New York City will pay homeowners up to $395,000 to build an extra dwelling in their garage or basement to help ease the housing shortage

• New York City unveiled a pilot program to help homeowners build accessory dwelling units.
• The city will give 15 lucky homeowners up to $395,000 each to construct the extra unit.

As cities and towns across the country struggle with a housing shortage, policymakers are looking to legalize and even fund the construction of accessory dwelling units, or "granny flats," on existing residential property.

New York City just unveiled its newest effort, which will hand 15 homeowners up to $395,000 to build an additional apartment. This could mean an extra unit in a garage, basement, or attic, or a tiny home in the backyard. The idea is to boost housing density in a city in desperate need of new housing.

New Yorkers can apply online for the funding, but high-income residents aren't eligible — the income limit for a family of four is $232,980, the New York Times reported. And the ADUs that are built will have a limit on rent: a one-bedroom can't be rented for more than $2,600.

The city's department of housing preservation and development on Tuesday unveiled the "Plus One ADU" pilot program, similar to a state-wide initiative with the same name that has doled out tens of millions of dollars to help homeowners across New York State build ADUs in their backyards.

"Whether it's for seniors who need space for a caregiver, a multigenerational household who want separate living spaces, or young parents with a little one on the way, an ADU can offer the flexibility families need to make New York City work for them," New York City Mayor Eric Adams said in a statement.

The effort is part of the city's sweeping new housing reform proposal, which seeks to pave the way for 100,000 new homes in the city by encouraging conversions of commercial buildings into residential, boosting density near mass transit, and reducing space devoted to parking. The proposal also aims to legalize ADU construction across much more of the city.

New York City is facing an especially severe housing affordability crisis. Over the last 10 years, the Big Apple has created 800,000 new jobs, but just 200,000 new homes, according to the mayor. Now, half of New Yorkers are rent-burdened, meaning they spend more than 30% of their income on rent.

New York is following in the footsteps of states like California and Oregon, which have altered zoning laws and made other policy changes to encourage ADU construction.