FHA Greenlights Inclusion Of ADU Rental Income For Mortgage Financing – NMP Skip to main content

FHA Greenlights Inclusion Of ADU Rental Income For Mortgage Financing

Oct 16, 2023
ADU
News Director

HUD's new policy targets affordable housing crisis, amplifying homeownership opportunities in dense urban areas.

The Federal Housing Administration (FHA) under the U.S. Department of Housing and Urban Development (HUD) has unveiled a groundbreaking policy to bolster housing affordability and increase homeownership opportunities. According to the press release, lenders can now include rental income from Accessory Dwelling Units (ADUs) when assessing mortgage applications.

ADUs are smaller housing units located on the same property as the main residence, which can be leased out. These units have the potential to provide a significant boost to housing supply, especially in densely populated areas.

HUD Secretary Marcia L. Fudge praised the move, stating, “Increasing the supply of affordable housing and helping families to create generational wealth is what today’s action, making it easier to finance an accessory dwelling unit, is all about. This is a part of our work to help address the critical shortage of affordable housing in communities across the country and help people increase the value of their homes."

Assistant Secretary for Housing Julia Gordon added that the policy primarily targets households with limited means, ensuring they can unlock the full benefits of homeownership.

This new policy "not only helps more people qualify for a mortgage and build wealth, it also helps to boost supply in neighborhoods where housing is least available," Gordon said at the MBA conference in Philadelphia Monday. 

Deputy Assistant Secretary for Single Family Housing Sarah Edelman underscored the policy's flexibility. She indicated that it would enable 75% of the estimated ADU rental income to be considered for some borrowers, making it easier for them to qualify for an FHA-insured mortgage.

Additionally, the policy sets specific guidelines for appraisers and introduces ADUs to FHA mortgages for new construction. The immediate implementation means that FHA-approved lenders can begin offering this new opportunity to prospective homeowners right away.

The move is in line with the Biden-Harris Administration’s Housing Supply Action Plan, further underscoring their commitment to address the nation’s housing challenges and championing the cause of affordable homeownership.

About the author
Christine Stuart is the news director at NMP.
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