Would it break fair housing laws to say we are not willing to work with the program since it's not a source of income and they pay on their behalf?

Some states like california you can do trust deeds where you break off the loan into multiple pieces.All of these will require significant capital to scale with your own funds. 

I'm fine paying my fare share of taxes, but the government incentivizes us to do what it wants us to do - buy real estate, by giving us tax breaks.

I maintain even break even on valuation (which is rare in SF Zoned areas), the ADU has big disadvantages versus new property acquisition including financing, level of effort, rent control, prop tax being based on cost rather than value added, length of time including length of time from first expenditures to first income, reduction of something from existing unit (in your case existing home lost its garage).Did you see starting next year Mf can add an ADU per unit up to 8 units without any affordable housing concessions?

other than buying better class assets and break even and bank on values rising and what little depreciation does for you..

Scaling up is a big leap, but breaking it down into small, actionable steps—like building a deal pipeline or starting conversations with potential investors—can help keep the process manageable.I’m based in the PNW (Seattle), so if there’s anything I can do to help or if you’d like to collaborate on deals in Washington, feel free to reach out.

Or you can look at it this way - you've learned nothing and still have money sitting in your checking account wasting away and I just put another $3500 against my mortgage yesterday without breaking a sweat or taking anything out of savings.

the market is much more unforgiving than it used to be - i know those price points in Ohio and Alabama look appealing to someone in California, but they come with their own challenges.see these threads and see what you think.https://www.biggerpockets.com/forums/12/topics/1215726-break...https://www.biggerpockets.com/forums/48/topics/1159104-overl...https://www.biggerpockets.com/forums/963/topics/1195280-expe...https://www.biggerpockets.com/forums/48/topics/1160450-run-i...https://www.biggerpockets.com/forums/48/topics/1137397-balti...

Finding some middle ground that is beneficial for both sides is so important and can make or break a deal. 

If you're competing for a hot property or need to close quickly, fast closings can make or break the deal.