Eric Santucci for Ryan O'Connell.
- Some California residents got $40,000 in grant money to build tiny homes on their properties.
- Due to the grant program, the state expected 2,500 new housing units to be build.
- Insider spoke to three families who received the grants about how it's improved their lives.
Thousands of California homeowners got a $40,000 check from the state to build a tiny home in their backyard last year.
Lawmakers allocated the funds in the 2022 budget, hoping it would grow the state's housing stock, and ease its shortage of about 2 million homes. Housing economists and experts argued that the cash infusion would make housing more affordable.
For homeowners, it was a chance to enhance their property value, add housing to their land, and give their adult children an affordable place to live. The funding had to go exclusively to pre-development costs such as designing the unit and permitting.
Insider spoke to three families — located near Orange County, in Napa, and in Los Angeles — who met income thresholds and received the grant. While all three described parts of the application process as arduous — the end result has been positive. All of these homeowners have finished their ADU in the last three months.
All said they would recommend the program to other California homeowners.
"Getting the grant was challenging, but worth it. I would recommend applying for similar grants when they are available," Dan Romo, one of the grant recipients, said.
California is reviving the ADU grant program again, but details are being worked out.
Here are their stories, edited for length and clarity.
Daniel Romo, 61 and Kristin Romo, 63
Courtesy of Dan and Kristin Romo
Home location: Whittier, California
Cost of unit: $240,000
How the unit is used: They rent it out to their daughter and son-in-law who live there with their two children.
The owners' story:
Dan: We paid $244,000 when we bought our house 20 years ago and I refinanced the mortgage to start my business, so it's even larger than when we bought the house. Last time I looked, our house was valued at $850,000.
Kristin: It became clear that — at the rate we were going on our mortgage and with the rising cost of living in California — we were going to be working 'til we're 75. We did not want that.
Dan: Last year, our oldest daughter and her husband realized that, with the cost of living, they wouldn't be able to afford to live in California if they wanted to own a home to raise a family. This March they wound up moving to New Hampshire. Our second daughter had just had her first child. She didn't want to move out of the area.
Kristin: After receiving a $40,000 grant from the state and taking out a $200,000 HELOC loan, we converted our garage into a modern apartment that our daughter, son-in-law, and grandchildren just moved into.
Dan: Last June, I went to the website of CalHFA — the entity that was distributing the funds — only to hit a roadblock. At that time, the only way you could get the grant was you had to go through a state-approved vendor.
There was only one bank that would allow you to take a second mortgage, which was what I wanted because my interest rate had gone down to 2.8%, and they were pretty unresponsive.
It didn't seem possible, so I felt like, "Oh, I guess I tried."
But the state realized there was something wrong with the way the program worked and decided to work with nonprofit agencies to help them distribute the grants.
I applied for the grant through HPP Cares. And, at first, my application fell through the cracks. But then, finally, I was able to get the grant. I received the money by late October or early November. It was a challenging process.
When I applied for the grant, I had to qualify. We had to have a certain amount of income, then we had to demonstrate that this was our home and primary residence. Once I submitted that, they also requested tax returns.
When I was approved for the grant, they required that I submit the contractor's budget and the cost of the construction. Then, they deducted the grant amount from that budget. I had to put the remaining amount in an escrow account, which was something that this state required.
Kristin: When I heard all that, it gave me peace of mind. I felt like this the way that the state was taking care of their money. They were really making sure that people weren't trying to do something underhanded. So, in some ways, I felt protected.
Dan: After the cost of administrative fees, we actually only got around $33,000. I was grateful for that, of course, but the sum of the grant was a little misleading.
Getting the grant was challenging, but worth it. I would recommend applying for similar grants when they are available.
I encourage people to humble themselves and have a growth mindset and open to the possibility of something that is completely foreign.
Jakota Rivas, 46
Eric Santucci
Home location: Napa, California
Cost of unit: $124,000
How the unit is used: Rivas rents the unit out to her two eldest children, who are 18 and 19 years old.
The owner's story: We have four kids and we moved from southern California to northern California right when the pandemic shutdowns started, in March 2020.
We lived out of a hotel for a period of time when everything was shut down, and then we rented for some time. We looked at over 40 houses to buy, we put in nine offers before we finally got to the house we bought, in December 2020 — nearly a year after we started our search.
When we bought the house, I had talked about building an ADU, but my husband wasn't sold.
Our house has got three bedrooms, and then it's got a sunroom off the kitchen. The sunroom was huge. This was your typical 1980s sunroom with skylights, single pane windows.
We had to do a lot of renovations on it to make it into a room for our sons. One of the issues was there was mold in the handling out there so we had to replace all that; we put screens on all the windows so the boys could open that up. We put heaters on the floor so that they would be warmer because it's not insulated.
Two of the kids stayed in the sunroom. We had made all of these changes but despite that this was our first winter in Northern California — so we underestimated just how cold it would get. The two kids in the room were freezing, so we knew we needed to do something. Luckily, around that time, I had gotten a promotion, so we had some extra money to do something.
In 2022, our two oldest kids were both about to graduate high school. My daughter graduated two years early from high school and my son was a senior. I said why don't we build them an ADU and then they can pay rent to live there?
We refinanced in April, and we tore the sunroom down in May. We finally got our permits submitted for that October, and that's when we got the grant, too. Come January, we're finally breaking ground, and all of a sudden I hear about this forgivable loan that Napa County is giving out. We applied and we got that. So this was all money that we weren't budgeting for.
It allowed us to then go ahead and fix all the grass in the backyard, it allowed us to build the loft in our ADU after it was finished with for our daughter. It allowed us to pay off my car. We are charging our kids for rent. So $1,000 a month, $500 each. Technically based on the income guidelines, I think we can charge up to $2,100.
We love it and it's just amazing. Altogether, we paid $124,000 out of pocket, got the $40,000 from the state, and a forgivable loan of $67,500.
Rosario, 66
Courtesy of Rosario
Home location: Los Angeles, California
Cost of unit: $300,000
How the unit is used: Rosario lives in the handicapped-accessible ADU, while his sister lives in the main house on the property.
Rosario's last name is not included due to privacy concerns. His last name is known to Insider and his identity has been verified.
The owner's story: I am handicapped and most of the time I need a wheelchair and a walker.
I decided to build an ADU on my property that's handicap accessible — so, wider doors to the bathroom, to the bedroom, making it easy to get around in a wheelchair. In the shower, I can go in with my walker because it's the same level as the floor. I also have a ramp that leads to the front door. My favorite room is the kitchen — I designed each aspect of it myself.
The ADU is 611-square-feet, and is located on the detached garage on the property that my sister and I share. She lives in the house. With furnishings and all, it cost $300,000. I paid for the majority of the project with my savings, and the rest with the $40,000 California ADU grant. I did not take out any loans.
I am very happy with my ADU but there was stuff about the grant I wish I had known before I started.
After administrative fees and taxes on the grant itself, I only cleared $21,355 out of the whole grant, which I used to reimburse myself for the pre-construction costs.
It was a kick in the pants.
On top of that, there were extra costs that were not in the original quote. The most difficult part of the process was when I needed to hire an engineer for an extra $20,000, after the project had already started. I had a wall adjacent to my neighbor, and to keep that wall, I needed to get an engineer, because the foundation underneath wasn't good enough to be approved by the city.
So, I would recommend applying to the grant if a friend wanted to build an ADU, but I would definitely need to explain the situation: you're not going to get the $40,000, you're only going to get half if you're lucky. And there may be extra costs.
But ultimately, I love my new home. I am tickled to death about how it came out, and was happy to get the grant.
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