Supporting Upgraded Property Projects and Lending for Yards (SUPPLY) Act

This bill would set up a new federal program to help homeowners finance accessory dwelling units (ADUs)—like a backyard cottage, garage apartment, or in-law suite—by insuring certain second loans on their property. The housing department would have up to two years to launch the program. ADUs must include a kitchen, sleeping space, and a bathroom, and can be added to, within, or separate from a single-family home. They can be modular, manufactured, or a conversion of an existing structure.

The insured loan size would be capped based on federal limits and the expected value of the home after the ADU is built, with up to half of projected ADU rent allowed to boost the cap. The yearly insurance fee could not be more than 1% of the insured amount. Owners must certify they own the property, and the department must report to Congress each year on how the program is working. To keep lenders active in this space, the housing finance regulator would allow Fannie Mae and Freddie Mac to buy and bundle these insured loans, unless it finds that market risks are too high and formally notifies Congress of a pause.

Key points

• Who is affected: Homeowners who want to build an ADU; lenders; potential renters looking for more housing options.
• What changes: A new federal insurance for certain second loans to build ADUs; limits on loan size; a max 1% annual insurance fee; and permission for Fannie Mae/Freddie Mac to buy these loans to support the market .
• When: Program must start within two years of the law taking effect; annual reporting begins one year after enactment .