The CalHFA $40,000
ADU Grant Guide

The California Housing Finance Agency (CalHFA) ADU Grant Program is a statewide initiative that provides eligible homeowners with up to $40,000 in grant funding — not a loan, not a deferred payment, but a true grant with no repayment obligation — to cover the pre-development and non-recurring closing costs associated with building an Accessory Dwelling Unit. In a state where the upfront costs of plans, permits, and engineering alone can run $10,000–$20,000, this grant can meaningfully reduce the financial barrier to getting a project started.

The program was funded by a $100 million allocation from the California state general fund ($81 million) and CalHFA's own resources ($19 million), launched in 2021 as part of California's broader strategy to address its severe housing shortage. Grants were distributed across 44 of California's 58 counties, with 42% of funds directed to socially disadvantaged communities. Over half of all grants were awarded to Black, Indigenous, and People of Color (BIPOC) households.

The fact that the grant is currently fully allocated does not mean it is gone permanently. California's housing crisis remains acute, and the state legislature has consistently renewed and expanded ADU funding programs since 2021. The most productive approach for LA County homeowners right now is to understand the program thoroughly, verify eligibility, and be positioned to apply immediately when the next funding round opens.

In the meantime, several alternative programs remain active and accessible to LA County homeowners — including the NHS LA County ADU Program and various construction loan products specifically designed for ADU projects. These are covered in detail in Sections 9 and 10 of this article.

The CalHFA ADU grant is specifically designed to cover pre-development costs — the upfront expenses that must be paid before construction begins and that are often the biggest barrier for homeowners who want to build but cannot afford the initial outlay. The grant also covers certain non-recurring closing costs when securing a construction loan through an approved lender.

The CalHFA ADU grant has five core eligibility requirements. All five must be met to qualify — there are no partial grants for partial eligibility. Applications are processed on a first-come, first-served basis when funding is available.

CalHFA's income limits are based on the Area Median Income (AMI) for each county, updated annually by the California Department of Housing and Community Development (HCD). The ADU grant program uses a "low-to-moderate income" threshold, which in high-cost counties like Los Angeles is set at a level that encompasses the majority of working homeowners.

The following table reflects the approximate income limits for LA County based on CalHFA's 2025 guidelines. These figures are updated periodically — always verify current limits at calhfa.ca.gov or with an approved lender before applying.

The CalHFA ADU grant is not paid directly to homeowners. Instead, it is disbursed through a network of CalHFA-approved lenders who manage the application process, verify eligibility, and administer the funds. This structure means that to access the grant, you must first be working with an approved lender — typically the same lender who will provide your ADU construction loan.

Once approved, the lender sets up a construction escrow account. The grant funds are deposited into this account and disbursed directly to vendors (architects, engineers, permit agencies) as pre-development costs are incurred. Homeowners do not receive the $40,000 as a cash payment — the money flows from the escrow account to the service providers.

When the CalHFA ADU grant program reopens, applications are processed on a first-come, first-served basis. The homeowners who succeed are those who have done their preparation in advance and can submit a complete, accurate application on day one of the new funding round. Here is the complete preparation and application process.

The $40,000 grant covers pre-development costs, but it does not cover the $80,000–$230,000 in construction costs that follow. Most homeowners use the grant in combination with one or more financing products to fund the complete project. The most common and cost-effective combinations are outlined below.

While the CalHFA grant is currently fully allocated, several other programs remain active and available to LA County homeowners. Some offer comparable or even larger grants; others provide low-interest loans or forgivable loans that function similarly to grants for qualifying households.

For LA County homeowners who want hands-on assistance navigating ADU financing, the Neighborhood Housing Services of Los Angeles County (NHS LA County) is the most accessible local resource. NHS is a nonprofit community development corporation that has served LA County neighborhoods for over 40 years, offering home repair, home rehabilitation, and affordable lending services.

NHS LA County's ADU program provides project management support, access to affordable lending products, and guidance through the grant application process. Their "Don't Move, Improve!" workshops are free and available online in both English and Spanish — a practical first step for any homeowner considering an ADU.

The $40,000 grant does not just reduce your upfront cost — it meaningfully accelerates your payback period and improves your overall return on investment. The following comparison illustrates the impact of the grant on a typical garage conversion and a detached ADU in LA County.