How to Finance Your NYC ADU
From city-backed grants to private loans, here are all the ways to fund your ADU project — including the Plus One ADU Program offering up to $395,000.
Plus One ADU Program
NYC's flagship ADU financing program administered by HPD. Combines grants and low-interest loans to make ADU construction accessible to middle-income homeowners.
Up to $395,000
Combined loans + grants
Up to $175,000
Grant component (no repayment)
165% AMI Income Limit
Preference at 120% AMI or below
Apply by June 12, 2026
Application deadline
Program Details
Eligibility Requirements
- Owner-occupied 1–3 family home
- Household income at or below 165% Area Median Income
- Priority given to applicants at 120% AMI or below
- Property must be in an eligible ADU zoning district
What You Get
- Up to $395,000 total financing (loans + grants)
- Up to $175,000 as a grant (does not need to be repaid)
- Remaining balance as a low-interest loan
- Technical assistance throughout the build process
Requirements & Commitments
- 10-year long-term rental commitment for the ADU unit
- Must maintain owner-occupancy throughout commitment period
- $200 non-refundable application fee
- ADU must meet all Local Law 18 requirements
How to Apply
Property Tax Exemption
NYC offers a significant tax break to homeowners who build ADUs.
Up to $200K
Increased market value exempt from property tax
5 Years
100% exemption on the increased value
Owner-Occupied
Must live on the property when the ADU is built
Example: If building your ADU increases your property's market value by $180,000, that entire increase is exempt from property tax for 5 years. At NYC's typical Class 1 tax rate, this saves roughly $2,000\u2013$4,000 per year in property taxes.
Other Financing Options
Private financing options for homeowners who don't qualify for Plus One or need additional funding.
HELOC
Home Equity Line of Credit
- Revolving credit against your home equity
- Borrow up to 80% of your loan-to-value (LTV)
- Variable interest rate (typically prime + 0–2%)
- Draw funds as needed during construction
- Interest-only payments during draw period
Construction Loan
Short-Term Build Financing
- Short-term loan (12–18 months typical)
- Converts to permanent mortgage after construction
- Interest rate: prime + 1–3%
- Funds disbursed in draws as work progresses
- Requires approved plans and licensed contractor
Cash-Out Refinance
Refinance for Higher Amount
- Refinance your existing mortgage at a higher amount
- Fixed interest rate (predictable payments)
- Single monthly payment replaces existing mortgage
- Access equity without a second lien
- Best when current rates are favorable
Financing Strategy by Project Type
Recommended financing approaches based on your ADU type and budget.
| Project Type | Est. Cost | Recommended Strategy | Notes |
|---|---|---|---|
| Basement Conversion | $100K–$250K | Plus One grant + HELOC | Grant may cover most of the cost for qualifying homeowners |
| Garage Conversion | $150K–$300K | Plus One (may cover most/all) | Strong candidate for full Plus One financing coverage |
| Backyard Cottage | $250K–$400K+ | Plus One + construction loan for gap | Plus One covers base; construction loan bridges the difference |
| Higher Income (>165% AMI) | Varies | HELOC + construction loan | Not eligible for Plus One; combine private options |
Find out what you qualify for
Check your property eligibility first, then book a consultation to discuss financing options specific to your situation.