What States Will Pay You to Build a Tiny Home? (Real Programs That Actually Exist)
"States will pay you to build a tiny home" — it sounds too good to be true. And honestly, the reality is a little more nuanced than the headlines suggest. But there are real programs out there that offer grants, loans, rebates, and incentives for building ADUs and small dwelling units. Here's what's actually available — and what the fine print looks like.
The Important Caveat Up Front
Most of these programs are technically for ADUs (Accessory Dwelling Units) — not "tiny homes" specifically. But in many cases, a well-built tiny home qualifies as an ADU, especially if it's on a foundation and meets local building codes. So the money is real. You just need to make sure your project fits the program's definition.
California
California has been the most aggressive state in this space. The CalHFA ADU Grant Program offered up to $40,000 per homeowner to cover pre-development costs like architectural designs, permits, and site prep. However, as of late 2023, the funding was fully allocated, and the program is currently paused. It's worth keeping an eye on for new funding rounds.
On the city level, San Diego has an ADU Finance Program through the San Diego Housing Commission that provides up to $250,000 in financing plus project planning assistance for qualifying homeowners. Santa Cruz has offered forgivable loans of up to $40,000 and fee waivers for ADU projects.
New York
New York's Plus One ADU Program is backed by $85 million in state funding. It provides grants of up to $125,000 to help low- and middle-income homeowners build or improve ADUs on their properties. The state distributes funds through nonprofits and local governments, which then pass them to qualifying homeowners. If you're in a participating locality, this is worth looking into seriously.
Vermont
The Vermont Housing Improvement Program offers eligible homeowners up to $50,000 toward ADU construction or renovation. Both landlords and owner-occupied homes are eligible, and applications are managed through five regional housing organizations across the state.
Colorado
Colorado passed HB24-1152 in 2024, creating the ADU Fee Reduction and Encouragement Grant Program. It offers down payment assistance, low-interest loans, and interest rate reductions for low- and moderate-income homeowners building ADUs. The state allocated $5 million for the program.
Oregon
Portland, Oregon, waives development fees for homeowners building ADUs — which can save thousands in upfront costs. Oregon has also been one of the most progressive states in terms of ADU-friendly zoning overall.
Washington
Spokane, Washington, offers a 3-year local tax exemption for single-family homeowners who build ADUs on their property. It's not a direct payment, but it's a meaningful financial incentive.
The Strings Attached
Almost all of these programs come with conditions. Most are designed to add affordable housing stock, not luxury units or short-term rentals. That means:
You'll likely need to rent the unit at or below market rate for a set period. There may be income limits on who qualifies. The ADU usually can't be used as an Airbnb or short-term vacation rental. Some programs require you to live in the primary residence on the property.
What This Means for Developers and Communities
If you're a developer or community planner looking at tiny home villages or workforce housing, these programs can significantly reduce per-unit costs. Several states are actively looking for ways to scale up ADU production to address housing shortages — and tiny homes built to code are a natural fit.
Want to Know If You Qualify?
Program availability changes frequently — funding gets allocated, new rounds open, and requirements shift. If you're interested in pursuing incentive money for an ADU or tiny home project, the best first step is to contact your local or state housing department. We can also help you understand what might be available in your specific area.
Talk to us at mycocoonhomes.com
Program details based on 2024–2025 data. Funding availability changes frequently — always verify current status with the relevant program administrator before applying.