States Offer Grants for Backyard Tiny Homes

Building accessory dwelling units (ADUs), or tiny backyard homes, can be prohibitively expensive for many homeowners, with costs ranging from $100,000 to $300,000 and permitting fees adding thousands more. To address this, several states have established grant programs to subsidize these costs and promote affordable housing. California previously offered up to $40,000 but currently has no remaining funds for its program. New York provides up to $125,000 through the Plus One ADU Program, which is currently accepting applications for its fourth funding round. Vermont offers up to $50,000 to homeowners through regional organizations, with applications currently open on a rolling basis. Additional programs are rolling out in Colorado and specific counties in Hawaii, aiming to make backyard housing more accessible to low- and moderate-income residents.

Building tiny backyard homes can be expensive. The units can range in cost — from under $100,000 to over $300,000. These backyard homes, called accessory dwelling units, or ADUs, are small housing units ranging from 150 square feet to 1,200 square feet, depending on where you live. The average cost of a unit can range from $100,000 to $300,000, not to mention the permit cost, and securing a loan to build an ADU can be challenging.

In California, where most backyard homes are being built, ADU building permits cost anywhere from $450 to $15,000 — even before construction starts. Other costs could include site preparation, which includes anything from inspections to running utility lines. If you don't have cash available or the ability to access financing for the project, it can be cost-prohibitive, making it harder for middle- and low-income homeowners to actually build one.

To combat this disparity, promote equity, and ultimately propel the construction of much-needed housing, some states have established grant programs to provide assistance. The deadlines for these programs vary from state to state. Those interested in building an ADU should be prepared for next year's application cycles, as they often experience high demand.

Three states are currently offering financial assistance for homeowners looking to build ADUs. Each program has distinct eligibility requirements and funding limits.

California: Up to $40,000

Previously, the state provided $40,000 to Californians for pre-construction ADU costs, including design, permitting, and soil inspections. However, as of 2026, no money had been allocated for the program. The application window is currently closed.

• Total Funding: $100 million was allocated in 2021, but by 2023, the money had been fully distributed. The program's funds were supplemented with $25 million in grant funding for the 2023-2024 period, but by 2026, the program had no remaining funds.
• Eligibility: In the past, Californians who fell in the range of low- to moderate-income limits were eligible.
• Agency: California Housing Finance Agency.

New York: Up to $125,000

The Plus One ADU Program provides eligible New Yorkers up to $125,000 to build or convert an ADU on their property. The program is a part of Gov. Kathy Hochul's five-year housing plan, which aims to create or preserve 100,000 affordable housing units.

• Total Funding: In 2026, New York State Homes and Community Renewal (HCR) plans to roll out a fourth funding round, committing the remaining funds authorized under the $85 million, five-year housing plan. HCR says nearly $74 million has already been allocated to 85 municipalities statewide.
• Eligibility: Any municipality can apply through the competitive funding round, and nonprofit housing organizations may also seek ADU funding. Homeowners apply directly through the nonprofits, and households earning up to 120% of the area median income are eligible.
• Agency: New York State's Homes and Community Renewal.

Vermont: Up to $50,000

This program allows Vermonters to receive up to $50,000 to build an ADU on their property. Both landlords and owner-occupied homes with plans to rent are eligible.

• Total Funding: As of 2023, Vermont had a $15 million budget.
• Eligibility: Any Vermont homeowner can apply through these five regional organizations: RuralEdge, Champlain Housing Trust, NeighborWorks of Western Vermont, Downstreet Housing and Community Development, and Windham and Windsor Housing Trust.
• Agency: Vermont Housing Improvement Program.

Other regions are also moving to support ADU construction through new legislation and county-level initiatives.

Colorado

In 2024, Colorado passed HB24-1152 to assist homeowners in building ADUs. The Colorado Department of Local Affairs (DOLA) works directly with local governments as they implement regulatory changes. DOLA also runs the Accessory Dwelling Unit Grant Program (ADUG), which provides $5 million to jurisdictions that bring their codes into compliance.

• Funding: The state has set aside $5 million for ADUG. An additional $8 million is channeled into the Colorado Housing and Finance Authority's (CHFA) ADU Finance Programs.
• Applications: The second round of funding opens on Monday, February 2, 2026.

Hawaii

Two counties in Hawaii provide grants or incentives for ADU construction to help expand the supply of workforce housing.

• Maui County: Launched the ʻOhana Assistance program, providing grants of up to $100,000 for qualifying homeowners to build attached or detached ADUs.
• Kaua'i: Offers the Affordable Additional Rental Unit (ARU) program. It waives certain county development and permitting fees, with total waivers and subsidies potentially reaching nearly $20,000.

As housing costs continue to rise, state and local governments are increasingly viewing ADUs as a vital tool for increasing affordable housing stock. While programs in states like California have temporarily paused due to high demand, others in New York and Vermont remain active and accessible. Homeowners interested in these grants should monitor official state housing agency websites for application openings, as these funds are often distributed on a rolling basis or through competitive rounds.