Ulster County discusses ADU revolving loan fund to expand Plus1EDU program and housing action fund

Ulster County legislators heard an extended briefing on March 18 about local efforts to increase accessory dwelling unit (ADU) production, including the Plus1EDU program and a proposed revolving loan fund to provide gap financing for homeowners.

Background and why it matters: County staff said the Plus1EDU program awarded grants to homeowners for construction or rehabilitation of ADUs and that the county received additional rounds of state funding: round 2 for about $5,000,000 to build roughly 52 units and another approximately $3,000,000 for round 3 targeted at nonparticipating municipalities. Staff reported the state’s $125,000 per-project assumption often proves insufficient once site-specific costs, septic work and other constraints are considered, and actual costs can range from about $100,000 to $200,000 or higher for detached ADUs.

Proposed revolving loan fund: Staff presented a plan to amend the Housing Action Fund to allow a revolving loan product to cover construction “gap” financing for ADUs. The county’s housing-action fund was originally structured for grants only; staff said a resolution will be drafted to allow loans, with the loans structured to follow the property as a lien and include affordability covenants (for example, priority for 60% area median income renters and typical affordability periods such as 7–10 years). Staff said the county could partner with a nonprofit housing organization and a local financial institution to administer the loan product and take on underwriting and reporting responsibilities.

Program design and safeguards: Staff discussed mechanisms to limit windfalls (for instance, restricting loan benefits to the intended affordability outcome), lien terms and recapture. They said prior county programs used liens and repayment if properties were removed from affordability requirements. Staff also said nonprofit partners would provide annual reporting attestations about unit use to reduce the risk that units become short-term rentals.

Implementation and funding: County staff noted the Housing Action Fund has received hotel-occupancy-tax allocations (roughly $1.7–$1.9 million per year under a 25% dedication estimate) and has granted $2,000,000 previously; staff said the revolving model could preserve capital by recycling repayments and increase long-term capacity. Staff also cited other jurisdictions (Vermont’s statewide EDU program, Rockland County ARPA-funded revolving loan) as models.

Legislators asked about construction-cost inflation (tariffs, lumber), modular construction studies funded by Empire State Development, eligibility for nonprofits and churches, geographic representation of applicants, enforcement against short-term rentals and qualification rules for households. Staff answered that the program focuses on gap financing (not full construction cost), that eligibility typically requires a homeowner-occupant primary residence for ADU programs, and that liens and recapture mechanisms are standard enforcement tools.

What’s next: Staff said they will prepare a resolution and a request for proposals for a nonprofit/financial-institution partner and bring draft language and an RFP to the committee next month for further review.