Thoughts on new ca laws SB9/ SB10?
Rental Property Investor · Santa Monica, CA · Member since 2018 · 24 posts · 7 votes
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 ?
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.
@Matt Devincenzo this is a really good summary. Another major issue with SB9 is that cities will still have control over is the infrastructure development process (main sewer, power, water, gas services). This could add large additional costs and potentially many months or even years to the timeline of an SB9 project. Our assessment is that the cities which are not on board with SB9 are going to have a lot of options to slow and prevent these developments. This is going to be a much heavier lift for cities than implementing the ADU laws. Homeowners considering these developments should focus on getting a clear read of how welcoming their city is to this legislation as a first step, including their interpretation of the requirements and their projected timeline to implement it.
It also seems pretty clear that SB9 developments will not be allowed by mortgage companies that have claims against the property. It is very likely that the homeowner will need to pay off their mortgage in advance of splitting the property.
@Patrick Collins @Matt Devincenzo actually you don't have to pay off your mortgage before splitting your property! The lender will need to approve the split and you'll likely need a partial release of mortgage. There's more info in this blog post :)
Thanks @Dylan, but actually that article you are pointing to seems to confirm the point we were making. I've pasted it below.
"There is nothing in the law that stipulates that a property must be owned outright to be eligible, and cities can’t require it via local ordinance. However, you may run into some challenges with your mortgage provider depending on the SB 9 development path you pursue.
If you’re considering an SB 9 urban lot split, there are some steps that you’ll need to take prior to submitting your application. First, you will need to contact your mortgage provider and have them approve the split. After that, you’ll need to obtain a partial release of mortgage. If your lender won’t approve the lot split, or if partial releases are specifically forbidden in your mortgage contract, then you may not be able to split your lot. You can, however, take advantage of the duplex provision of the law."
@Patrick Collins SB9 doesn't change the State mapping requirements, it just allows an additional option for recording a small subdivision. The CA subdivision map act regulates what it takes it takes to record any map including maps related to these new SB9 subdivisions. The Subdivision Map Act requires either the trustee or the beneficiary of any 'recorded title interest' to sign any map. So yes your lender will be required to agree to the subdivision. You may not need a partial release for the subdivision, only if/when you attempt to sell a lot.
Anyone hear anything back from their building/Planning departments? Mine is still radio silent haha. I'm praying I can just apply for a lot split on the detached ADU we just completed. per sqft value in our neighborhood is touching $1200 on the low side. That little 746sqft ADU could potentially be worth $895k in value in a very generic unrealistic world.