Goodbye single family zoning. If you didn’t know, two weeks ago SB9 was signed into law in California, which now allows property owners to build a duplex on any residential lot or subdivide to build up to four units. This is massive news, so let’s talk about it. I’d love to hear your take in the comments.
Some perspective (not arguing for or against):
We need time: This is a huge change, but will it alter what neighborhoods look like? In short, there are some sensational ideas floating around, but we need time to tell. With that said, it seems so far news sources are talking about only modest change. For instance, First Tuesday quotes a study stating at the very most we could see an impact to 410,000 parcels (roughly 5.4% of parcels).
By the way, here is a CalMatters piece that goes into more depth on some of the details of this bill (or read the bill here).
Minneapolis as a case study: In 2019 Minneapolis legalized triplexes to be built on single family lots and Axios points out there was little change. In fact, there were only 70 units added in 2020 (20 brand new units and 50 single family units converted to multi-units). Oregon has also banned single family zoning in most cities, so let’s keep an eye on Oregon too.
Scared of renters: I’ve heard some fear about more renters moving into neighborhoods, but did you know roughly 45% of residents in California are renters? Let’s be cautious about vilifying half the population.
Expensive to pull off: Just because zoning has been modified doesn’t mean we will see a big change in the market. It is still going to be really expensive to build, there is a labor shortage, and land in California is pricey.
Three units were already allowed: Under existing California law home owners have already been allowed to build two other units on site. If you didn’t know, you can build an ADU (accessory dwelling unit) and JADU (junior accessory dwelling unit). This is good to keep in mind as we talk about the end of single family zoning and the idea that new units are now possible because of SB9. All I’m saying is technically more units have already been possible.
Highest and best use: As far as highest and best use in appraisal reports, that’s something appraisers will need to think about as they craft highest and best use statements. Let’s remember highest and best use isn’t just about what is legally possible, but also what is financially feasible and even physically possible. In short, it’s not going to be financially realistic to see multi-units built on every single family lot, so the highest and best use will continue to be the existence of single family homes. Of course we’re going to have to see if SB9 affects some neighborhoods or price ranges more than others. Moreover, it could be difficult to fit a multi-unit property on a postage stamp lot, so it really might not even be physically possible in some cases.
We need more inventory (but not like this): For years we’ve been saying we need more housing inventory, but when SB9 became law so many have said, “It is true we need inventory, but not inventory like this.” I completely get it and I’m not here to argue. Ultimately this new law is likely to expose NIMBYism (not in my backyard) and YIMBYism (yes in my backyard).
Other: What else? What’s on your mind? What did I miss? What are you concerned or excited about?
In closing, this change in zoning is certainly unconventional and even scary to many, but the impact is still to be determined. My advice? Let’s be objective about the issues, listen, embrace facts, and avoid sensationalism.
I hope this was helpful. Thanks for being here.
Questions: What do you think about the end of single family zoning? Is this good or bad? What opportunities and threats will exist as a result of this?
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Curious if HOAs can impede a member from violating CC&Rs. And is this a way to incur permit fees.
I have no idea. How does this relate though? Make the connection for me. I haven’t had my tea yet (coming very soon).
CC&Rs offer another layer of restrictions that members must obey. Building an ADU or a 4plex in your backyard wouldn’t be approved by our HOA. So what gives?
Got it. I could be wrong, but my understanding is HOAs cannot disallow construction of ADUs under California law. The reading I’ve done online seems to suggest that, though I’m not committed to saying this is absolute truth yet without more research. I am not entirely clear on how HOAs fit into SB9. I’d love for someone in the know to speak into that.
Depends on the type of property you own within the HOA. If it’s single family and you have your own backyard that can fit an ADU then probably yes, but if it’s a townhouse.condo or if you need to tear down your home, then not likely. Also your CC&Rs may have other restrictions such as parking and what your residency can be used for.
Thanks David. Yeah, I don’t suspect tearing down a tiny townhouse is going to play out. 🙂
Based on what I have read so far, HOA’s in California may still be permitted to have resonable restrictions such as set-back rules, parking, view obstruction, architectural design, etc. Much of this will need to be played out in court when a homeowner is told no and hires an attorney. So…..besides builder and developers, attorneys will also benefit from these new California bills.
That’s the sense I’ve walked away with when looking through some articles today. It sounds like HOAs have some control (as do historic districts). But it also sounds like HOAs cannot create rules that would make it impossible. I’d love for a legal expert to speak up here at some point (just in case an attorney in the know is reading this and wants to scratch out some thoughts).
Good article, Ryan. Unfortunately, I live in Florida and I can’t even build a shed on my lot because of my HOA.
That’s wild. I think rules can be helpful at times, but no shed seems over the top.
1004?, no!, 1025, all units can be rented.
What do you mean Rick? I haven’t had my tea yet.
Hi Ryan!
This is a great article. I have friends in Land Park panicking over this. I keep telling them it doesn’t make financial sense to raze and build a new multi-family structure (which is what they are envisioning). Of course, the City of Sacramento discussing more than just duplexes just adds fuel to the fire. I don’t expect a huge change in our neighborhoods.
Thank you Paula. Yeah, I think panic is the correct word. This is where good design will be important. If someone does build a multi-unit property, it’s a good idea to build something that blends into the neighborhood or at least complements it (if the architecture is different). I think many people are not connecting the reality that it is already legal to have three units on site with an ADU and JADU. I feel that is a good point to consider.
Where will tenants park their cars when multi-family structures are built on postage-size lots? Someone didn’t think it [SB9] through.
I don’t know the requirements are for parking. I haven’t looked into that part. Same issue with ADUs.
Didn’t I read in the Bee that there would be no parking requirements? Also, what are the restrictions for multiple units under this bill – I just can’t build anything, can I? BTW, The Bee article this morning on ADUs states that in Sac ADUs can abut rear and side property lines. Time to start panicking, people!
Thanks Kerry. I haven’t read that ADU piece yet. I need to check it out as a few people have mentioned it. The bill itself is linked at the top of my post, but it’s not always easy to navigate a bill and walk away with clarity. The bill does mention some restrictions though for demolishing homes and such. Here is a CalMatters piece that is helpful in terms of being a good intro into some of the details of the bill (does not go into multi-family much). There is also SB10 that will allow up to 10 units on a single family lot, but as the article states it sounds like cities will basically have a hand in this moving forward or not. The key is the location has to be near a transit hub or urban infill development, so on paper at least this sounds like a typical tract subdivision neighborhood wouldn’t fit. I think we’re going to need more clarity and details on this point. https://calmatters.org/housing/2021/09/california-housing-crisis-newsom-signs-bills/
When I lived in Watertown, Massachusetts I shared a single-width driveway with 4 other people/families/cars. Typically the landlord, an old Greek guy, would pull most of the cars out to the street early in the morning. You had to leave your keys on a board and sometimes had to move other people’s cars. Oh, and then there were snow days, with restrictions due to the plows.
This is the kind of constant mental game that I moved out to Sacramento to get away from! I don’t want it for myself, and don’t want to see it in my neighborhood.
I don’t understand why this law passed, yet there is so much empty land in the Sacramento area that apparently can’t be zoned for residential.
Thanks Charlie. I appreciate hearing your experience and for the record I don’t want a peg board like this either. Haha. There really is so much vacant land. I think that’s exactly why we cannot pin solving the housing shortage on adding more accessory dwellings and more duplexes. That may help chip away at the problem, but it doesn’t seem like the main solution. We have to normalize building more frequently and for less money if possible. The permitting fees are astounding locally and throughout the state. It is simply profoundly cheaper to build in other states, so in my mind something has to give here over time if we are to really make progress with adding more units.
Yes- parking will be an issue
I personally own a single family with an ADU on 1 acre. My husband asked if I thought we should add more units and split the lot. I said no. I do have concerns as to what this will do to neighborhoods. Only time will tell.
I’m going to raise the other item. Our states are changing. None of us knows what will happen to all the illegal people crossing the borders. Where will they end up. Will they end up in the residential neighborhoods? 2 or 3 families to a house? I know it’s not a popular subject. But this zoning will make more people in smaller areas more possible.
Thanks Martha. Society is changing and if we see more multi-generational living situations that changes things also. Over the past few decades we’ve been seeing larger homes built, so theoretically that should help a bit. But there is no mistaking there is a relationship or even tension at times between housing and demographics. The truth is things are always changing.
I love your response here, Ryan. And your comment in the blog warning people to be careful vilifying renters – which make up almost half the state. People are fearful of the unknown and what they don’t realize is not everyone who lives is a condo or multi-family home is a bad person – or a bad neighbor. We need to make room for more people to live comfortably here and I support that. Change is often what people are most worried about but it is a constant! Let’s get used to being a little uncomfortable.
Thanks Jane. Excellent commentary.
The truth is there is often a bias toward owners, but let’s be real there are some people who probably should not own homes because they don’t take care of their properties. This is true for some investors and it’s even true for some owner occupants. An investor friend used to say he would take a good renter over a lousy owner any day (when talking about neighbors next to his flips).
I totally agree with you regarding judging others. I think this 45% stat can give us pause to help us reflect on what we believe and what we think. There’s nothing like holding up a mirror and doing some self-work. On a related note I’m thinking about doing a follow-up post talking about rents. I spotted some compelling data this week that might be worth a share.
Ryan,
Thank you for the informative article. Take me back to the 60’s and 70’s!!!
The music was way better in the 80s and 90s though (yeah, I said it). 🙂
Dig a lil deeper and look for larger size multi family builds near transit hubs and pick up/get off locations…
Thanks Randy. Yeah, I’m anxious to see what the requirements are. We want more apartments though, right? We have a severe housing shortage with single family and multi-unit. I don’t know the specific requirements for where these can be located, but I do know it’s going to be very difficult to put an apartment on most small single family lots. I get the concern though. I was just talking with someone about that on Instagram actually. I think lots of onlookers share this concern also.
The language doesn’t say “transit hubs”. The language allows for it to be near “transportation.” That could mean Uber and Lyft.
We made this change in Portland, Oregon. We call it the Residential Infill Project or RIP single family zoning. It is too soon to see any shifts in development. It will take time. However, it has created a problem for appraisers. RIP allows for up to six units on many otherwise single family lots in Portland. However, Certified Residential appraisers, under appraiser licensing rules, are not qualified cannot make highest and best use decisions when the potential for units exceeds four units. Depending on interpretation of the appraiser rules, this means that many single family homes could need a commercial appraiser to determine the highest and best use or it gets appraised under an extraordinary assumption of highest and best use.
Once again, state policy affects real estate. My first thoughts around this issue echo Gary’s regarding Highest & Best Use. Financial feasibility will likely limit building additional units. Much like the ADU allowance, there will be criteria that must be met to actually build more units on a parcel-I have read that California has 700,000 qualified properties. We are not seeing a lot of ADUs, IMO we wont see a lot of SFRs being converted to multi family. I have seen more of builders taking advantage of the Transit Oriented Use (TOU) policy in Los Angeles to build up to 7 units near the rail lines. Stay informed on policy-it can change our businesses overnight.
Thanks Mark. Policy matters. That is absolutely true. And on a side note, we’ve seen the effect of policy in the appraisal space with over-regulation and it being too difficult to become an appraiser. ADUs are interesting because they are so costly, so it’s not easy to build them even though they are legal. It’s hard to imagine seeing something different with SB9 as you said. Some people will crack the code to make it work though. It won’t work everywhere though. I saw that 700,000 figure and one study boiled the number down further to 410,000.
Thank you Gary. Wow, I didn’t know that about six units. Very interesting. And clever name of “RIP” for your market. At some point we will get stats and know for sure what sort of effect these laws had.
The short answer is this will allow the California working class people to be stacked up on top of one another in tight, cramped housing on small single family lots with little to no parking and living in accomodations that may not meet human living condition standards. It’s the state government answer to a problem allowing those with the most money already, the builder/developers the opportunity to make even more money…..now.
Thank you Scott. I hear what you are saying. What is a better alternative? I think that’s the question.
Elect me governor….and I’ll tell you. lol. Seriously the only real people that will benefit from SB9 abd SB10 are builders and developers. They can now convert single family homes into 4-unit apartment complexes. A better alternative? That’s the million dollar question. The easy answer is better paying jobs so people can afford to purchase a single family home. However buying a single family home in California has become little more a carrot and string parody. When we get close, they pull the carrot farther away. The only alternative is to move out of California…..or cram 4 families on a single lot.
on a sq ft basis, single fam resid is ALWAYS >$ than multi res. To make it H&B use one will have to put a lot of sqft on the site to make it equiv to SFR values. ADU’s are a really clever way to have both worlds. Gary’s comments bringing in the layers of square footage in Oregon are interesting…and of course, there will ALWAYS be carve-outs for wealthy ‘hoods’, LOL. This stuff is part of the ongoing Europeanization of the US, an accelerating change over past 50+-yrs.
Thanks Merv. Interesting to hear your last line. I don’t hear that sentiment much in my circles. I’d be curious to hear what you mean by that if you’d like. No pressure.
Wow, I hadn’t even heard of SB9, interesting that it hadn’t really been talked about in appraisal circles (unless I just missed the conversation). I was surprised to see that 45% of Californians are renters. Makes me wonder who the majority of landlords are–large companies, individuals, out of state owners? Thanks for writing about an interesting topic that has the potential to affect our industry.
Thank you Alanya. Yeah, this hasn’t seemed to permeate appraisal circles I’ve been watching either, but it definitely needs to pop up when we consider highest and best use. This may not be something that affects the entire market en masse, but it is something we need to think about technically in appraisal reports at the least.
It is amazing to see stats on rentals. I just got an email this morning from Rent Cafe (Yardi Matrix) talking about a few markets in my area with over 50% rentals. It’s shocking at times how many rental units there are.
It’s stupid, these Legislators in California have no idea what they are doing and pass useless laws. This will not change the cost of building materials, labor or permitting processes. Many laws and policies that are currently on the books should be looked at because they contribute to the high cost of housing and they could be tweeked.
Thanks David. It seems like the idea is to change the number of housing units most of all. We have a real problem on our hands. Is this a bad idea? I think society is going to need to watch and speak up if it is. On a related note, while it’s exciting to watch more accessory units being constructed due to laws changing in the past, I think you have a point that we have to look at other things too. The permit fees for single family construction, for instance, are outrageous in California and I suspect that really impedes development. There are surely other issues too.
Ryan, while this bill allows multiunits, doesn’t local building departments control if a duplex or fourplex can be built?
This is a state bill, so it now supersedes local zoning. This doesn’t mean every parcel will qualify though. The study I quoted boiled it down to say they think only about 5.4% of parcels could maybe be effected (but more parcels would clearly qualify). Something similar happened with ADUs as the state basically passed laws to make it easier to build accessory dwelling units, so state laws are now the trump card. Yet I imagine there are some lots where they cannot be constructed for one reason or another. I’m not an ADU or SB9 expert just to be clear.
I love reading all of the comments on this post. This will be interesting to see how this plays out. It does seem that Oregon has already had this law in some cities and it’s still being played out. Time will tell. The analysis of the highest and best use will certainly be very important for real estate appraisers.
Thanks Shannon. This is a big deal to watch for appraisers especially. The market is always moving and sometimes laws change too that end up affecting our work.
Absolutely, nothing in real estate is static. Changes are always happening and come from many different sources. Thanks for your thoughts on this topic.
Hey Ryan,
I am noticing that this legislation does not allow for short term rentals- which may reduce the desirability of adding more units: “A local agency shall require that a rental of any unit created pursuant to this section be for a term longer than 30 days.”
Oh, that’s a critical detail. I didn’t catch that yet. Thank you.
They want us to be packed-in like sardines without
yards and trees. These so-called leaders want us to live on top of each other, while they live on estates.
Thanks Amy. It’s difficult to not become more dense in design as the population grows and prices rise. New construction at times has such tiny lots in brand new neighborhoods too because it’s easier financially to create more units. It’s pretty amazing to see.
I don’t agree. What about quality of life? No one will have room for a yard and trees and pets. It will be hotter without the cooling impact of grass, trees and bushes. They’re going to turn our town into a cement and gravel hell.
One of the things I like about Sacramento is we have so much more open space. I hope we never lose that. I grew up in SoCal and to me it feels like a concrete jungle when going back. This is the trend though with so many new developments. It doesn’t happen all the time, but smaller lots help maximize profit and I suppose if buyers are purchasing then they’re voting that they’re cool with the size (and the quality of life). Of course some buyers don’t want a larger yard because it’s more of a lifestyle thing. I do personally want a large yard.
For most of us, this is just an intellectual argument with no consequences. Those that have purchased homes in a specific area based on the previous law, could have something to worry about. 5.4%? Do we not worry about the rights of small groups. The main problem regarding the wait and see approach for these owners is that if the impact is bad, there is no going back and there is no recourse.
I hear you, Ray. I’m just saying this is not 75% of the market that is going to become a duplex or fourplex. It’s important to keep that in perspective (as we both know). I’m not minimizing 5.4% either (if the number even ends up being that high).
If I purchased a single family home and my neighbor subdivides the property next to me ending up with four units, I am not happy. To me, it seems like politicians are stepping on the rights of a whole group of property owners. It will be interesting to see if any of those groups affected will end up in court over this.
I just can’t imagine the headaches getting utilities to my backyard for an ADU let alone a fourplex.
I completely understand that. Though to be technical, we don’t have control over what happens next door and I think this reminds us of that harsh reality in real estate. I know someone building a custom home right now and this person previously said to me, “The lot next door cannot be built out.” Guess what’s now for sale? The lot next door. I suspect it will be purchased and we’re going to see a new unit built on that lot. I realize this is different of course, so it’s really NOT a perfect comparison despite there being a hint of similarity. I’m just saying this reminds me that we never know what is going to happen in life and sometimes in real estate. Whether that is right or wrong is up for debate and I suspect many heated arguments will ensue over this issue. There is no mistaking this is a deep DNA-type change though, so it’s really unprecedented. And that’s the part that does warrant debate.
People need to fight this. Sacramento is over reaching in telling us what to do with out neighborhoods. This is a local issue.
Thanks Amy. That’s what I hear from the opposing side that local authority has been cut off. I think there needs to be discussion about this for sure.
Thank you Ryan for the great info! My understanding is the law requires some units designated as affordable for 30 years and/or requires an owner to occupy at least one unit. I think these requirements make it financially infeasible in many CA markets right now, especially for investors or developers. Like you said, the ADU law allows for similar density but we’ve seen relatively few new units as a result.
Thank you Erik. I have yet to hear about units designated as affordable. If you find a source to substantiate that, I am open ears (any onlookers can speak up too). Here is a CalMatters piece that goes over some of the details of the law and they did not mention affordability requirements. I know I read a letter to the editor of the LA Times a few days ago where the person writing sort of made this point too that there won’t be affordable units required. I’m open ears. Thanks hombre. https://calmatters.org/housing/2021/09/california-housing-crisis-newsom-signs-bills/
Could be a convenient tool if investors target an underprivileged neighborhood to gentrify.
I suspect investors are going to really crunch numbers to see what works and does not work. I’ve observed very few 2-4 units being built in the region in recent years. It seems like Del Paso Heights has been able to pencil lately for a smaller cluster of new duplexes. And then there is Midtown where the numbers can work for the right type of unit. I just checked and since 2017 on MLS there have been 7 new 2-4 units in North Sacramento, 1 in Natomas, 1 in Midtown, and three in or near Oak Park. It’s possible other units could have been built and not listed on MLS, so this is a very limited view. Even 7 units in North Sacramento is pretty minor considering we’re looking at five years of sales on MLS. But if this view reflects opportunity as seen by investors, it does tell us lower-priced areas where land is less expensive could be a viable target. The issue is acquisition of land at the right level and then capitalizing on massive rental growth. Let’s be real. Without huge growth in rent (and property value), it’s hard to imagine these numbers would even pencil out.
I’ll be watching this closely and I welcome any stories from the trenches from onlookers.
I read an analyses of the Portland OR ordinance and, according to it, the numbers just don’t pencil out, so the effects are not likely to amount to much- now. And that’s probably true for CA and most of the places enacting these zoning
changes, it’s down the road 10 or 20 years we’ll see the impacts. By then though it’ll be the “normal” thing. In 40 years of RE investing I’ve seen several “oh-my-god-it’s-the-end-of-the-world” panics over some new development or law, and not once has it ever proven true. Humans adapt very quickly, and soon no one remembers it was ever any different.
Thanks Mary. I love your take and I think you’re right. We’ll see how the numbers pan out, but for now this looks like we’re poised to not see an avalanche of multi-units. What will we see after a couple of decades though? That’s going to be the fascinating part.
New laws almost always create panic, whether they are big or small. On a smaller scale, I remember a few years ago when California changed a few things with plumbing fixtures so they would have to be low-flow and such. There was lots of conversation and some worry over that. Now we never hear anything about it. (I’m not equating toilets with zoning changes by the way. I’m just using a minor example.).
You’re correct, I re-read the actual Assembly Bill (good times) and it does not include an affordability requirement. It does appear to require owner occupancy for three years prior and three years afterwards.
Thanks Erik. Yeah, that’s an interesting angle. It seems like that will limit units. If I remember correctly, it seemed like language in the bill seemed to talk about maybe limiting speculation after splitting lots and whatnot. I appreciate the follow-up. This really helps advance the conversation.
So many questions. Occupy one unit or the new unit? New utilities or shared? Its own septic tank? Two story?
Clearly we’re going to need someone to make an infographic to answer all these questions. 🙂
Referring to human beings as “illegal people” doesn’t make the subject of demonizing refugees and asylum seekers popular with me. Please remember that people who were not born citizens in the US are, nonetheless, people.
Thanks Jim. I was talking with my doctor once about appraising and the conversation shifted to her profession. She made the comment that it would be even more complex if appraising humans. I actually said it would be easier because we all have the same value. Okay, it was a cheesy zinger, but it’s so true.
upvoted
I looked into the feasibility of adding ADUs to any of 3 rental homes I owned in 95838. These all had big enough yards.
Generally the cost of a second unit averaged over $200 per square foot running up to $300 per square foot and higher. So $200,000 to $300,000 or more to add a unit.
I plotted scenarios for small 600sf, medium 900, and family size 1200sf adds for each of the lots. Nine times out of nine, there was no profit, only very large losses, when I calculated the improved value – cost of construction and permits – the early 2020 as-is valuations for the lots as they exist.
Subtract further for for time use of money (or financing cost). Subtract further for selling costs. The loss, if selling, would be spectacular.
Build and hold, a little better. Still can’t justify the effort. The best for that was the 1200sf at about $300,000. Rent at $1800 (This is 95838) The cap rate for the new investment would be about 4, about where sfrs are, but on the low side for multi-family in that zip code. Still can’t justify the effort, because I would be investing $300,000 in actual money into a building that would add less than $250,000 in market value, leaving me $50,000 instantly in the hole.
Thank you Jim. I appreciate hearing your story. This is exactly the problem with ADUs. They are SO expensive. I have a friend really needing to build one, but the financial aspect is a difficult hurdle to overcome. I always say an ADU is a marathon approach for value whereas buyers are sprinting to the market and they really might not pay anywhere near the full cost of the ADU in the resale market in one instance (despite the owner wanting that).
Wow! This will be very interesting to watch! You thoughts on Highest and Best Use are spot on. Definitely more to think about and comment on now with regards to HBU. Nice post, as always!
Thanks as always for reading. I appreciate you Jamie.
I apologize if this was asked before but…. Where does the calculation come from that this only applies to 5.4% of parcels? I’ve seen this referenced in multiple articles but can’t seem to find the source or figure out what parcels it applies to. Thanks as always Ryan!
Hi Scott. That’s a great question. Here are two links.
1) This article quotes the 5.4% figure. I have no idea if this is accurate, but that’s what they say based on #2 below. https://journal.firsttuesday.us/what-does-the-end-of-single-family-zoning-look-like/79871/
2) The Terner Center for Housing Innovation out of UC Berkeley wrote this report in July 2021 (PDF). This study is linked in the aforementioned article. If you end up reading through this let me know if you find anything interesting. https://ternercenter.berkeley.edu/wp-content/uploads/2021/07/SB-9-Brief-July-2021-Final.pdf
Does this apply to HOAs?
Hi Jim. I’m not 100% sure about this distinction. It seems like it does, but I defer to an expert on SB9 for the straight dope. I do know HOAs are not exempt from ADU laws (from the reading I’ve done). My assumption is HOAs are not exempt, but that’s just an assumption, so I’ll defer to someone in the know.
Just because it can be done, should it be done? I just completed a 1025 (duplex) where the owner legally added an ADU, but considering Fannie and Freddie do not loan on such a configuration (Accessory Unit box checked), the loan was dead.
Of note, adding an ADU to your duplex does not make it a triplex, nor does adding an ADU to your SFR make it a duplex.
With this change in zoning, will added structures change a property into units (2-4 / Form 1025), or will it remain the same (Form 1004) where the building/ADU, etc. will be considered on a separate line?
Seek the truth.
Thanks Bill. It can be so tricky in these situations. I just had someone ask me to appraise a duplex with two ADUs being built (hard money loan). I’m a busy guy so I referred a friend thankfully. What a nightmare valuation.
I will say I wonder if the line between an accessory unit and second unit will be blurred in the future a bit as the ADU trend grows more and more. Time will tell.
For any onlookers, here is a post on the difference between a second unit and an accessory dwelling. This was written years ago, so if anyone has updated commentary do speak up. It gets tricky at times to distinguish though. https://sacramentoappraisalblog.com/2014/06/17/is-it-a-second-unit-or-an-accessory-dwelling/
So if it was already possible to build up to 3 units and Minneapolis stats show that there was not that much change why did this bill need to be signed into law? It’s interesting that Oregon banned single-family housing. I have not had a chance to read the details but I would be interested to know what fuels the need to ban single-family zoning. Just curious and looking at it from an outsider’s perspective.
I appreciate your critical mind Tom. That’s a good question. Technically it’s been possible to build two extra accessory dwellings on a single family site since California introduced new laws in recent years. For reference, one is a smaller unit though called a Junior ADU (but still an extra unit). I am not positive if there are any parameters in place for what you can build under SB9, but this new law is not talking about ADUs, so it is different.
As appraisers we know there is a difference between accessory units and full-fledged second units, but I made the point above about additional units because even if SB9 did not exist we would still have a law in place that can create more density, cause parking issues, add extra units (accessory ones), etc… I’m not arguing for or against SB9. I’m just saying this is an important logical consideration to embrace as we start having conversation.
One thing the new law does is allow larger lots to be split so a duplex can be built on that split site. Whether this is good or bad is something the public can debate, but I have heard some offer a bit of praise for this point since it allows maybe more people to take advantage of the possibility of participating in the market. The problem with adding ADUs of course is the enormous cost. It is serious money, so it’s not easy for just anyone to build an extra unit. I suppose the idea is theoretically under SB9 we could see some property owners split their lots and get to participate in the market without enduring the huge cost of ADU construction. Of course it is NOT cheap to split a lot either, so I’m curious to see if there ends up being any merit to this idea or not. Anyway, I’ve heard that talking point and I wanted to share it.
When it comes to eliminating single family zoning there is also a narrative of undoing racist policies from the past that kept people and types of properties out. The idea I hear articulated is to give everyone more access to neighborhoods.
Thanks for the clarification, Ryan. After posting my comment I read up a little on the move to do away with single-family zoning designations. It will be interesting to see how all of this unfolds. If it is being done to allow more underserved participants in the market to get into the housing market I’m not sure if this is the right move considering all of the costs involved that you mentioned. It seems that citizens in the lower-income brackets may not be able to afford this type of housing since there are higher costs involved. Again, just thinking out loud here. Thanks for sharing what is going on in your state.
Thanks Tom. This is only one way to provide access to real estate and I’m hoping at some point we can get the costs to build down. It’s just insane in California in light of all the permit fees and such.
I know in parts of West L.A. they are already tearing down $1 million older homes Between Olympic & Santa Monica Blvd) and building 2-3 units at $1.5-$2m each.
Postage stamp lot? – they build up to 3 floors of living space
Parking? now you’ll have to buy a permit;
The city wins with fees for resident permit parking, bldg permits, fines for illegal parking, and higher assessed values for taxes.
residents lose their space, views, and peace.
Was SB9 actually voted by voters or just CA legislature?
Thanks for your commentary Will. The people did not vote for this. It was the legislature.