It’s a big deal in a state where homeowners have fiercely fought any changes to single-family neighborhoods. California Governor Gavin Newsom is catching up on his “to do” list after the recall election, and just signed two important pieces of housing legislation. One is SB 9 which eliminates single-family zoning in most neighborhoods across the state. The other is SB 10 which makes it easier for cities to build multi-family apartment buildings in some areas. (1)
Hi, I'm Kathy Fettke and this is Real Estate News for Investors. If you like our podcast, please subscribe and leave us a review.
Senate Bill 9 is especially significant after years of homeowner opposition to previous efforts to increase housing density in single-family neighborhoods. This bill allows for single-family parcels to be split in two, and duplexes to be built on each half, which allows for a total of four units on one lot. The other bill will streamline the approval process for the development of multi-family housing near transit and urban infill areas.
The Single-Family Mindset
The bill that ends single-family zoning is especially significant. It’s a housing concept that is deeply entrenched in the minds of homeowners and housing codes across the U.S., not just California. The so-called “single-family neighborhood” has created the suburbs as we know them today.
Single-family zoning has also been used as a racial barrier for people who can’t afford bigger homes with bigger yards. And with higher home prices, the gap is growing between those who can afford to buy homes and those who can’t. In California, the median price for a home has gone up more than 21% in the past year to more than $700,000. That’s according to Zillow. (2)
Those two bills along with Senate Bill 8 are part of Governor Newsom’s California Comeback Plan. SB 8 extends the Housing Crisis Act of 2019 to jumpstart more housing production, and the Comeback Plan is a five-point plan to address major issues in a post-pandemic world.
California’s Comeback Plan
The first leg of that plan is the state’s effort to help people hit hard by COVID-19. Other parts of the plan include housing affordability and homelessness, upgrading schools as gateways for opportunity, addressing climate change and making the state more resilient against wildfires, and creating infrastructure that will take the state into the next century.
SB 9 and 10 are part of the housing affordability leg. As Newsom says: “The housing affordability crisis is undermining the California Dream for families across the state, and threatens our long-term growth and prosperity.”
SB 9 Do’s and Don’ts
So what does all this mean for you if you are a single-family homeowner?
Currently, the law allows two units on a single-family lot. You can have a stand-alone home along with an accessory dwelling unit no larger than 500 square feet. This new law will allow up to four units on the same amount of land. But there are plenty of guidelines.
For example, if someone wants to split their lot in two, each new lot must be at least 1,200 square feet. Properties that have been listed as historic landmarks cannot be altered by this law. Also, any new unit created under this law CANNOT be used as a short-term rental. That’s defined as a unit that’s rented for less than 30 days, so more than 30 days is okay. (3)
According to the Daily Democrat, anyone who wants to build a duplex or split their property to build two duplexes must also plan to live in one of the units for at least three years. That applies to both homeowners and landlords.
The law makes it difficult for local districts to deny a valid development application. Local officials can reject a proposal if the project would have a “specific adverse impact” on “public health and safety, or the physical environment” and there are no other options for eliminating that adverse impact. As for size and design, upzoning projects would still need to adhere to local standards.
Will It Solve the Housing Gap?
Will this make a huge difference in California’s housing gap?
According to a recent study by the Terner Center for Housing Innovation at UC Berkeley, 5.4% of California’s single-family lots could be developed under SB 9. That could potentially create an additional 714,000 homes. But that’s still far short of the 3.5 million homes that Newsom wants to create in just another four years, by 2025.
If you’d like to read more about this legislation, check for links in the show notes at newsforinvestors.com.
You can also join RealWealth for free at our website. As a member, you have access to the Investor Portal where you can view sample property pro-formas and connect with our network of resources, including experienced investment counselors, property teams, lenders, 1031 exchange facilitators, attorneys, CPAs and more.
And please remember to hit the subscribe button, and leave a review!
Thanks for listening. I'm Kathy Fettke.