To amend the National Housing Act to direct the Secretary of Housing and Urban Development to establish a program to insure certain second liens secured against property for the purpose of financing the construction of an accessory dwelling unit, and for other purposes.
- Bill Number
- H.R. 4479
- Origin Chamber
- House
- Congress
- 119th Congress, Session 1
- Policy Area
- Housing and Community Development
- Status
- Introduced
- Latest Action
- 2025-07-17: Referred to the House Committee on Financial Services.
- Last Updated
- 2025-12-05T22:56:16Z
AI-Generated Summary
Purpose
This bill (H.R. 4479) aims to make it easier for homeowners to finance the construction of accessory dwelling units (ADUs)—smaller, additional living spaces on a property, like a backyard cottage or basement apartment—by allowing federal insurance for secondary loans (second liens) on these projects. The goal is to increase housing options and affordability, especially in areas with limited space.
Key Provisions
- New Insurance Program: The Secretary of Housing and Urban Development (HUD) must create a program within two years to insure second liens used specifically for building ADUs. Insurance is optional and based on terms set by the Secretary.
- Loan Limits:
- The insured amount is capped at the lower of 30% of the Federal Housing Administration (FHA) loan limit for a single-family home or 100% of the property's projected value after ADU construction (including any existing loans).
- The limit can increase if the ADU will generate rental income, factoring in 50% of expected annual rent.
- Application Process: Borrowers must apply with required details and certify they own the property. Only owners qualify.
- Costs and Oversight:
- An annual insurance premium of up to 1% of the loan principal.
- HUD must submit annual reports to Congress starting one year after enactment, detailing program activities.
- HUD can issue rules to implement the program.
- Definition of ADU: An ADU is a self-contained unit (with kitchen, sleeping, and bathroom facilities) that can be:
- A modular or prefabricated structure built to recent state or local building codes.
- A manufactured home (as defined in existing federal law).
- A conversion of an existing structure on the property.
- It must be attached to, within, or detached from a single-family home on the same lot.
- Loan Purchases by Government-Sponsored Enterprises:
- The Federal Housing Finance Agency (FHFA) Director must allow Fannie Mae and Freddie Mac to buy and package (securitize) these insured loans for resale to investors.
- Exception: FHFA can block this if market conditions create excessive risks, but only after notifying Congress in writing.
- FHFA must report on these activities in its annual report to Congress.
Significant Changes to Existing Law
- Adds a new Section 259 to Title II of the National Housing Act (which governs FHA mortgage insurance), introducing federal backing for second liens tied to ADU construction—something not previously covered under standard FHA programs.
- Expands the role of Fannie Mae and Freddie Mac to include these specialized loans, with safeguards for market stability, amending oversight under the Federal Housing Enterprises Financial Safety and Soundness Act of 1992.
Potential Impacts
- On Government Agencies: HUD gains responsibility for a new insurance program, including rulemaking, applications, and reporting, which could increase administrative workload and costs. FHFA may need to monitor market risks more closely.
- On Citizens: Homeowners could more easily access financing for ADUs, potentially adding affordable rental units or multigenerational housing without selling their property. This might lower housing costs in high-demand areas but could raise property values or local zoning debates.
- On International Relations: No direct impacts; this is a domestic housing policy focused on U.S. properties.
- Broader Effects: Could boost housing supply by encouraging ADU builds, helping address shortages, but success depends on program uptake and local building regulations.
Main Stakeholders Affected
- Homeowners and Borrowers: Primary beneficiaries, as they can secure insured loans for ADU projects.
- Lenders and Financial Institutions: Gain access to federally insured second liens and opportunities to sell loans to Fannie Mae/Freddie Mac, potentially reducing risk.
- HUD and FHFA: Responsible for program implementation, insurance, oversight, and reporting.
- Fannie Mae and Freddie Mac: Required to purchase and securitize these loans, expanding their portfolios.
- Local Governments and Communities: Indirectly affected through increased ADU development, which may strain or improve local housing infrastructure.
- Congress: Receives ongoing reports to monitor the program's effectiveness.
Notable Legal, Constitutional, or Political Implications
- Legal: Builds on existing FHA authority without overriding state/local zoning laws, but the ADU definition aligns with federal standards to promote consistency. The premium cap and loan limits provide clear boundaries to prevent overuse of federal insurance.
- Constitutional: No apparent challenges; it involves standard congressional power to regulate housing finance and interstate commerce.
- Political: Supports bipartisan goals of affordable housing and urban density, but could spark debates on federal involvement in local land use or risks to taxpayer-backed insurance if defaults rise. Annual reporting ensures accountability without mandating program expansion.
This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.
Sponsor
Rep. Liccardo, Sam T. [D-CA-16]
Cosponsors (16)
Rep. Cleaver, Emanuel [D-MO-5], Rep. Sherman, Brad [D-CA-32], Rep. Thompson, Mike [D-CA-4], Rep. Ruiz, Raul [D-CA-25], Rep. Soto, Darren [D-FL-9], Rep. Peters, Scott H. [D-CA-50], Rep. Garamendi, John [D-CA-8], Rep. Swalwell, Eric [D-CA-14], Rep. McBride, Sarah [D-DE-At Large], Rep. Goodlander, Maggie [D-NH-2], Rep. Fields, Cleo [D-LA-6], Rep. Elfreth, Sarah [D-MD-3], Rep. Gray, Adam [D-CA-13], Rep. Cisneros, Gilbert Ray [D-CA-31], Rep. Stanton, Greg [D-AZ-4], Rep. Harder, Josh [D-CA-9]
Recent Actions
- 2025-07-17: Referred to the House Committee on Financial Services.
- 2025-07-17: Introduced in House
- 2025-07-17: Sponsor introductory remarks on measure. (CR H3469)
- 2025-07-17: Introduced in House
Bill Versions
- To amend the National Housing Act to direct the Secretary of Housing and Urban Development to establish a program to insure certain second liens secured against property for the purpose of financing the construction of an accessory dwelling unit, and for other purposes. — issued 2025-07-17 — PDF (6 pages)