Carras Community Investment, Inc. (2026)

29/06/2026

My latest article on Capital as a Civil Right on Substack

01/06/2026

https://jamescarras.substack.com/p/financing-the-missing-middle

Missing middle housing — duplexes, triplexes, fourplexes, and accessory dwelling units (ADUs) — is among the most efficient ways to add attainable homes to existing neighborhoods, yet it has been chronically underbuilt. The principal cause has been financial: a lending system organized around single-family homes and large commercial multifamily left two-to-four-unit and ADU projects in an underserved seam, with new construction especially dependent on personal wealth, home equity, or cash. That is now changing. Between 2023 and 2026, FHA, Fannie Mae, and Freddie Mac each began allowing borrowers to count ADU rental income toward qualifying and required appraisers to measure it; a wave of statewide ADU legalization has removed zoning and approval barriers; and mission and specialized lenders are building products around the value these units create. Meaningful gaps remain — speculative construction lending, four-unit and cooperative finance, and appraisal practice for three-to-four-unit properties — but the central question has shifted from whether the capital exists to how to connect it to the owners and small developers who need it. This paper maps the financing landscape, the recent reforms, and the agenda that remains.
James Carras
Adjunct Lecturer | Harvard Kennedy School
Principal | Carras Community Investment, Inc.

Barriers and Emerging Opportunities in Funding ADUs and Small-Plex Housing

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