With the housing supply diminishing, many cities have encouraged ADU development to offset this crisis. As a result, many people have begun building and renting out ADUs to help provide houses to low-income families and make some extra income for themselves during the process. However, there are laws in states, like California, that can make renting out your ADU more complicated than you think.
There are three main factors that affect whether rent control will apply to your property once you add an ADU. They are location, the year the house and ADU are built, and the type of ADU.
The overlapping city, county, and state laws make it confusing what rent-control and tenant-protection rules apply to your ADU property. Also, the various emergency orders placed due to the pandemic can make it even more confusing for some. Read on to find out what ADU rent control laws apply to you and where to find them.
Renting Out Single-Family Homes with ADUs
Before we dive into the three main factors that affect ADU rent control, let’s talk about what happens if you rent out your main home if there is an ADU on the property.
Many people who build ADUs live within their primary homes and rent out their additional dwelling units. However, some people develop ADUs to live within and rent out their primary dwellings to help pay off the ADU costs quicker. Since California encourages it, many people who rent out single-family homes also build ADUs on the property to rent those out too, turning the lot into a multi-family property.
How, might you ask? Well, since the main home and the ADU are two separate structures that share the same lot and cannot be sold separately, the property becomes multi-family instead of single-family. This allows for the main home to be subject to a limit on rent increases, restrictions on evictions, and other tenant protections. If you live in an area with a local rent stabilization ordinance, you may also be required to register your rental property, report vacancies, and pay fees.
So, to sum it up, if you are renting out a primary home that has an ADU on the same lot in the state of California, rent regulations could affect you very soon, even if you were previously exempt due to changing laws as ADUs become more popular. You should keep this in mind when deciding whether to rent your primary home or the ADU. Also, be sure to check with your local government to see if the laws have taken effect in your area or not.
1 Location Of ADU
In Los Angeles, an emergency COVID-19 order has frozen rents on all properties (including ADUs) temporarily. However, unless you live in the city of Los Angeles, a new ADU will most likely not be covered by rent control.
In 2019, California enacted Assembly Bill1482 which covers tenant protection and rent control. This law governs the parts of California that do not have local rent stabilization ordinances such as:
- Long Beach
For the cities and counties that do have their own controls, the state law only applies to properties built after local rules elapsed since most local ordinances only apply to old ADUs.
What Is in AB 1482?
Assembly Bill 1482 allows landlords each year to raise rents by 5% plus the rate of inflation in their metropolitan area. However, they can not raise rents by more than 10% no matter how high inflation is. This limit applies to structures that are 15 years old or older and expires in 2030. Meaning that any new unit built today will not be affected by this law.
Remember how we talked about homes with ADUs built on the same property as them being affected as well? Well, the rent limit applies to a house on the same lot of an ADU as long as the house is 15 years or older. These homes are exempt from eviction limits if they are owner-occupied. So, if you build a new ADU but decide to rent out the primary home and it is older than 15 years, you still have to abide by AB 1482 laws.
If your local ordinance has more strict laws when it comes to rent control, those laws will be the ones you have to follow. So, you may be limited to 3% instead of 5% depending on where you live. Nowhere in California will allow for more than 10% based on state law. A local ordinance can not allow for rents to be raised higher than the state allows.
Examples Of Local ADU Ordinances
Let’s take a quick look at Los Angeles to get a better understanding of how AB 1482 works within areas that have their own local ordinances.
L.A. County’s ordinances exclude single-family homes. However, ADUs occupied before February 1, 1995, are covered by the ordinances regardless of whether or not they received a permit. Where it gets tricky is an ADU that is issued a certificate of occupancy after February 1, 1995, is not covered by the local L.A. ordinances, but rather by the state law laid out in AB 1482.
So, ADUs in the same city can be covered by different laws based on when they were built.
2 The Age of Your House And ADU
We started to touch on this when we talked about location. The age of your ADU or house will determine what laws apply to you. So, your neighbors may have to abide by local ordinances but since your ADU is newer, it will have to abide by state laws even though you are both in the same location.
What Happens If Your Unit Is 10 Years Old Right Now?
Since state laws are only for units 15 years or older, you won’t have to abide by them until 5 years from now. Once your unit turns 15 years prior to 2030, you will be subject to state laws until 2030 when AB 1482 runs out and new laws will likely take place.
Why Do Local Ordinances Only Apply to Older Units?
The Costa-Hawkins Act prevents local governments from imposing rent controls on any unit built after February 1, 1995. The only exception to this is if the new unit was built to replace an old unit that was rent-controlled. This happens usually when people undergo a garage conversion or some other form of conversion. Only then can local ordinances govern new ADUs rent control.
The cut-off date can vary from city to city as long as it is before Feb.1, 1995. For example, Oakland’s cut-off date is January 1, 1983.
What About Eviction Limits?
The Costa-Hawkins Act only applies to rent controls. This means that a recently built house or ADU can still be subject to local ordinances that have to do with eviction limits and other tenant protections.
So, to recap, AB 1482 only applies to units that are 15 years or older. Local ordinances only apply to units that were built prior to Feb 1, 1995, or earlier depending on the city. Your new ADU, as long as it is less than 15 years old by 2030, will not be subject to AB 1482 laws or local ordinance laws but may be subject to local eviction limits.
3 Type Of ADU
The final factor that determines what rent control laws apply to you is whether or not your ADU is attached or detached. The type of ADU may not be a factor in some cities but can be a huge factor in cities like Los Angeles.
For example, in L.A. a detached ADU is exempt from local rent stabilization ordinances unless it is being built to replace a unit that was previously rent-controlled. The primary dwelling on the lot the detached ADU is built upon will only fall under local city ordinance if it was constructed before October 1978.
If an ADU is attached to a primary dwelling constructed before 1978 in L.A., the house and the ADU both have to abide by local city ordinances. According to Costa-Hawkins though, rent limits will not apply to a newly constructed ADU, just tenant protections.
So, depending on what city you are in, laws will determine whether your ADU is subject to local rent ordinances based on if it is an attached or detached unit.
Different Types of ADUs
You are probably thinking that there are multiple different types of ADUs, not just attached and detached. You would be thinking right. So, how do you determine what laws apply to your ADU if it is one of these types instead?
- Above Garage ADU
- Garage Conversion ADU
- Internal ADU
ADUs that are above a garage/workshop or converted from a garage count as detached ADUs in terms of these laws. These are what we are talking about when an ADU is “replacing a unit that was previously rent-controlled.”
Internal ADUs and basement ADUs all fall under the “attached” ADU laws since they are technically attached to the interior of the home.
Although all ADU types are indeed different, they all either fall under the attached or detached laws when it comes to rent control. There are no differentiations for conversion or interior units.
Do These Laws Apply to Guest Homes?
Different names for ADUs include:
- Accessory apartment
- Backyard bungalow
- Carriage house
- Coach house
- Garage house
- Granny flat
- In-law suite
- Laneway homes
- Secondary Dwelling Unit
Although they are called different things, this does not change their type. They are still either attached, detached, a conversion, or internal ADUs.
What ADU Rent Control Laws Apply to You?
We have gone over a few examples of different ADU rent control laws in various cities, but what if you don’t live in one of the cities we talked about? Do not worry. It is easy to find which laws apply to you.
All you have to do is go to your local government’s website or office and they will be able to tell you what laws pertain to you. Be sure you know your location, age of unit and house, and the type of unit you plan to build or already have on your property. By knowing these 3 key aspects, it will be easy for you to navigate the laws to see what applies to your property.
You can also always work with an ADU professional who will be able to help you determine what laws apply to you. This can save you time if you don’t want to scroll through all the legal jargon surrounding rent controls. We recommended working with someone familiar with your state’s particular laws and who has been in the business for a while. They will be more likely to provide you with the best information that is easy for you to understand than someone new to the world of ADUs or new to your state.
Looking To Build An ADU?
Are you looking to build an ADU yourself to start renting out for extra income? If yes, then several resources can make the process easier for you.
For people who are not sure where to start their ADU construction, you can check out this ADU Guidebook and eCourse for tips, sample plans, and a general run-down of how to develop your ADU. There is a multitude of videos that make ADU development easy to understand for anyone.
If you are looking for a team to help guide you through the entire process with years of experience, you can reach out to us. Here at Levi Design Build, we can help navigate you through every aspect of developing and owning an ADU. Contact us today for a free consultation to see how we can help make developing and renting out an ADU a much simpler process!