Each year, California introduces exciting new legislation aimed at making it easier for homeowners to construct additional dwellings on their properties.
In late 2022 Newly enacted legislation in California has introduced groundbreaking measures for ADU development. Governor Gavin Newsom has signed these crucial bills into law, which are poised to revolutionize the construction of additional dwelling units.
With revised setback regulations and expanded size limitations, constructing the ADU you’ve always envisioned will soon become more accessible than ever before.
Why ADU Laws Need Updates?
In response to the ongoing homelessness crisis in California, the state government has recognized the need to address the issue. One strategy they have employed is to promote the development of Accessory Dwelling Units (ADUs) by making the process more affordable and streamlined. ADUs are small, compact housing units that offer an affordable housing solution for low-income families, thereby assisting in meeting the demand for housing in California.
Although new ADU laws were enacted in 2017 and 2019, there is room for improvement. Despite initiatives such as the CalHFA Grant signed into law by Governor Newsom, changes in ADU rules by Freddie Mac, and the launch of ADU programs by various local jurisdictions, there are still obstacles preventing people from constructing these units.
Updating these laws aims to address unforeseen barriers that emerged when the original laws were drafted. Consequently, the modification of these laws will lead to the construction of more ADUs, thereby combating the escalating housing crisis that is affecting the state of California.
The year 2023 is no different, as two new bills have been proposed in the state legislature to further loosen restrictions on these secondary dwellings.
AB 1033, aims to eliminate the current ban on selling Accessory Dwelling Units (ADUs) separately from the main residence.
Similarly, AB 976, seeks to end the permanent prohibition on owner occupancy restrictions for ADUs.
While it will take some time for these bills to become law, it is worthwhile delving into them and exploring the possibilities they offer for your own ADU in the future.
AB 1033
Also known as Affordable Homeownership Units, suggests that individual cities and counties should have the final say on whether ADUs can be sold separately from the main home.
Currently, California law prohibits the sale or transfer of an ADU as a separate property from the primary residence. This amendment aims to change that and provide lower-income households in California with an opportunity for homeownership, especially considering the high average housing costs ranging from $700,000 to $1 million.
By allowing ADUs to have their own addresses and be considered separate properties, this proposal opens up the possibility of ADUs functioning as standalone units, similar to condominiums. This could pave the way for more affordable starter homes to be created in both new and existing buildings.
It’s worth noting that the concept of selling ADUs separately from the primary residence is not new in the United States. Several cities across the country, such as Seattle, WA, Austin, TX, Portland, OR, and Princeton, NJ, have already implemented this approach for years in an effort to address affordable housing crises.
AB 976
Seeks to permanently eliminate owner occupancy restrictions that currently exist in cities and counties. These restrictions, which prohibit the requirement of the property owner’s occupancy in either the accessory dwelling unit (ADU) or the primary residence, are set to expire soon. However, this new law aims to remove these restrictions permanently.
Studies have shown that areas where owner occupancy restrictions are enforced experience slower rates of ADU construction. Previously, the ADU occupancy requirement mandated that either the primary residence or the ADU had to be occupied for a minimum of five years following the ADU’s completion.
These occupancy requirements also extended to property sales. If the property was sold within the five-year period, the new owner would have to comply with the occupancy requirement for the remaining duration.
The owner occupancy requirement posed a significant obstacle to ADU financing, as it reduced the potential rental income that could be leveraged. This led lenders to perceive homeowners as being at a higher risk of loan default, discouraging them from providing financing for ADU construction or the purchase/refinancing of properties with additional units subject to these restrictions.
Furthermore, these owner occupancy requirements deterred homeowners from pursuing ADU creation. The high costs associated with constructing a secondary dwelling unit, coupled with limited potential for passive income, rendered secondary units financially unviable for many homeowners.
Additionally, the owner occupancy restrictions prevented real estate investors from building ADUs on investment properties or acquiring properties with existing dwelling units to maximize their rental income potential.
Closing Statement
Should these bills receive approval, they would bring significant advantages to current homeowners and middle-income working families seeking homeownership prospects. The upcoming legislation will establish a pathway for increased construction of Accessory Dwelling Units (ADUs) and play a crucial part in tackling the state’s housing crisis.
Embark on Your ADU Journey Now
Are you interested in creating an accessory dwelling unit (ADU) for your single-family or multi family residence? Explore this comprehensive guidebook on ADU development for a general understanding, and then take advantage of a complimentary consultation with Levi Design Build. During the consultation, we will guide you through all the necessary steps to bring your accessory dwelling unit (ADU) project to life.
We are committed to addressing all your accessory dwelling unit (ADU) inquiries and assisting you in understanding the regulations specific to your area. Together, we can analyze the advantages and disadvantages of developing an accessory dwelling unit (ADU), as well as provide support with ADU financing. Our team of experienced professionals in design, planning, and construction will be at your disposal to develop a tailor-made accessory dwelling unit (ADU) that meets your individual requirements.
Reach out to us today and begin realizing your dream of an accessory dwelling unit (ADU).
