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?
If you liked this post, subscribe by email (or RSS). Thanks for being here.
FOX 40 INTERVIEW: By the way, I did a 
MARKET SUMMARY: In short, we’ve been seeing the drama of a spring real estate season during the fall months. The housing market has been on steroids and the slower fall season we normally have just didn’t happen. Well, technically we are seeing some stats start to slow down as prices have gone sideways lately and we’re seeing fewer sales like we normally do in November and December. But here’s the thing. The “slower” stats are still so elevated from where they should be that it just doesn’t feel slow at all.
MARKET SUMMARY: For anyone interested, here are some tidbits for social media, newsletters, or in case you want to win the real estate category on Jeopardy.
