Durham Rolls Dice On Backyard Tiny Homes In $1.75 Million Loan Pilot
Durham is putting $1.75 million on the table for a new pilot program that helps homeowners build tiny rental units, known as accessory dwelling units (ADUs), on their lots and keep those units affordable for three decades. The effort teams the city's Housing & Neighborhood Services department with local builder Coram Houses to offer low-interest construction loans to qualifying owners. City officials say they want to create about 20 ADUs and focus opportunities on long-time residents and neighborhoods that have seen years of disinvestment.
Pilot Details and Loan Terms
According to the City of Durham, the ADU Loan Pilot will use $1.75 million from the Forever Home fund to provide construction loans of up to $80,000 at a 2% fixed rate, amortized over 30 years, with a 30-year affordability covenant on each unit. The city plans to fund projects in cohorts of five and expects the pilot to generate up to 20 ADUs across Durham.
Who's Building the Units
Coram Houses is administering the program and has designed a roughly 300-square-foot ADU model it says can be built for about $80,000. Homeowners can hire Coram as the general contractor or choose a licensed contractor who meets program requirements. Coram will also handle outreach, help homeowners through the application process, and assist with placing tenants once the units are finished.
Who Gets a Slot
The pilot uses a stratified lottery that reserves slots across several tiers. According to the program manual, there will be six winners for homeowner households at or below 80% of area median income (AMI), two winners for households between 80% and 120% of AMI, four winners for properties in formerly redlined areas, four winners for certain civic uses, and two winners for duplex ADU projects, which would create four total units. Those selected move on to underwriting and must meet criteria such as owner-occupancy, current tax payments, and a preferred minimum credit score before the city releases any funds.
Officials' Rationale
Topher Thomas of Coram Houses told ABC11 that while "$80,000 is typically not enough to build a house" a compact design can fit that budget and "it's just like one small piece of the puzzle" for Durham's housing crunch. Housing & Neighborhood Services Director Sarah Viñas has described the pilot as "a creative solution" that layers financing and technical help to make backyard rentals possible for long-time residents who might otherwise be priced out of adding units.
Where the Money Comes From
The $1.75 million for the ADU pilot comes from Forever Home, Durham, the city's affordable-housing initiative funded by a 2019 $95 million voter-approved housing bond along with additional local and federal dollars. WRAL has reported that the bond and the broader Forever Home package have supported dozens of projects and sit at the center of Durham's effort to build and preserve thousands of affordable units.
How to Apply
Applications are being accepted on a rolling basis, with winners chosen in lottery cohorts. After selection, Coram Houses underwrites the projects and the city must sign off on each cohort before any money goes out the door. Homeowners who want to apply can start the intake process through Coram Houses.
The pilot is modest in size, at roughly 20 units, but city officials and housing advocates say it could become a model for adding rental options in existing neighborhoods without forcing out the people who already live there. For now, Durham is betting that backyard units and cheaper financing can keep a few more households housed as prices continue to climb.
