New York will pay homeowners up to $125,000 to build an ADU in their backyard to help ease the nation's housing shortage

• New York allocated $85 million to pay homeowners for building ADUs in their backyards.
• Grants are given to local governments or nonprofits who distribute the funds.

New York is doling out millions to help homeowners build tiny homes, called accessory dwelling units, or ADUs, in their backyards.

As of August 15, the Empire State has spent $23.4 million doing so, according to New York State Homes and Community Renewal, which is in charge of the funds.

It's part of a package passed within the state's 2022 to 2023 budget called the Plus ONE ADU Program, which provides grants of up to $125,000 to homeowners across the state who add an additional housing unit to their property. The state plans to give a total of $85 million out in grants by 2028.

"It comes at a time when we need to investigate every avenue to build every single unit that we have," Jolie Milstein, president of the New York State Association for Affordable Housing, told Insider.

The program is one way lawmakers are trying to ease a worsening housing shortage, a nationwide issue that is making both buying and renting a home very expensive for most Americans.

Through this program and other proposals, Gov. Kathy Hochul is planning to address "New York's housing crisis by increasing the housing supply, which is why she brought forth initiatives to expand housing options — including through the construction of accessory dwelling units," a HCR spokesperson told Insider.

In the first round of funding, HCR gave out nine grants of between $500,000 to $2.6 million to local governments like Ulster County and the Town of Amherst, and nonprofits like Habitat for Humanity of New York City and Westchester, HCR said.

Through these grants scores of homeowners — from those located near Buffalo to New York City — will receive cash to turn their garage into an apartment or build a tiny home in their backyards, HCR said.

In order to apply, owners need to meet a certain threshold of the area median income, which varies depending on where they live in the state.

Many cities, in New York and beyond, have eased zoning ordinances to allow homeowners to build additional living units on their property.

In California — where the housing crisis is especially dire — the state legislature even overrode local zoning ordinances, to allow all homeowners to build on their property. A similar bill in New York did not make it through the legislature, Spectrum News 1 reported.

Still, Milstein sees the grant program as an "innovative" way to give those a head start where building is legal, and "show this can be a successful way to allow people the freedom and flexibility to address the crisis in their own home."