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16 Places That Will Pay To Put a Tiny House in Your Backyard

Tiny house
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Finding an affordable rental is not an easy task in any part of the nation. However, a possible solution is emerging as more homeowners consider building and renting accessory dwelling units (ADUs).

These tiny home rentals — also called guest houses, casitas or mother-in-law suites — are gaining momentum. New York, Vermont and Arizona are only a few of the states with current incentives for ADU owners.

If you’re thinking of building a tiny home or an ADU on your property, we’ve highlighted places around the country with financial incentives designed to increase affordable housing rentals.

Claremont, California

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Claremont, California, offers a $20,000 “forgivable loan” grant to construct an ADU in exchange for homeowners agreeing to rent out the unit at a reasonable rate to a low-income person or family for three years.

14 places in New York

Ithaca, New York
SEALANDSKYPHOTO / Shutterstock.com

The New York State 2022-23 Capital Budget included funding to renovate and build new ADUs throughout the state.

The Plus One ADU Program is part of $85 million set aside to address the housing shortage in 14 cities and towns:

  • Amherst
  • Babylon
  • Bedford
  • Brookhaven
  • Dobbs Ferry
  • Hastings-on-Hudson
  • Huntington
  • Irvington
  • Ithaca
  • Kingston
  • New York City
  • Shelter Island
  • Southampton
  • Southold

Each municipality maintains its own application process, and if you don’t see your area listed, you can still indicate your interest by filling out this form.

Vermont

Lake Memphremagog in Newport, Vermont
NEKVT / Shutterstock.com

The state of Vermont offers grants of up to $50,000 under the Vermont Housing Improvement Program. That money can be used toward the renovation and construction of additional housing units.

Not sure what the requirements might be? Read this brochure for homeowners who are considering a build.

Other types of assistance

tiny house
ppa / Shutterstock.com

Some programs don’t offer money upfront to residents who are building ADUs but offer other incentives. These can still save you quite a few dollars and include tax savings, reduced-cost permits and design assistance.

Tax savings

Houses in Spokane, Washington
Kirk Fisher / Shutterstock.com

Some communities don’t pay homeowners to build ADUs, but they do offer a tax break that can be just as valuable.

For example, Spokane, Washington, has approved a three-year tax exemption for ADU builds and renovations.

Reduced permit costs

Austin, Texas
Roschetzky Photography / Shutterstock.com

Some cities are offering to reduce permit costs. If you’re in Portland, Oregon, for instance, the city will waive system development charges for the addition of an ADU — assuming it’s not used as a short-term rental (think Airbnb).

Design assistance and inspiration

View of downtown San Antonio, Texas.
f11photo / Shutterstock.com

If you’re ready to build, but aren’t sure of what design to use, there are a few cities that have options for you to choose from.

Renton, Washington, offers pre-approved economical floor plans for new builds (one- to three-bedroom options available). Meanwhile, San Antonio, Texas, and Tucson, Arizona, recently held design competitions to promote interest in ADUs by awarding cash incentives to the winners.

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