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A new bipartisan bill introduced on July 21, 2025, could make it significantly easier for San Diegans, and homeowners across the country, to finance Accessory Dwelling Units (ADUs).
Known as the SUPPLY Act (Supporting Upgraded Property Projects and Lending for Yards), H.R. 4568 was introduced by Rep. Sam Liccardo (DCA) and Rep. Andrew Garbarino (RNY). The bill aims to address the housing shortage by helping more homeowners afford to build small backyard units on property they already own.
While many states have reformed zoning laws to allow ADUs, also known as granny flats, in-law suites, or backyard cottages, the SUPPLY Act tackles what is arguably the final barrier: financing.
If passed, H.R. 4568 would authorize the U.S. Department of Housing and Urban Development (HUD) to insure second-position home loans specifically for ADU construction.
A second-position loan is a mortgage that’s subordinate to the homeowner’s original loan, also known as a first mortgage. In a default, the first mortgage gets repaid first. Because second-position loans carry more risk, lenders typically charge higher interest rates or offer less favorable terms, if they offer them at all.
The SUPPLY Act seeks to change that dynamic. By backing second-position ADU loans with federal mortgage insurance, the bill reduces lender risk and makes this financing more accessible and affordable, especially for homeowners who don’t want to refinance their primary mortgage or tap into retirement funds.
This type of federal insurance is common for first mortgages, such as Federal Housing Administration (FHA) loans that help buyers qualify for home purchases but is rarely applied to second-lien loans. According to HousingWire, a housing industry publication that first reported on the SUPPLY Act’s financial structure, this could represent a breakthrough in small-scale housing finance.
San Diego has been a national leader in ADU policy, with initiatives like the ADU Bonus Program, which allows additional units when some are reserved as affordable. The city has also streamlined permits and provided pre-approved plans. These policies are working. In 2024, ADUs accounted for nearly 20% of all new housing permits, according to the City of San Diego Development Services Department.
But financing remains a challenge. Trusted Mortgage Capital, a firm specializing in ADU lending, reports that construction costs typically range between $150,000 and $300,000. Many homeowners either lack the home equity required to secure financing or are hesitant to refinance if they already hold a low-interest mortgage.
Unlike most home improvement or refinancing loans, the SUPPLY Act is tailored specifically to ADU construction. The bill doesn’t mandate that anyone build an ADU, but it does make doing so more feasible, particularly for middle-income homeowners, young families, or retirees who may want to house relatives or generate rental income.
Support for the bill comes from a broad coalition. In public statements, both the Mortgage Bankers Association and the California Credit Union League said expanded ADU financing could improve affordability while maintaining property values, an especially important message in competitive real estate markets like San Diego.
San Diego has already reformed zoning, permitted thousands of ADUs, and embraced design innovation. But those policy wins don’t translate into new homes if homeowners can’t access capital. Many San Diegans already have the zoning approval, site access, and plans. What they lack is financing. That’s why the SUPPLY Act could be a game-changer. It aligns federal finance policy with local land use reform, creating a more complete system for advancing small-scale housing.
While states such as California and Oregon have been early leaders on ADU policy, the SUPPLY Act could accelerate the movement in states like Texas and Florida, which have only recently passed ADU-enabling laws. In places where zoning now allows ADUs but development remains slow, this bill could unlock financing for projects that would otherwise be out of reach for everyday homeowners.
The bill has been referred to the House Financial Services Committee, where it will undergo hearings before heading to a House vote. From there, it would need Senate approval and a presidential signature to become law. Its introduction is part of a broader shift: housing is increasingly a bipartisan issue. Lawmakers from both parties are recognizing that ADUs and other forms of “middle housing” (like duplexes and triplexes) offer scalable, community-friendly solutions without radically altering neighborhood character.
If the SUPPLY Act becomes law, San Diegans who want to build but haven’t had the financing to do so may finally have a path forward. Architects, designers, and builders could see a spike in interest from new clients ready to act. And for housing advocates, the bill signals a turning point: ADUs are no longer experimental. They’re moving into the financial mainstream, alongside traditional mortgage products.
Quick Tip: ADU laws and financing tools differ by location and change frequently. If you’re considering building an ADU, consult your local building department or speak with a qualified ADU lender to ensure you have the most current information.
Xavier Rodriguez is the CEO of ADU Geeks, San Diego’s leading ADU consulting and project management firm. In 2024, the company was ranked No. 1 on the San Diego Business Journal’s Fastest Growing Private Companies list in the Small Business category, achieving 594.3% revenue growth.
Looking for more ADU news? Continue exploring in-depth articles on California accessory dwelling unit laws, policy updates, and development trends.
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