Calif’s new granny unit law & ADU flips: is CA the next Portland?

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I am happy that California has passed a new law that eases restrictions on secondary units, effective January 1. When Portland did something similar, it sparked an ADU boom. Permitted ADU projects skyrocketed, and a cottage industry sprung up, including ADU designersowner/developer consultingADU breakeven calculator. With our new law, I see opportunity to build:

I'd love to get your opinions: 

  1. Are you ADU's as part of your strategy – househacking, flips, BRRRs?
  2. How do you think the new regulations will impact real estate investing in the Bay Area?

CA Granny unit law: Summary

  • no extra parking space required for ADU if it's within ½ mile of a public transit stop, or part of an existing primary residence, or part of an existing accessory structure, or in an area requiring on-street parking permits
  • parking can be tandem on existing driveway
  • when a garage is demolished or an ADU and off-street parking spaces must be replaced, they can be anywhere on lot, including tandem
  • no set back required for a garage conversion; side/rear setback of 5 feet max for ADU above a garage
  • no extra utility, water or sewage hookup fees
  • detached ADU's shall not exceed 1200 sq ft

 CA Granny Unit law: Background docs

@Jeff B. is right. The state of California passed this improvement, however local jurisdiction will have final say at this point and can enforce whatever they please, including the hefty utility fees and impact fees. 

Alameda county is quite difficult to deal with and is known to strictly enforce local jurisdiction. It's only a matter of time before local gov begins to understand the need for more infill, especially those towns that are unincorporated. Love to hear more thoughts on this from those on BP.

@Jeff B. and @Ryan Hopkins Call me overly optimistic or naive, but I'm hopeful that the new state mandate will put local governments in check, at least somewhat. The law mandates that all CA cities and counties adopt and ADU ordinance consistent with the new state provisions by January 1. Last week, I spoke to a planner at Alameda County, who said the county attorney is working on it.

Awesome!! i have been hearing about this and finally it is approved. I have a SFR in orange county and have the lot size to build another unit in the back! Going to call city and look into this further! Give me your guys thoughts on my approach. Thanks!

AS others have mentioned the Portland ADU rules are CITY rules not state..

And the city of Portland is all about cramming in as much density as possible.. CA has never really been like that.  at least in my expeirnce developing there

Originally posted by @Jay Hinrichs :

AS others have mentioned the Portland ADU rules are CITY rules not state..

And the city of Portland is all about cramming in as much density as possible.. CA has never really been like that.  at least in my expeirnce developing there

 Yes, I've experienced that too.  In fact, our city is all about SLOW & Controlled grown and is heavy handed in this area and high density housing.

Another issue that is just beginning to get attention is the reassessed property tax bills on ADU's. Some folks have been hit with such excessive tax bills that they are forced out of their homes - doubling or tripling their bill! One reason given is the amount of added sf triggers a total reassessment that considers the original property to be new construction even when only the ADU is new. Appealing can be time consuming and expensive - and not guaranteed.

@Varinder Kumar  

Here's what I'd do:

Look up your property's zoning online - is it zoned for an ADU?

Is your property within half a mile of a bus stop? If yes, and your property is zoned for an ADU, then there's relaxed parking restrictions under the new state law.

Look up your city's ADU regulations. Maybe compare them to SB 1069 (see summary in my post)

Call the city planning department and find out what's allowable. If the plannersays that an ADU is not allowed, ask how the your city is addressing SB 1069 and/or how will it impact your ability to add an ADU on your property. You likely won't get a definitive answer yet. The city attorney is reviewing the law, and no action has been taken yet, as cities aren't required to adopt an ADU ordinance consistent with SB 1069 until Jan 1.

In my city, ADUs are restricted to only 300 sq ft by the city which makes it a really difficult sell. Are there any guidelines in SB 1069 which provide relief?

@John D. Wow, 300 sq ft is very restrictive. The new law says detached ADUs shall not exceed 1200 sq ft. However, I'm not clear on whether that state mandate will supercede city regulations; and, if so, how the state will enforce it. We may see squabbles over this in the near future. Any attorneys on BP who can speak to this?

The law also states that:

"It is the intent of the Legislature that an ADU ordinance adopted by a local agency has the effect of providing for the creation of ADUs and that provisions in this ordinance relating to matters including unit size, parking, fees, and other requirements, are not so arbitrary, excessive, or burdensome so as to unreasonably restrict the ability of homeowners to create ADU's in zones in which they are authorized by local ordinance.

Do you think that 300 sq feet is an "excessive" provision that "unreasonably restricts" your ability to create an ADU?

Source: Senate Bill 1069, Approved by Governor September 27, 2016.

@Ryan Hopkins @Jeff B.  My reading of the legislation is that it limits the ability of cities and counties to regulate ADUs and impose costly fees. As I understand it, our laws are a hierarchy, and municipal ordinances may not violate state laws. It seems that cities no longer have final say on ADUs. 

The law also curtails hefty utility fees, stating:

"A local agency may require a new or separate utility connection directly between the ADU and the utility. The connection may be subject to a connection fee or capacity charge that shall be proportionate to the burden of the proposed ADU, based upon either its size or the number of its plumbing fixtures, upon the water or sewer system. This fee or charge shall not exceed the reasonable cost of providing this service.

This sounds to me like utility connection fees must be reasonable and proportionate. 

How do you see this shaking out at the local level?

I am going to have to read over this again, however upon first read the verbiage is intentionally very loose with the intent to derive stipulations on day only where there "are currently none". I work with county and local government every single day. Most have their own regulations, like Danville can have an adu of no larger than 750sf, can't be within the setback unless 65ft from the front property line, separate utilities must be run, etc etc...I would absolutely love for each of the towns to ascent to the new statute! Reality is, most have specific regulations in place. I will have to read through this more carefully to be sure though. Keep posting and updating your finds as you read through the legislation please!

@Ryan Hopkins  I’m reading and re-reading it, trying to wrap my head around it. According to an Oakland law firm’s summary of SB 1069, if a city imposes requirements beyond those in the new state law, those local provisions are preempted as of January 1, and only the new state standard may be enforced! And, If a city FAILS to adopt an ADU ordinance in accordance with state law, that city is required to approve an ADU application applying only the standards in the new state law!

For example: I want to buy a property in Castro Valley and do a garage ADU conversion. Most of Castro Valley is zoned for ADUs. It's an unincorporated area of Alameda County, so I talked to an Alameda County planner about a property I'm considering buying. He said I can build an ADU, but the county requires four independently accessible parking spots (i.e. they cannot be tandem). Well, there's no way I can fit four spaces on that property : ( Similarly, an Oakland city planner told me that Oakland's parking requirements are the #1 ADU killer there.

Enter the new law. Section 65852.2 states that: 

  • parking requirements shall not exceed one parking space per unit  
  • spaces may be provided as tandem parking on an existing driveway  (yay! - all I need is a long driveway)
  • no setback is required for an existing garage that is converted to an ADU (yay!)

Clearly, that’s a game-changer for anyone who wants to do a garage conversion. Alameda County’s parking requirements are NOT compliant with the new state law. The county attorney is wrestling with this right now. I can’t wait to see what the county submits to the state on January 1!

No doubt, a lot will be hashed out in practice, and it may get contentious. For instance, Section 65852.2 says that cities can establish minimum and maximum size requirements for ADUs. But the law also says its intent is that local ADU ordinances don't make unit size requirements "so arbitrary, excessive, or burdensome so as to unreasonably restrict the ability of homeowners to create ADUs in zones in which they are authorized by local ordinance." How will that be interpreted and enforced?

For instance, suppose the City of Fremont submits their revised ADU ordinance to the state on January 1, and keeps its 300 sq ft max. Would the state redline it as "burdensome" and require revision? Would a homeowner ultimately have to sue a city like Redlands if its ADU ordinance doesn't comply with the new state standard?

There’s a lot to think about here . . . and potential business opportunities for architects who understand the new state standard and specialize in ADUs. There's a lot of demand out there for ADUs.

You mentioned the bill text applies only where there “are currently none.” Where are you seeing that in the bill text? Are you referring to paragraphs 3-5, which state that “existing law, when a local agency has not adopted an ordinance governing 2nd units as so described, requires the local agency to approve or disapprove the application ministerially, as provided [meaning: as provided in this new state law]. This bill would instead require the ordinance for the creation of accessory dwelling units to include the provisions described above [i.e. the new state law] . . . This bill would incorporate . . . changes in Section 65852.2 of the Government Code . . . on January 1, 2017.” Like the Oakland law firm, I read that to mean that cities must adhere to the new standards laid out in Section 65852.2, which is the meat of the new standards. 

parking requirements shall not exceed one parking space per unit  
• spaces may be provided as tandem parking on an existing driveway  (yay! - all I need is a long driveway)
• no setback is required for an existing garage that is converted to an ADU (yay!)

One space per unit.
So does it mean if you have a double car garage door. Which has 2 in the driveway would meet the requirements?

@Taye N.  Yes! The new parking rules are a blockbuster, Taye. With a stroke of a pen, the state of California has eliminated that pesky extra parking spot required by many cities and counties, since most properties in bigger cities are within a half mile of a bus stop. 

Take Oakland as an example. The city of Oakland liberalized its ADU regulations in 2015, eliminating the extra parking spot for properties within a half a mile the intersection of two bus lines that each run every 15 minutes at peak hours. That's helpful in theory, but I looked up AC Transit's bus schedules: (1) not many buses run every 15 minutes, (2) there are only a dozen high frequency intersections -- most of them in low rent areas. So, Oakland's law didn't open up a lot of opportunity.

But NOW, the city of Oakland must update its ADU regulations to comply the new state standard, and allow an ADU within a half mile of ANY bus stop in Oakland. That covers most of Oakland, including the hills! So, if your property is zoned for an ADU (attached or detached) and within a half mile of any bus stop ANYWHERE IN CALIFORNIA, you don't need to create an additional parking spot.

@Taye N. You asked about a one space per unit and a double car garage door. The law states that "Parking requirements for accessory dwelling units shall not exceed one parking space per unit or per bedroom." I take this to mean that one parking space is required per ADU (unit). If your ADU has two bedrooms, then you need to create two parking spots.

That said, you are ONLY required to create extra parking IF:

  • your property is more than a half mile away from a bus stop, OR
  • the ADU is NOT part of an existing primary residence or an existing accessory structure

So, if you're converting a two car detached garage, then your ADU is part of an existing accessory structure, and no extra parking needed (yay!)

At least, that's how I'm reading the law. We'll see what city attorneys come up with, when they submit their revised ADU regulations to the state, due by January 1.

@Taye N. Great question. According to the website of the Alameda County Assessor, an ADU is considered "new construction", and will trigger a reappraisal of property tax. The Assessor receives copies of your permit, and will estimate the fair market value of the ADU when it's completed. I don't see any information on rates or fees. Wouldn't an online fee estimator be nice? Best to call the county assessor for an estimate.

There are a couple of exclusions that might be relevant: 

  • if you incorporate an active solar energy system
  • if it's designed for a disabled person 

So, if you're building an accessible ADU for an aging parent with universal design features, you can file a claim for exclusion from reassessment. It's a great solution to support seniors in aging in place, and why the AARP supported this legislation.

Here's a gotcha: if you intend to claim an exclusion, you must notify the Assessor prior to, or within 30 days of completion of the project AND file within six months after completing the project. Gotta be on top of the paperwork!

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