Small Homes, Big Impact

Building homes that more of our neighbors can afford is essential to all who live and work in our communities

We believe Bay Area homeowners can help solve the housing crisis by building homes to rent in their own backyards.

Small Homes, Big Impact offers educational workshops to homeowners wishing to build an accessory dwelling unit (ADU) and can offer a financing option through an ADU construction loan program. Join our ADU Contact List to receive helpful information and program updates.

COVID-19 Safety Measure: No In-Person Meetings

How it Helps

Changes to California state law made it easier to build ADUs – also known as granny flats, in-law units or backyard cottages. Housing Trust’s forthcoming construction loan program bridges the gap between conventional financing options (such as a cash-out refinance, HELOC, borrowing from a retirement account, etc.) and the lack of secondary mortgage construction financing options.

The ADU construction loan program will serve homeowners in Santa Clara County and the City of East Palo Alto. It will consist of a construction loan made as a second mortgage for a 36-month term for up to $200,000 to help cover hard construction costs.

ADU Construction Loan Terms

  • Maximum Loan Amount: Up to $200,000 or 97% of the property’s combined loan to value, whichever is lower. Hard construction costs will be eligible
  • Collateral: Second Mortgage / Deed of Trust
  • Repayment: Borrower is expected to repay the remaining principal balance and any interest due at the end of the 36-month term with a balloon payment
  • Monthly Payments: Interest-only payments for first 12 months, interest and principal payments in months 13 through 36
  • Must work with a Qualified Builder per Housing Trust requirements
  • Tenant income restriction up to 120% of Area Median Income.
  • Borrower must lease the ADU at an affordable rate. Rent caps will be determined by the size of the ADU and will be updated annually.

ADU Monthly Rental Limits

1 person in
2 persons3 persons4 persons
Unit SizeStudio1 Bedroom2 Bedroom3 Bedroom
Rent Limit$1,986$2,270$2,553$2,834

California Department of Housing and Community Development, 80% of Area Median Income (updated as of April, 2021)

Income Limits for Renters of ADU

% of Area Median Income (AMI) Level1 person
in Household
2 persons3 persons4 persons

How to Apply

Applicants are required to attend at least one in-person workshop or two online webinars in order to qualify. You can find ADU events on Housing Trust’s Events Calendar.

    How to Apply

  1. Project and Financial Readiness: Can You Answer ‘Yes’ to the Following?

    Project Readiness

    Are you the owner-occupant of this home?

    Is your property located in Santa Clara County or East Palo Alto?

    Are you planning to have a detached ADU or garage conversion?

    Is your project shovel-ready with your permit issued?

    Do you have previous property management experience, or are you willing to take an online course for property management? (Online property management course available at

    Financial Readiness

    Do you hold title to the property?

    Do you have a first conventional loan on the property?

    Do you have a FICO score of 680 or higher?

    Is your property free of other leins, open HELOC’s, or encumbrances?

    Do you have sufficient income to make payments on both your first mortgage and this ADU loan?

    If the answer to each of these questions is “yes” please email to schedule an appointment with us.

  2. Phone Appointment and Completion of Eligibility Application

    Based on the information you provide on the ADU Construction Loan Interest Form, ADU staff will contact you to set up a phone appointment, at which time Housing Trust will walk you through the ADU Program Eligibility Application and the documentation you will be required to submit.

    After the phone appointment, we will review your complete ADU Program Eligibility Application to determine your project readiness and financial readiness.

  3. Complete ADU Construction Loan Application

    Program-eligible applicants will be provided with the ADU Construction Loan Application. ADU staff will review all submitted documentation and will notify you with a credit decision.

  4. Finalize Loan and Begin Construction

    ADU staff will review all documents with borrower over the phone prior to the signing appointment to answer any questions and review the construction, draw process, and program rental requirements.

    Construction must start within 90 days of loan closing and completed within 180 days. Within 60 days of construction completion, you must find an income-qualified tenant (see ‘loan terms’).

Additional Program Resources

ADU Program Eligibility Application

Infographic: Nine Steps to Completing your ADU with Housing Trust

ADU Construction Loan Program Guidelines and Sample Documents

SHBI ADU Presentation – Module 1 – 6.4.2020

SHBI ADU Presentation – Module 2 – 6.10.2020

Program Partners

  • J.P. Morgan Chase
  • Wells Fargo
  • AARP
  • Sares Regis Foundation
  • Silicon Valley Community Foundation