Thoughts on new ca laws SB9/ SB10?

20 Replies

For the people who read the new CA SB9 and SB 10 laws, what do you think the impact of these laws will be?

I feel that SFH in big cities like SD, Bay Area, and LA are going to become more valuable as more of them get converted to multi family properties.

It also seems tempting to try to buy single family homes and convert them in some of the smaller cities.

Thoughts ?

As I understand it, the basic ideas are:

SB 9 - ADUs

SB 10 - Opening up for small multifamily zoning up to 10 units

Your idea seems sound, the supply of sfh will reduce but the demand will likely remain, so sfh prices will continue to rise. While certainly a step in a positive direction as far as increasing the supply of doors, I wouldn't expect a massive impact on housing costs in CA. The cost per square foot to build will certainly remain astronomical.

SB10 in particular seems to include quite a few exceptions. One notable exception is "(4) If the ordinance supersedes any zoning restriction established by a local initiative, the ordinance shall only take effect if adopted by a two-thirds vote of the members of the legislative body." 

I'll stick with cash flowing properties in more amenable states :)

@Adrian Hollifield , I think SB 9 is hamstrung by the rules around owners needing to live in one of the units up to 3 years. 

SB10 is super ambiguous from what I can tell and depends on what city you invest in. 

On the other hand I am encouraged by the increasing pro-development initiatives from the state. It will just take time to work out a lot of kinks and see the effects on the local level. 

The owner occupancy requirement of SB9 will limit its use for most investors.  

SB10 does not override local zoning, so a local jurisdiction can prevent it if desired.  

I see both SB9 and SB10 as the continuing assault on SFH and low density housing options.

 Where I live they recently converted zone open space to zoned mixed residential/commercial zoning.  They used various justifications but one was the state could force even higher density construction on that open space than what was being proposed.   It did not matter that no one could point to a single instance of the state mandating open space zoning be converted to non open space zoning (I think it was a developer scare tactic based on nothing). Another primary factor was the fire danger.   That is a tough one to argue seeing the threat of fire is significant.  I cringe at the thought of changing open space zoning.   The developer scored a windfall buying zoned open space at a price reflective of that zoning and getting it rezoned residential/commercial.



Adrian,

The bottom line is we need more housing in Ca. This bill is a way to grease the skids on a monumental housing problem the state faces. I am bullish on the ADU conversions anywhere in a major metro area. As a SoCal investor/agent, I think the intention of the bills will make it easier to add value to traditional single family residences that were previously hindered by local zoning/code. My goal is to find those properties, keep the integrity of the neighborhood intact, and contribute to the increasing demand for housing. Solving problems by adding value is what will provide the return on investment. [Solicitation Removed by Moderators]

Hope this helps,

Tim

Zoning was largely created to assist speculators in profiting from zone changes.

The owner occupancy requirement in SB9 applies to the lot splits, not the duplexes.

If people want to be surrounded by SFRs they can move out of cities.

I don't expect a huge amount of construction from these laws, but there will be some. I already scoped out a few opportunities to add duplexes or to split existing detached duplexes into SFR lots of their own.

@Seth Borman , Can you point to the text that excludes the duplexes from owner-occupancy? I want to scope it out and didn’t come across the distinction in my first reading of the law. But even if that is the case, I wonder if many conversions for single family to duplex will actually pencil in terms of value since duplexes often trade at a lower $/sq ft. And I wonder then how the market will eventually value sfr+adu vs duplex if there are a lot of conversions. 

Originally posted by @Robert C. :

@Seth Borman, Can you point to the text that excludes the duplexes from owner-occupancy? I want to scope it out and didn’t come across the distinction in my first reading of the law. But even if that is the case, I wonder if many conversions for single family to duplex will actually pencil in terms of value since duplexes often trade at a lower $/sq ft. And I wonder then how the market will eventually value sfr+adu vs duplex if there are a lot of conversions. 

 It's in there. 

I suspect that you'll see more SFR lot splits and duplexes behind SFRs than anything else. In scoping out lots I found a really nice one in Los Angeles where you can buy a house for $650,000, put a duplex in the back and it will be worth $1M, or a few hundred grand more than it cost to build. The SFR won't lose any value, so it's definitely a way to create real value if you are willing to house hack for a few years.

The other thing that is in there is a parking minimum reduction to 1 or 0, which is really powerful for narrow lots.

@Mike B.  That was probably the case long ago. Now they are pretending it is to help neighborhoods remain stable and for the good of the people. But it still probably used to help the mayor's brother...... :-)

You trust the Government?

I'm curious to see how these laws play out in practice. After successfully going through the permitting process for a detached ADU nearly the same size as the existing single family home, I'm convinced the ADU laws are the easiest way to do any residential real estate development. I've got back to back ADU builds, and my only limiting factor is that the utility companies just can't keep up with the service requests to provide water, power, and gas to these new units.

This is yet another example of politicians thinking they know how to fix a problem, but they don't. Gascon's idea to fix the prison overcrowding problem is to simply release prisoners. Fantastic idea moron! So if I have too much cash in my bank account, I should burn some to fix that problem, right!

I like the ADU laws as an investor, as a primary residence owner, I do not like the idea that any of my neighbors can create a new rental unit in their back yard adding more cars parked on the street and tenants in the community. I love the ADU laws associated with multi family properties. They are already multi family and higher density than an SFR lot so no big changes. As for SB9 & SB10, I think they are a horrible answer to the problem of housing shortage and housing affordability. The state is already massively overcrowded in the cities and you don't alleviate the housing shortage by converting some SFR's to multi family. Just as you don't alleviate the drought by placing rules on single family homeowners during the drought which account for a tiny fraction of the state's water usage.

That all said, from an investor/developer standpoint, getting your hands on lots that can be rezoned could produce windfall profits for you if done right. Splitting SFR lots to build more and sell doesn't work for investors due to the owner occupancy for 3 year minimums unless you do a long term house hack play for that and of course, could only do that once every 3+ years.

Bottom line, not a fan of them or those who wrote them! How about building us more freeways (or at least more lanes on each freeway) and increasing density for multi family.

Originally posted by @Mike B. :

@Seth Borman

“Zoning was largely created to assist speculators in profiting from zone changes”

Are you aware of substantial evidence to back up this claim? (sincere question)

 There were a lot of contemporary reports about it in the teens and 20s. Even the proponents of zoning that wanted it for non-speculative reasons realized quickly that it was a tool for speculation within 10 years.

Hi all, I'm also thiking of the implications of SB 9, and especially the idea to separate a duplex into two different lots.  In principle you have to live there for 3 years, but imagine a house that is all set up for splitting by just going to the city and doing the paperwork.  Wouldn't such a property be very valuable to potential buyers who are willing to live there for 3 years?  And would this not mean that such a property would increase in value without having to wait for three years?  Thoughts appreciated.

Unless the setback, lot coverage, floor area ratios, parking requirements were also changed, these new laws are meaningless for majority of urban properties. 

I'm interested in how SB9 will change the valuations for ADU's built and the future of home valuations. I recently completed a detached 2/2 ADU set at the rear of my property which is 135ft deep. The main home is 70ft away so the sense of privacy is great. Upon reaching out to lenders for a HELOC I was told they won't count ADU income which was strange. They stated the property needs to show on tax records as Multi-Family. Will this still apply next year? If so, what if someone just applies to split the lot to work around this? Would both lots be considered SFH standalone? It's confusing and unclear whenever I pick lenders brains…

I'm considering demolishing the main 3/2 home and building a duplex in its place. The building would be a narrow lot design 40x60 two story split down the middle. Tandem two-car garage for each duplex on ground level with living space for duplex units on second story. I can get creative and put a 1bed attached ADU behind each tandem garage since each duplex unit is allowed one ADU right?

This just sounds crazy but totally legal under SB9 without a lot split since the ADU I just completed is detached? I can take a 1 door SFH lot of 6800sqft and split it into a multi-family lot

2- 3bed/2bath duplex 1,200sqft

2- 1bed/1bath attached ADU 600sqft

1- 2bed/2bath detached ADU 746sqft

All above can be done on one lot. According to the bill but how would something like this be valued in the eyes of appraisers? The neighborhood commands north of 1mil for even a 2/1 SFH on a lot of 3,000sqft.

Originally posted by @Jason Berend :

Hello - would anyone happen to know if SB9 can be implemented in a Coastal Zone?  Everything I've read does not indicate it would be a problem except for this link: https://www.hklaw.com/en/insig...

Thank you

SB9 can be implemented in a Coastal Zone:

"(k) Nothing in this section shall be construed to supersede or in any way alter or lessen the effect or application of the California Coastal Act of 1976 (Division 20 (commencing with Section 30000) of the Public Resources Code), except that the local agency shall not be required to hold public hearings for coastal development permit applications for a housing development pursuant to this section."

Source is the text of the bill:

https://leginfo.legislature.ca...

Best,

Jon