If you are considering developing an ADU in California, then you need to know about the new CalHFA ADU grant. This grant, along with a number of city initiatives, has made it significantly easier to build a unit within the state.
What Is The ADU Grant?
The CalHFA grant gives low-income homeowners up to $40k for pre-construction costs. Since it is a grant, it does not have to be paid back, saving you quite a bit of money. However, there are tax implications associated with receiving the grant, so you will need to plan for those.
Income Limitations
The grant is designed to help low-to-moderate-income individuals develop ADUs. The borrower, not the household, must fall below the income requirements for the county they reside in to qualify for the grant. In some parts, the borrower can make up to $200k whereas in other areas they can only make up to $159k.
What Are Pre-Construction Costs?
The grant can only be used for costs associated with pre-construction. These costs usually average between $9,000 and $25,000 depending on the complexity of the design and the difficulty of planning. They can be much more if you have a complex design.
Pre-construction costs include everything that occurs before construction begins including:
- Engineering plans and calculations
- Energy reports
- Impact fees
- Permits
- Property survey
Everything that goes into designing and planning a unit is included in pre-construction costs which make up a good chunk of your overall ADU costs.
Loan Requirements
Another stipulation to the grant is that you must receive a loan from their list of pre-approved lenders. The downfall to this is that most lenders offer loan types that force you to refinance your mortgage. If you don’t want to do that, one lender lets you take a second position, but has a $200,000 borrow minimum.
Recently, special financing grant program participants have been added to the list of approved lenders. One of these participants allows you to get the grant without taking out a loan. They do this by putting funds you already have into a managed escrow account.