The main image is courtesy of Maxable, which showcases a detached garage that was converted into an ADU studio apartment with loft.

A recent webinar by Maxable reviewed the updated details of the new CalHFA program that reimburses homeowners up to $40,000 of their ADU (Accessory Dwelling Unit) pre-construction costs. These free grants are only being offered in California and have very specific rules and stipulations.

One strict requirement is that these funds can only be used to reimburse soft costs of your newly built or in-progress ADU. Examples of soft costs for an ADU project that would be covered include designs, permits and engineering reports.

Though $40K of free money to improve your home sounds enticing, we strongly recommend thoroughly reviewing the details and requirements of this program before applying. If you think your household income may be too high to quality, keep reading as the income limits are generously high.

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About CalHFA

The California Housing Finance AgencyCalHFA, is the state’s affordable housing lender. As a completely self-supporting state agency, it offers programs that are supported by bonds, which are repaid by revenues generated by their mortgage loan products – not taxpayer dollars!

Since 1975, CalHFA has provided financing assistance to renters and homebuyers by supporting the needs of low to moderate income Californians in their quest for homeownership. Through partnerships with various financial institutions and developers, CalHFA finances affordable rental housing and down payment assistance for first-time homebuyers.


CalHFA’s $40K ADU Grant Offering

The $40,000 ADU grant offering is funded by a $100 million dollar program that aims to spur development of ADUs to help alleviate the state’s housing crisis. Initially the program offered $25,000 per borrower, but when only one homeowner took the agency up on its offer, the amount per borrower was increased to the current $40,000 grant amount.

The program had also suffered from glitches in the application process which have since reportedly been addressed.

Doing the math of the total fund amount ($100M) and per-grant amount of $40,000, this equates to a total of only 2,500 homeowners that will receive a grant. That said, Maxable strongly recommended to attendees of its webinar that, if interested, they should act fast, as the clock is ticking to secure one of these available awards.


Who Can Qualify for a $40,000 ADU Grant?

Contrary to perceptions of CalHFA’s usual customer base, borrower income limits are extremely generous for those who may qualify for ADU grants. Here are maximum income figures for the three primary metro areas that Maxable serves:

  • SF Bay Area: $300,000
  • Los Angeles: $180,000
  • San Diego: $211,000

Here are two other examples of generous income ceilings that Maxable also shared:

  • Yuma County: $159,000
  • Marin County: $300,000

Keep in mind that these maximum income figures are for specific borrowers only, and are not household income caps. Only the borrower whose name is on the grant application must be below the income threshold.


CalHFA ADU Grant Stipulations

The $40,000 grant may only be used on soft dollar costs, such as:

  • Permits
  • Construction Plans
  • Municipality Fees
  • Soil or Engineering Geology Reports
  • Architectural Designs

Funds may also be used for non-recurring costs, such as buying down interest on the loan for the ADU. The funds cannot be used for construction labor or materials (AKA hard costs), such as lumber, cement, roofing, siding, finishes, and drywall.

The costs that are eligible to be reimbursed by this grant are specifically defined by CalHFA, as the following:

  • The ADU Grant provides up to $40,000 to reimburse pre-development and non-recurring closing costs associated with the construction of the ADU.
  • Pre-development costs include: site prep; architectural designs; permits; soil tests; impact fees; property surveys; and energy reports.

It is important to note that grant dollars are not paid out until AFTER a Certificate of Occupancy is granted by the required municipality. In other words, if you are expecting the funds upfront to defray any early ADU building costs, then this program is not for you.

The CAlHFA grants are only for owner-occupied dwellings and are not for investor-owned properties. You will be required to sign a sworn affidavit certifying that you currently occupy the main home on the land where the ADU is being built.

You also must take out an approved loan, by a CalHFA approved lender, or refinance your primary mortgage in order to qualify for a grant. Thus, these grants are not eligible for ADU constructions that are being financed by cash.

If you choose a lender who will take a second position on your primary mortgage, the following terms apply:

  • You must take out a minimum loan of $200,000
  • You must have between 25% to 35% equity in your home
  • Your loan interest rate will be between 7.5% and 9%
  • General Contractor bids must be formatted in a specific manner as deemed by the program

If you are interested in learning which lenders offer secondary mortgages that meet the requirements of this program, we recommend reaching out to Maxable. They can also help connect you to contractors that are familiar with this program and the requisite proposal requirements.


About Maxable & Upcoming ADU Tours

Maxable is a San Diego-based ADU concierge service that provides expert guidance to homeowners navigating the build of their ADU. They currently serve the following California metro areas: San Diego, Los Angeles, and the Bay Area. As experts in the field of ADU construction, Maxable understands the changing landscape of processes, rules, limitations and laws from concept-to-occupancy, and can guide prospective homeowners during all facets of their ADU construction effortlessly.

Maxable also hosts ADU tours for prospective ADU owners to see the latest in ADU construction throughout California. You can meet Caitlin Bigelow, the CEO of Maxable, in person at the Airlane ADU property during the upcoming Los Angeles tour.

Maxable California ADU Tours San Diego, Los Angeles, SF Bay Area

Here are the dates and links to register for Maxable’s next upcoming ADU tours:


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