CRA board approves $2.9M ADU financing program to be administered by CDCU

The Salt Lake City Community Reinvestment Agency Board on March 18 approved a resolution authorizing staff to negotiate a funding agreement with the Community Development Corporation of Utah (CDCU) to operate an accessory dwelling unit (ADU) financing program using $2.9 million in CRA funds.

CRA staff described the program as a revolving loan fund that will offer two loan types. For homeowners at or below 80% of area median income (AMI) CDCU would offer an unrestricted loan allowing market rents; for homeowners above 80% AMI CDCU would offer a restricted loan requiring the homeowner to rent either the ADU or the primary residence at rents affordable at 80% AMI. Loans would be construction loans up to $200,000 amortized over 30 years with a 5‑ or 10‑year balloon and a fixed interest rate of 3%. The program includes a borrower fee ($200/year) and a partial loan forgiveness incentive (10% of loan balance forgiven at payoff) for rent‑restricted loans.

Staff said the total funding, drawn from a $2.9 million allocation (including $1.9M tied to the 9 Line project area and $1.0M from general housing development funds), would create roughly 15–20 ADUs over two years. CDCU will perform income and affordability verification for homeowners and tenants and provide counseling; borrowers must participate in city good‑landlord training and CDCU financial counseling.

Board members asked whether the affordability deed restriction lasts the loan term and how tenant income will be verified. CDCU staff confirmed that repairs and compliance would be administered by CDCU; deed restrictions last while the loan is active and CDCU will income‑qualify tenants at application. Board members also discussed whether the fund will cover all construction costs; staff said loans will be underwritten to a debt‑service coverage ratio and homeowners may be required to contribute some equity depending on the project.

A motion to adopt the resolution authorizing staff to negotiate and execute a funding agreement with CDCU for the ADU program passed unanimously.

What the program will do CDCU will operate a revolving loan fund and loan‑loss reserve using the full $2.9 million. Eligible homeowners may borrow up to $200,000 for attached, detached or internal ADUs. The program includes marketing, underwriting and compliance work and will target West Side areas, including the 9 Line project area.

Next steps Staff will finalize a term sheet, negotiate a funding agreement with CDCU and bring final documents back for execution. CDCU will launch program outreach and expects to start issuing loans in summer 2025.