These 5 states will pay you to build a tiny home in your backyard

• The ARU must be no larger than 800 square feet, and one additional parking space is generally required, subject to zoning and County standards.
• The ARU cannot be used as a short-term rental and must be rented for long-term residential use.

Agency or Department in charge of distribution: The County of Maui Department of Housing, Kaua’i County Housing Agency

Massachusetts’s ADU incentive program is in its first phase

Under Massachusetts’ Affordable Homes Act, homeowners in most parts of the state—excluding Boston—have the right to build ADUs of up to 900 square feet on their property.

To help homeowners build them, Massachusetts has launched a statewide incentive program. The program is in its first phase and focuses solely on property owners.

Who can apply? Any homeowner in Massachusetts living in an area that allows residential ADU construction.

Total funding available:

Massachusetts’s ADU Incentive Program pays approved professionals up to $500 to conduct feasibility studies for homeowners. These studies are designed to help property owners make informed decisions about their ADU projects and include:

• Details about a property’s specific conditions and limitations
• Zoning and permitting requirements in the local municipality

• Utility needs, including water, sewer, and energy

• Key ADU design considerations, though the study does not provide architectural designs, engineering plans, or construction documents
• Estimated project costs and budget considerations; the program does not provide permit application services

When are applications open? The program launched in July 2026, and applications remain open.

Requirements:

• The property must be located in Massachusetts.

• Only one feasibility study is available per household.

Agency or Department in charge of distribution: The Massachusetts Housing Partnership, in collaboration with the Executive Office of Housing and Livable Communities

New York: Up to $395,000 per grantee

Earlier this year, the Plus One ADU Program reopened and began offering eligible New Yorkers up to $125,000 or $395,000 in financial support and technical assistance to build or convert an ADU on their property. The program is part of Gov. Kathy Hochul’s five-year housing plan, which aims to create or preserve 100,000 affordable housing units.

Who can apply? Any municipality in New York State, or any nonprofit housing organization partnering with a municipality, may apply during the open funding round.

Eligible homeowners must earn no more than 120% of the area median income.

Total funding available: In 2026, New York State Homes and Community Renewal rolled out a fourth funding round, allocating the remaining funds authorized under the $85 million, five-year housing plan.

The agency says it has awarded nearly $74 million to 85 municipalities across the state, helping fund the anticipated construction of more than 565 ADUs.

When are applications open? Applications are available through HCR’s website and will be reviewed on a rolling basis until all funding has been awarded.

Requirements:

• Applicants must confirm that local zoning explicitly allows ADUs, preferably through an adopted local resolution.
• For homeowners:
  • The ADU can be within the existing home, such as a basement or attic apartment, an in-law suite, or a completely independent and detached structure.
  • A 10-year restrictive covenant is in place to ensure the home remains the owner’s primary residence and that the ADU is kept in a livable condition.
  • The ADU must be occupied by a tenant or a family member, and it cannot be rented out on a short-term basis.

Agency or Department in charge of distribution: New York State’s Homes and Community Renewal

Vermont: Up to $50,000 per grantee

While not exclusively an ADU program, the Vermont Housing Improvement Program funds vacant-unit rehabilitations, ADUs, and new construction.

Through the program, Vermont homeowners can receive up to $50,000 to build an ADU on their property. Both landlords and owner-occupied homes with plans to rent are eligible.

Who can apply? Any Vermont homeowner can apply through one of five regional organizations serving all 14 counties: RuralEdge, Champlain Housing Trust, Cornerstone Housing Partners, Downstreet Housing and Community Development, and Windham and Windsor Housing Trust. These organizations review applications and oversee projects.

Partners anticipate opening an application window later this Fall to assign these funds to projects.

Total funding available: The program operates on Vermont’s fiscal year, which runs from July 1 through June 30. For fiscal year 2027, the program received $4 million for incentives and administration.

When are applications open? Applications are expected to open in fall 2026.

Requirements:

• Those who receive a grant must abide by certain stipulations, such as complying with local ordinances, maintaining HUD Fair Market rent, and matching at least 20% of the grant funds.
• The project must be completed within 18 months of signing the grant agreement.
• Those using their ADU as a rental property must sign a rental covenant or a forgivable loan agreement, committing to charge rent at or below the Fair Market Rent for the entire duration of the agreement.

Agency or Department in charge of distribution: Agency of Commerce and Community Development

California’s ADU program is currently out of funds

Previously, the state provided $40,000 to Californians for pre-construction ADU costs, including design, permitting, and soil inspections. However, as of 2026, no money had been allocated for the program, a spokesperson with the California Housing Finance Agency told Business Insider.

Who could apply? In the past, Californians who fell within the low- to moderate-income range were eligible.

Total funding available: $100 million was allocated in 2021, and by 2023, it had been fully distributed. The program’s funds were supplemented with $25 million in grant funding for the 2023-2024 period, but by 2026, the program had no remaining funds.

When were applications open? The program is no longer accepting applications.

Previous requirements:

• Homeowners do not need to live in the primary home or the ADU they build.
• For single-family lots, you can be approved for one ADU (attached or detached) up to 1,200 square feet and one Junior ADU up to 500 square feet.
• For multi-family lots, you can build multiple ADUs attached to existing structures and up to two detached ADUs on the property.
• Homeowners can build an ADU at least 800 square feet, up to 16 feet high, and must be set back 4 feet from the side and rear yards.

Agency or Department in charge of distribution: California Housing Finance Agency

Have you built an ADU on your property? We want to hear from you. Email the reporter, Alcynna Lloyd, at alloyd@businessinsider.com to share your story.

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