In 2019 Los Angeles city council placed new restrictions for AirBnB.
"Only the host’s primary residence can be rented out, defined as the place where a host lives for at least six months per year."
1. With these new restrictions, are you legally allowed to use an ADU as an AirBNB? Since an ADU has a different address than the main house?
2. Since the ADU has a separate address, are you allowed to place a mortgage on it or refinance it? Similar to how if I purchased my house for 500k all cash, I can go to the bank tomorrow and refinance it, effectively placing a mortgage on it and pulling out all that cash.
No to the ADU. Has to be where you live. Many Airbnb owners are turning to short term rentals instead. Here is an article on the rules.
ADU's cannot be legally rented for less than 30 days anywhere in the state as of Jan 1, 2020. This is a new provision in AB 881.
@Carlos Carbajal stupid question but what if it is an attached garage? Also, what really qualifies as an ADU? What if i simply remodel an attached garage into a bedroom with a bathroom?
According to that link, “Existing law defines the term “accessory dwelling unit” for these purposes to mean an attached or a detached residential dwelling unit which provides complete independent living facilities for one or more persons.”
But what if it's missing a kitchen. And instead has a hotel style mini fridge, microwave, and coffee maker. I wonder if this could be a loophole to not qualify as an ADU and therefore be eligible for short term rentals.
@Paul Wolfson if it's an attached garage without a stove then you can probably get away with calling it an addition to the house vs an ADU.
An ADU that is attached to the house is called a Junior ADU or JADU for short.
What makes it an ADU or JADU vs just more rooms in the house are permits you file with the local city to make it an ADU as well as providing separate bath and cooking facilities and a separate entrance. Here is a complete run down for what makes a JADU:
If you are trying to create space in the house you can legally rent out nightly on Airbnb then yes you want to build it out as additional space to the main house and not build it out as a permitted JADU.
@Carlos Carbajal all I truly care about is that it has a separate entrance. Does that automatically mean it's a JADU or ADU?
@Paul Wolfson yes I think you can probably go even further. A sink and countertop are probably ok. It’s the stove that the city will probably tell you you can’t put in and still keep it legal for Airbnb.
Portable induction cooktop is fine though.
@Paul Wolfson no that doesn't make it an ADU or JADU. I think you can install almost anything except for the stove and still call it an extra room of the house.
@Carlos Carbajal thanks much. What about a detached garage conversion without a full kitchen or stove. Would that be a loophole to allow short term rentals?
@Paul Wolfson yes that would probably work too. Assuming you can either :
A - get the permits from the city to convert the garage to an “artist studio” or “office” or “detached bedroom” space. Or,
B - get it built without permits and without the neighbors reporting it to the city.
@Carlos Carbajal I’m guessing a permit for a “guest house” would work too. I believe a guest house must NOT have a gas stove to qualify.
6. Require the permitted junior accessory dwelling unit to include an efficiency kitchen, which shall include all of the following:
(A) A sink with a maximum waste line diameter of 1.5 inches.
(B) A cooking facility with appliances that do not require electrical service greater than 120 volts, or natural or propane gas.
(C) A food preparation counter and storage cabinets that are of reasonable size in relation to the size of the junior accessory dwelling unit.
B is worded weird, but looks like a gas stove is not required to qualify for JADU.
@Paul Wolfson 2. One property (parcel) can have multiple addresses. ADU is a part of your property hence your 1st mortgage on the house also has the right to that ADU you paid all cash. You just added a little value to your property but did not create another property. Refinancing ADU, not impossible but difficult as the other lender needs to allow it and give up their portion. You can refinance the whole property with ADU however ADU does not add much value to appraisal making it hard to pull out the money you put in.
The best option is to subdivide your parcel and make 2 properties out of it, however it is a difficult and expensive option (if not impossible) as city/county has to approve.
@Paul Wolfson a remodeled attached garage would be an ADU conversion.
@Paul Wolfson They have those limitations for a reason. Too many CA homes are being used as STR, adding high traffic, and bringing constantly changing people into residential neighborhoods.
As to loans, you'd need a separate lot to secure the ADU for lender. If lot size allowed it and all requirements can be met for a SFR home, you could split off.
@Karen Margrave but perhaps if the remodeled garage without a kitchen, is simply a bedroom and extra bathroom (no kitchen), it doesn’t qualify as an adu and can be considered just extending my house?
@Paul Wolfson that probably would meet the requirement, but you'd want to check with the Planning Department first. You probably can even do a kitchenette with microwave (check on dishwasher, disposal, etc.)
@Karen Margrave so it seems like a lack of a full kitchen maybe a loophole to continue to allow AirBnB
If the stipulation is that owner needs to live on premises, since an ADU would be a part of the primary residence, whether it is attached or not as it's on the same lot, I don't know that for the purpose of Short Term (Vacation) Rental it will make a difference, and seems it should be allowed. There's also something called a junior ADU, which is what the garage conversion would be (from my understanding) although I don't think a junior ADU is required to have a bathroom, as it can use one from the main house. Double check everything with your planning department. Good luck.
City of Los Angeles Home-Sharing Registration Form:
You need to register the home to list it on Airbnb
A lot of people have posted on this so I apologize if it comes off as repetitive:
Converting the garage and not getting it permitted does run the risk of getting caught with the city. The risk is generally low assuming no one rats you out. That could include a disgruntled guest.
Look into permitting it into a "Recreation Room" instead if you want to avoid the classification as ADU. The downside to the rec room is that it is only for a half bath, no shower. You can explore options from there.
You can only utilize your property as an ADU for no more than 120 days out of the year (there are exceptions). You might be better off just keeping it as a traditional rental. Run the analysis for both scenarios, plus factoring in your time. I had clients run an Airbnb and it was practically a full time job for them (granted they had two units).
Not sure if you already own the property, but check to see if your area would even do well. For example, I had clients in the Granada Hills area look into it and there appeared to be no demand.
Just some food for thought. Best of luck!