How Three Californians Built Their Dream ADU with the CalHFA $40,000 ADU Grant

An ADU, granny flat, or an accessory dwelling unit (ADU), is a small, independent structure that can serve as a secondary residence, a rental unit, or a guest house. ADUs can offer many benefits, such as creating more affordable and sustainable housing options, enhancing property value, and providing extra income.

The California Housing Federal Administration ADU Grant Program

But building an ADU can also be a daunting and expensive task, involving design, permitting, construction, and financing. That’s why the state of California decided to help homeowners with some of the costs by offering a $40,000 grant program in 2022. The program was aimed at creating 2,500 new ADUs across the state, adding to the existing stock of about 200,000 ADUs.

The program was a huge success, but also a huge challenge. The program ran out of funds quickly, but it is expected to be revived soon with new details. The program also had some restrictions and fees that reduced the amount of money that homeowners actually received.

Business Insider spoke to three families who received the grants and built their ADUs in the past year. They shared their stories, challenges, and benefits of having a tiny home in their backyard. They all said they were happy with their ADUs and the grants, but they also warned about the difficulties and the costs involved.

Here are their experiences, edited for length and clarity.

Daniel and Kristin Romo: A Garage Turned into an Apartment

Location: Whittier, near Orange County | Cost: $240,0007 | Use: Rented to their daughter, son-in-law, and two grandchildren

Daniel and Kristin Romo bought their house 20 years ago for $244,000 and refinanced it to start a business. Now, their house is worth $850,000, but they still have a large mortgage and high living expenses.

They wanted to retire sooner rather than later, but they also wanted to help their children stay in California, where housing prices are skyrocketing. Their oldest daughter and her husband moved to New Hampshire last year, while their second daughter and her husband had their first child and wanted to stay close to their parents.

That’s when the Romos decided to convert their garage into a 600-square-foot ADU that would serve as a home for their daughter’s family. They applied for the state grant and took out a home equity line of credit (HELOC) to finance the project.

The grant application process was not easy, as they had to go through a state-approved vendor, submit various documents, and put the remaining amount in an escrow account. They also had to pay administrative fees and taxes on the grant, which reduced the amount they received to $33,00012.

However, they were grateful for the opportunity and the assistance they received from HPP Cares, a nonprofit agency that helped them with the grant. They also hired a contractor who specialized in ADUs and who handled the design, permitting, and construction.

The result was a modern and spacious ADU that has a living room, a kitchen, a bathroom, and a bedroom. The ADU also has a separate entrance, a patio, and a parking space. The Romos rent it out to their daughter and son-in-law for $1,000 a month, which is below the market rate and the income limit set by the grant.

The Romos are happy with their ADU and the benefits it brings to their family. They have more income, more equity, and more quality time with their grandchildren. They also feel good about contributing to the housing solution in their community.

They recommend applying for the grant to other homeowners who want to build an ADU, but they also advise them to be prepared for the challenges and the costs involved.

Jakota Rivas: A Sunroom Replaced by a Cozy Cottage

Location: Napa | Cost: $124,000 | Use: Rented to her two eldest children, who are 18 and 19 years old

Jakota Rivas and her family moved from Southern California to Northern California in March 2020, right when the pandemic shutdowns started. They had to live in a hotel for a while, then rent a house, and then look for a house to buy16. They finally bought a house in December 2020, after making nine offers and viewing over 40 houses17.

The house they bought had three bedrooms and a sunroom, which they converted into a room for their two sons18. However, they soon realized that the sunroom was not insulated and was too cold in the winter. They also wanted to give their children more independence and privacy.

That’s when Jakota decided to build an ADU in their backyard, where the sunroom used to be. She convinced her husband, who was initially reluctant, and they refinanced their house in April 2021. They tore down the sunroom in May and submitted their permits in October19. They also applied for and received the state grant in October.

The grant helped them cover some of the pre-development costs, but they also got another surprise: a forgivable loan of $67,500 from Napa County, which was offering another incentive for ADU construction. The loan would be forgiven if they rented the ADU to low-income tenants for 10 years.

With the extra money, they were able to upgrade their ADU and their backyard. They built a 400-square-foot ADU that has a kitchen, a bathroom, a living room, and a loft. They also fixed the grass, added a fence, and installed a fire pit.

The ADU was completed in July 2021, and their two eldest children moved in. They pay $500 each for rent, which is much lower than the average rent in Napa. They also have their own space and their own entrance, while being close to their parents and siblings.

Jakota loves her ADU and the way it turned out. She thinks it was a great investment and a great opportunity for her family. She also thinks it was a great way to support the housing needs in her area.

She recommends applying for the grant and the loan to other homeowners who want to build an ADU, but she also warns them about the potential difficulties and delays in the process.

Rosario: A Detached Garage Transformed into a Handicap-Accessible Home

Location: Los Angeles | Cost: $300,000 | Use: Lived in by Rosario, while his sister lives in the main house on the property

Rosario is 66 years old and handicapped. He needs a wheelchair and a walker most of the time. He lives with his sister on a property that has a detached garage. He wanted to build an ADU on the garage that would be handicap-accessible and comfortable for him.

He used his savings to pay for most of the project, and he also applied for the state grant to reimburse himself for some of the pre-development costs. He did not take out any loans.

He hired a contractor who had experience with ADUs and who followed his design preferences. He wanted a 611-square-foot ADU that would have a kitchen, a bathroom, a bedroom, and a living room. He also wanted a ramp, wider doors, and a walk-in shower.

The ADU was finished in August 2021, and Rosario moved in. He loves his new home, especially his kitchen, which he designed himself. He enjoys having his own space and his own entrance, while being close to his sister, who lives in the main house.

Rosario is happy with his ADU and the grant he received, but he also had some issues with the grant program. He was disappointed that he only got $21,355 out of the $40,000 grant, after paying administrative fees and taxes. He also had to deal with some unexpected costs, such as hiring an engineer for an extra $20,000 to fix a wall that was not up to code.

He recommends applying for the grant to other homeowners who want to build an ADU, but he also advises them to be aware of the limitations and the expenses involved.

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The state of California has offered a grant program to help homeowners with some of the pre-development costs of building an ADU. The program has provided $40,000 to thousands of homeowners who met the income requirements and agreed to rent out their ADUs to low- or moderate-income tenants for at least five years.

The program has been successful in creating more affordable and sustainable housing options in the state, but it has also faced some problems and criticisms. The program ran out of funds quickly, but it is expected to be revived soon with new details. The program also had some restrictions and fees that reduced the amount of money that homeowners actually received.

They recommended applying for the grants to other homeowners who want to build an ADU, but they also advised them to be prepared for the process and the expenses.

Exploring the CalHFA $40,000 ADU Grant

The CalHFA $40,000 ADU grant has been a linchpin in the journeys of these Californian families, making ADU construction a reality. For those eager to delve deeper into this grant and its possibilities, here are some essential resources:

1. CalHFA Website: Visit CalHFA’s official website for comprehensive information on eligibility, application processes, and more.
2. CalHFA ADU Grant Income Limits
3. Local Government Offices: Local government departments often provide ADU-related support and guidance. Reach out to your city or county offices for insights.
4. Financial Institutions: Some financial institutions collaborate with CalHFA to facilitate grant distribution. Check with your bank or lender for grant-related details.
5. Contact CalHFA: For direct inquiries and assistance, find CalHFA’s contact information here.
6. Contact Yifu Design Studio: Yifu Design Studio can prepare your architectural plans needed to apply for the CalHFA ADU Grant. We can guide you how to get started and connect you to our trusted lending and financing partners.

These resources serve as valuable starting points for unlocking the potential of the CalHFA $40,000 ADU grant, offering the guidance needed to navigate the application process effectively. The future of California’s ADU initiatives promises transformative changes for homeowners and their communities, with the grant playing a pivotal role.