The SUPPLY Act makes it easier for homeowners to build accessory dwelling units (ADUs)—like a small apartment or cottage on their property—by creating a federal loan insurance program. Here's what it does: The Department of Housing and Urban Development will set up a program to insure second mortgages that homeowners take out specifically to finance ADU construction. This means lenders will be more willing to offer these loans because the government backs them if something goes wrong.

The loans can be fairly substantial. You can borrow up to 30% of what a standard single-family home loan limit is in your area, or potentially more if you plan to rent out the ADU—the program lets you count half of the projected rental income toward your borrowing capacity. The insurance premium costs homeowners no more than 1% per year of the loan amount. To qualify, you must own the property where you're building the ADU, and the unit needs to have its own kitchen, bedroom, and bathroom.

The bill also allows Fannie Mae and Freddie Mac (the major government-backed mortgage companies) to buy and resell these insured loans, which helps get more money flowing into the ADU lending market. The government will report annually to Congress on how the program is working. Essentially, this bill removes a major financial barrier to building ADUs by making it cheaper and easier for homeowners to borrow money for these projects, which could help address housing shortages in many communities.