Supporting Upgraded Property Projects and Lending for Yards (SUPPLY) Act
- Sponsor
- Rep. Liccardo, Sam T. [D-CA-16]
- Committees
- Financial Services Committee (primary)
- Last action
- Jul 21, 2025
Bottom line
The SUPPLY Act aims to boost housing supply and affordability by facilitating the financing of Accessory Dwelling Units through federal insurance and secondary market support from government-sponsored enterprises.
What it actually does
This bill directs the Secretary of Housing and Urban Development (HUD) to establish a program within two years to insure certain second liens used to finance the construction of accessory dwelling units (ADUs). It also mandates that the Federal Housing Finance Agency (FHFA) permit Fannie Mae and Freddie Mac to purchase and securitize these insured ADU loans, thereby creating a secondary market. The goal is to make financing for ADU construction more accessible to homeowners.
Proponents argue
Supporters argue that this bill provides a crucial mechanism to address the national housing shortage and affordability crisis by unlocking the potential for homeowners to create new housing units on their existing properties. They contend that ADUs offer flexible housing solutions, enable multi-generational living, and provide homeowners with opportunities for rental income, all while leveraging existing infrastructure and promoting sustainable density.
Opponents contend
Critics may raise concerns about the potential for increased federal financial risk through the new FHA insurance program, particularly for second liens. They might also argue that federal intervention could distort private lending markets or that a widespread increase in ADUs could impact neighborhood character, parking, or local infrastructure, even though the bill does not preempt local zoning laws.
The bill is short and relatively straightforward, making it highly accessible for a reader to understand its core provisions within a few minutes.
Section 2, adding National Housing Act Section 259(a)
Establishment of ADU Construction Insurance Program
This provision directs the Secretary of Housing and Urban Development (HUD) to create a new program within two years. This program will insure certain second liens that homeowners take out specifically to finance the construction of Accessory Dwelling Units (ADUs) on their properties. The insurance aims to reduce the risk for lenders, making it easier for homeowners to obtain financing for ADU projects.
Supporters argue
Proponents argue that this program is essential to overcome existing barriers to ADU financing, which often stem from lenders' reluctance to underwrite second liens for construction. By providing federal insurance, the bill will stimulate ADU development, contributing to housing supply and affordability.
Critics contend
Opponents might contend that creating a new federal insurance program for second liens introduces unnecessary risk to taxpayers and could potentially distort private lending markets. They may question the extent of federal involvement in what they see as a local housing issue.
Tradeoffs
The provision balances the goal of stimulating housing supply through ADUs with the potential financial risk to the federal government by insuring a new class of loans.
Section 2, adding National Housing Act Section 259(b)
Maximum Loan Amount and Rental Income Consideration
This section sets limits on the maximum amount that can be insured for an ADU construction loan. The loan amount cannot exceed the lesser of 30% of the standard FHA loan limit for a one-unit residence, or 100% of the property's projected value after the ADU is built, when combined with any other existing liens. Crucially, the Secretary of HUD can increase this maximum amount by considering 50% of the projected annual rental income that the ADU is expected to generate.
Section 2, adding National Housing Act Section 259(g)
Definition of Accessory Dwelling Unit
This section provides a clear definition of what constitutes an 'accessory dwelling unit' (ADU) for the purposes of this insurance program. An ADU must include kitchen, sleeping, and bathroom facilities. It can be a modular or prefabricated unit built to current building codes, a manufactured unit (as defined in existing law), or a conversion of an existing structure. Importantly, it must be added to, created within, or detached from a single-family dwelling on a single property.
Section 3
Fannie Mae and Freddie Mac Purchase and Securitization
This section directs the Director of the Federal Housing Finance Agency (FHFA) to allow Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation) to purchase and securitize the ADU loans that are insured by HUD under the new program. This means these government-sponsored enterprises (GSEs) can buy these loans from lenders and package them into securities for investors, which provides liquidity to the mortgage market and encourages lenders to originate more such loans. The FHFA Director can, however, prohibit this if market pressures pose an excessive risk.
This provision grants the Director of the Federal Housing Finance Agency (FHFA) the authority to prohibit Fannie Mae and Freddie Mac from purchasing and securitizing the newly insured ADU loans. This prohibition can be enacted if the Director determines that market pressures pose an "excessive and unmitigable risk" to the lending market for such loans, provided a written notice is submitted to Congress.
Section 3(b)
Why it matters:This is standard legislative practice to include a 'safety valve' or discretionary authority for regulatory agencies to mitigate unforeseen risks. It's a prudent measure rather than an evasive one.
Case for: Supporters argue that this provision is a crucial safeguard, protecting the financial system and taxpayers from undue risk should the ADU loan market become unstable or experience unforeseen challenges. It provides the FHFA with necessary flexibility to respond to adverse market conditions.
Case against: Critics might contend that this discretionary power introduces an element of uncertainty for lenders and investors, potentially hindering the program's effectiveness if the FHFA Director is overly cautious. This uncertainty could make lenders less willing to originate these loans, even with FHA insurance.
Estimated impact: Potentially significant. If invoked, this provision could effectively halt the secondary market for these ADU loans, severely impacting their liquidity and availability, and thus the overall success of the program.