A new bill could make it easier to build a tiny home in your backyard—here's what to know

Granny flats, backyard cottages, garage apartments, in-law suites, guest houses — whatever you call them, a new bipartisan bill could make them easier to finance.

The SUPPLY Act, introduced in the House last week by Reps. Sam Liccardo, D-Calif., and Andrew Garbarino, R-N.Y., would allow homeowners take out a government-backed second mortgage to build an accessory dwelling unit on their property.

Second mortgages tailored for ADU construction are virtually non-existent, according to the Urban Institute, because lenders see them as risky and hard to resell without government backing.

Currently, most homeowners who build ADUs have to rely on cash savings or home equity loans — options that aren’t available to many lower- and middle-income households. That financing gap has made it harder for less affluent homeowners to build ADUs.

The proposal comes as the U.S. faces a shortage of roughly 4 million homes, according to Realtor.com estimates, a supply gap that has pushed housing prices higher nationwide.