mortgage secured by an ADU. Agency validation is in limbo, he said."

"Dallas says that ADUs are essentially a curveball to the GSEs. If you think about the crux of the challenge, Fannie Mae and Freddie Mac are built upon owner-occupied single-family dwellings to one borrower and one use. So when you add an owner-occupied property and you sort of now make it an income-producing property, you thwart the entire practice of how the agencies operate."

If enacted, the bill would allow homeowners to use federally backed second-lien mortgages to fund ADU construction, replacing reliance on home equity loans or savings. National builders and mortgage trade groups support the change, citing opportunities to build generational wealth and increase housing supply. Federal backing alone would not resolve valuation, underwriting and builder-capacity challenges that hinder ADU scaling. Appraisal and construction variability increase product risk. No established market yet exists for mortgages secured by ADUs, and government-sponsored enterprises remain unable to fully integrate income-producing ADU properties into owner-occupied single-family mortgage frameworks. Industry leaders view the bill as a step toward clearer ADU policy and reduced underwriting risk.

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