ADUs, or accessory dwelling units, are becoming increasingly popular, and it's easy to see why. These versatile backyard homes not only elevate your property's value but also offer a potential source of rental income and a flexible option for housing extended family.
Recognizing the importance of ADUs in addressing the housing crisis, the State of California has made efforts to simplify ADU building requirements. This has provided the impetus for homeowners throughout California to consider building an ADU.
For instance, according to an article in the Washington Post, the number of ADU permits issued across the state saw a remarkable increase, soaring to more than 23,000 in 2022 from fewer than 5,000 in 2017 — coinciding with a period of legislative and regulatory reforms that boosted ADU development in California.
To further promote the construction of ADUs, California lawmakers have continued to pass favorable legislation for homeowners. Read on for an in-depth explanation and insight into the new ADU laws AB 1033, AB 976, and AB 1332, which impact homeowners and buyers in 2024.
What is an ADU?
An Accessory Dwelling Unit (ADU) is a secondary housing unit located on the same lot as a larger, primary residence. ADUs, often referred to as granny flats, in-law suites, carriage homes or backyard cottages, are independent living spaces equipped with their own kitchen, sleeping, and bathroom facilities for one or more persons.
The Accessory Dwelling Unit Handbook, developed by the California Department of Housing and Community Development (HCD), defines the 3 main types of ADUs:
- Detached: This type of unit stands alone, separate from the primary residence on the property.
- Attached: This unit is directly connected to the primary structure, sharing at least one wall.
- Converted Existing Space: This involves transforming an existing space (such as a primary bedroom, attached garage, storage area, or existing accessory structure) on the property into a self-contained living unit.
A special category of the converted space is the JADU, or Junior Accessory Dwelling Unit, where the transformation occurs entirely within the footprint of an existing or proposed single-family residence. JADUs can share bathrooms with the main house, but they must have a separate entrance and at minimum, an efficiency kitchen with sink, counter space, cabinets and cooking appliances.
Considering an ADU as a buyer or homeowner? Here's some helpful information and key benefits of ADUs to guide your decision.
The Benefits of ADUs
ADUs offer a range of benefits for both buyers and homeowners, each enhancing the living experience in unique ways:
Multigenerational Living and Aging in Place
ADUs provide the perfect balance of proximity and privacy for families. They enable loved ones to live together on the same property while maintaining their own separate spaces. This setup is ideal for those who value close family connections but also appreciate having their own privacy. Such units have become increasingly popular as a way to offer independent living spaces to family members.
ADUs are also a great solution for older adults who wish to stay close to their families while retaining independence. This arrangement offers the dual benefits of autonomy and accessible support from loved ones. For instance, if you have aging parents and want them nearby, acquiring a home with an ADU or constructing one on your existing property could be a practical choice.
Affordable to Build
Generally smaller in size, ADUs are often more cost-effective to construct than larger standalone homes. ADUs can also add significant value to your property.
Income Generation
Homeowners with an ADU, or those who build one, can benefit from the additional rental income, which can be used to offset mortgage payments. Recent laws have passed at the state level that make it easier to rent out your ADU, regardless if you live on the same property or not. However, short-term rentals, i.e. rentals of less than 30 days, are generally prohibited for ADUs in California.
AB 1033: ADUs can now be sold separately - like condos!
The introduction of AB 1033 dramatically alters the landscape for Accessory Dwelling Units (ADUs) by permitting their sale as separate entities from the primary residences on a property.
Under the groundbreaking legislation, property owners in participating cities will be able to construct an ADU on their land and sell it separately, following the same rules that apply to condominiums.
By allowing ADUs to be sold separately, the bill creates a new market of smaller, more affordable homes, tailored to the needs of modern families and individuals.
The law empowers local municipalities to pass ordinances enabling the individual sale of ADUs. This means that the adoption of these provisions will vary across different jurisdictions, with some cities embracing the change, while others may opt out.
The implementation of AB 1033 is not without its challenges. For homeowners, selling an ADU separately involves converting the property into a condominium. This process requires legal and survey expertise to submit the paperwork associated with conversion application, which includes a detailed subdivision map. Once these documents are recorded and approved, the ADU can be marketed as an independent unit. However, this conversion impacts the valuation of the primary residence, transforming it from a single-family home to a condominium, and necessitates the formation of a Homeowners Association (HOA) for shared property management.
An additional layer of complexity arises for property owners with existing loans. Selling a portion of loan-secured property, like an ADU, requires lender approval, a step that might not always be straightforward due to the dispersion of loan security.
AB 1033 marks a significant stride in making homeownership more accessible and providing property owners with greater flexibility. Yet, the steep learning curve involved in its application highlight the need for careful consideration and planning by homeowners.
For detailed information on AB 1033, refer to the official document.
AB 976: No more owner-occupancy requirements
Owner occupancy refers to the requirement that a homeowner who builds an ADU must live on the property, either in the ADU or the main residence. AB 976 brings a pivotal shift by permanently eliminating the owner occupancy requirement.
This change allows property owners to turn their properties into investment opportunities without the constraint of needing to live on-site.
This legislation expands upon the groundwork established by SB 13 in 2020, which initially set a moratorium on the owner occupancy requirement until 2025. In response to strong demand, the government has chosen to extend this moratorium indefinitely, marking a significant victory for property investors and homeowners.
It's important to note that while AB 976 liberalizes regulations for ADUs, Junior ADUs still fall under the owner occupancy requirement.
Additionally, local governments retain the authority to impose rental duration limits, restricting rentals to periods longer than 30 days.
This legislative update opens new avenues for property development and investment, aligning with the growing need for flexible and diverse housing options in California.
For detailed information on AB 976, refer to the official document.
AB 1332: Fast-tracked ADU development with pre-approved plans
AB 1332 is a pivotal piece of legislation that aims to streamline the process of ADU development across the state. By January 1, 2025, it requires all California cities and municipalities to implement a pre-approved ADU plan scheme, marking a significant step towards simplifying and expediting ADU construction.
Under AB 1332, cities are required to accept submissions for ADU plans and grant them pre-approved status for future use by applicants or other property owners. This innovative approach not only standardizes ADU development but also promotes transparency and accessibility.
The overarching goal of AB 1332 is to accelerate the ADU planning and construction process in California. By providing a selection of pre-approved designs on city websites, the law aims to cut down the time and expenses involved in custom ADU development.
This builds on previous regulation which expedited the approval process for ADU permits, mandating local agencies to approve or reject applications within 60 days.
AB 1332 represents a forward-thinking approach to housing development in California, offering a framework that could significantly ease the process of ADU construction and contribute to addressing the state's housing needs.
For detailed information on AB 1332, refer to the official document.
Considerations
The new regulations significantly benefit anyone interested in constructing an ADU on their property. But, remember that the specifics of the new ADU regulations can vary by county or city. What is true in San Jose may not be true in Cupertino, so it is important to do your research and seek expert advice to make informed decisions.
In addition, ADUs are subject to local zoning laws and building codes, which can vary significantly from one area to another.
In California, ADUs are only allowed in residential zoning districts for single-family and multi-family residential uses, and in mixed-use zoning districts where residential uses are permitted.
There are also lot size requirements to consider and they will vary across local jurisdictions. Each ADU type — attached, detached and conversion — has specific lot and size requirements, so you need to check with your local agency to find out what your lot size requirements are.
In California, off-street parking requirements for residential units have been relaxed for ADUs, but they might still apply. High-density areas could face increased on-street parking demand, particularly where public transport is limited.
A common challenge in ADU projects is assessing if the added structure requires expanded water, sewer, and electrical services. You'll need to coordinate with utility companies for electric and possibly gas connections, evaluate and upgrade your property's water and sewer capacity as necessary.
While some cities may seek ways to circumvent ADU legislation and discourage their development, it is safe to say that most of them are embracing backyard homes.
San Jose has embraced and facilitated the ADU movement by offering support, resources, and pre-approved plans, streamlining a complex ADU development process.
San Mateo County launched its 'One Stop Shop' program in 2019. It's goal is to assist homeowners with the design, permitting, and project management associated with building an ADU.
As we look towards the future in California's dynamic housing landscape, the ongoing evolution of ADU legislation remains a key topic of discussion and development statewide. Lawmakers are consistently focused on improving livability and accessibility, demonstrating their commitment to fine-tuning regulations that support the growth and integration of ADUs into communities.
YOU DON'T NEED TO GO IT ALONE!
ADUs have some great advantages for buyers and homeowners alike. If you're interested in evaluating whether an ADU right for you, reach out! I can help you navigate the local codes and regulations for this type of housing and what’s available in your market. My dedicated team is committed to offering you expert guidance and support. Additionally, my broad professional network stands as a rich resource, readily available to meet your unique needs and assist in your endeavors.
The content above is purely for informational purposes. It should not be seen as financial, legal, or tax guidance. For advice tailored to your specific situation, please consult with the relevant professionals.
