The US Federal Housing Administration (FHA) has proposed changes to its guidelines that could remove a significant barrier to homeownership for those on low to moderate incomes. The draft regulations would allow renovation loans to fund the construction of an accessory dwelling unit (ADU) attached to a single-family home or multi-unit building like a duplex. Currently, FHA-backed loans do not permit rental income from ADUs to be included in affordability decisions. The agency supports proposals to change that, which would boost income calculations and enable people with few assets to borrow enough to build an ADU. The changes, however, may be subject to revision following public opinion. The FHA’s proposals are intended to increase the number of affordable housing options and promote wealth equity for a range of households, including multi-generational families who share resources to build housing compounds that might include two houses and two ADUs.
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