The U.S. Department of Agriculture (USDA) Rural Housing Service (RHS) published a final rule expanding eligibility under the USDA Single Family Housing Guaranteed Loan Program to include properties with income-producing accessory dwelling units (ADUs) and clarifying eligibility for homes with features that accommodate home-based businesses.
ADUs are a practical, cost-effective way to expand housing opportunities. They can support multigenerational living, provide additional housing flexibility, and help communities make more efficient use of existing residential properties, particularly in areas where new development can be constrained by land availability, infrastructure, or construction costs.
NAR supportedpdf the proposal, noting that prior program restrictions prevented rural borrowers from purchasing or improving homes with ADUs that had previously generated rental income, even when the borrower had no intention of renting the unit. Those limitations reduced financing options and restricted access to housing in communities already facing limited inventory.
For REALTORS®, the rule is significant because it expands the inventory of homes eligible for USDA financing and removes a financing barrier that may have sidelined otherwise qualified properties. As a result, eligible rural buyers may have access to a broader range of housing options, including homes with existing ADUs that were previously more difficult to finance through the program.
USDA also clarified that, under the rule prospective, rental income from an ADU will not be considered in loan underwriting. While the rule broadens property eligibility, borrower qualification standards remain unchanged under existing USDA underwriting requirements. However, Congress addressed the issue in Section 502pdf of the recently enacted 21st Century ROAD to Housing Act. The NAR-supported bill allows USDA financing for a home with a leased ADU, with that rental income counting toward loan qualification.
Overall, the final rule is a positive step toward expanding housing opportunities in rural America by recognizing ADUs as an important part of the housing stock and removing regulatory barriers that limit financing for otherwise eligible properties.
