Explaining CA Senate Bill SB9

In California, Senate Bill SB9 went into effect on January 1st, 2022. For those who rent property from a landlord, require no additional living space beyond a standard home, or own a condo in larger building, this senate bill is unlikely to affect life in any notable way. However, for homeowners and real estate investors eager to expand the housing space on their properties, this new law may very well be a game changer.

 

Much like the 2020 bill that allowed for accessory dwelling units, or ADUs, to be built on a single-family lot, this new piece of legislation allows for the increased use of property via lot-split provisions and the building of duplexes. In a state where housing costs are at a premium, this unique bill opens the door to increased opportunities for renters and investors alike.

 

However, before you to your local hardware store to buy lumber and nails, it’s important to understand what Senate Bill SB9 means and how you can legally build on your property. These are the ins and outs of this new piece of legislation, including what it covers, what it doesn’t, and how you can make best use of its opportunities as a property owner.

 

What Is Senate Bill SB9?

Historically, single-family land lots have been just that: a lot that allows for a single-family home with no option for additional housing. This changed in 2020, with the ADU allowance, and again in 2022, with the passage of Senate Bill SB9, which allows for duplexes and lot-splits on land previously barred from these kinds of expansions.

 

While the bill encompasses both things – building duplexes and splitting lots – many people won’t take advantage of both options simultaneously, though some may. As such, homeowners should understand each part of this bill separately, as well as what can be done for those who may want to take the more extreme combined option.

 

Understanding Duplexes

As far as SB9 is concerned, the term “duplexes” refers to two homes on one single-family lot. In most situations, duplexes are a single structure with two residences contained within, but this bill allows for a second detached dwelling as well.

 

It’s important to note that duplexes must be ministerially approved, which means that cities must approve these structures in form and function using objective criteria. Cities are allowed to apply restrictions on things like height and setbacks, just as with the ADU bill from 2020. The same parking provisions apply, too; homes that aren’t within a certain distance of public transportation must have a parking option. Differences in development fees apply to ADUs vs. duplexes, too; development impact fees apply in the same was to duplexes as standard housing, unless a duplex unit matches ADU size criteria.

 

Those hoping to convert existing ADUs to duplexes may want to consider waiting for further clarification on legislation. There are currently no rules in place for converting an ADU to a duplex under Senate Bill SB9, or whether it’s permissible to split a lot with an ADU and sell the split lot for use as a primary residence.

 

Building Additional Residences Without Splitting a Plot

For homeowners who would like to build more than one additional housing unit – going beyond a duplex – but do not want to split a lot to do so, the bill does have a workaround. Each multi-family home is permitted two ADUs, which means that it is theoretically possible to build a duplex on a single-family lot as well as two detached ADU units.

 

To accomplish this, a duplex must be constructed first, followed by two ADUs. This will negate future property splitting unless the ADUs are removed, but all units – the additional duplex unit as well as both ADUs – can function as rental opportunities. This requires some complicated coordination, but for those who are enthusiastic about rental income, it’s a possibility to work through the provisions.

 

Understanding Plot-Splitting

For those with a lot of property who wish to maximize their land, splitting a lot into two and either building a home, duplex, or home with an ADU on the second property, or selling the second property for profit, may be a viable option to consider.

 

Plot-splitting is exactly what it sounds like: a single-family plot of land is split into two distinct plots, both of which are then available to use for single-family housing. This, of course, includes duplexes under Senate Bill SB9. However, if a split lot is used to build two duplexes, ADUs are not permitted, as this would allow for up to eight units on what used to be a single-family plot of land, which is not permissible, even under the looser rules in this new bill.

 

There are some additional rules governing lot-splitting that those considering this option should keep in mind. First, plots of land can only be split once. Even if a property is theoretically big enough to split multiple times, this is not permitted. Further, splitting plots is contingent on the size of the full property. New plots must be a minimum of 1,200 square feet.

 

Splits are also limited in how they can be split; a split must follow at least a 60/40 ratio. This means that a lot that is 5,000 square feet can be split, at maximum, into two plots that are 3,000 square feet and 2,000 square feet. This is to prevent homeowners from keeping a large plot of land for themselves and creating a small 1,200 square foot property to sell or rent. Property owners can’t build tiny homes on split lots, either. Properties built on a split lot must be at least 800 square feet in size.

 

Local governments are allowed to impose area-specific laws as well. If, for example, utility easements or setback rules apply, property owners can’t bypass these simply by splitting a plot. Development fees and mapping acts may also apply, depending on jurisdiction.

 

Protecting Property

The main force behind Senate Bill SB9 is to increase available housing. As such, there are some limitations on removing existing housing for the purpose of splitting a plot of land.

 

In order preserve housing already in place, this bill prohibits demolishing a residential unit that as serves as a rental within the last three years. This law also applies for demolition in order to build a duplex. This who want to tear down property for the sake of building something larger or splitting land will need to stop renting and wait at least three years to proceed.

 

In addition, the new laws in this bill aren’t intended to assist developers. In order to split a lot, property owners must sign an affidavit agreeing to live in one of the dwellings on one of the lots for at least three years.

 

Points of Consideration

For many property owners, Senate Bill SB9 won’t play a sizable role in life. Others, however, may have been enthusiastically waiting for this policy to go into effect.

 

That said, there are potential consequences or hurdles to consider before diving into duplex construction or plot-splitting.

• Fees: Splitting a plot of land won’t be cheap; fees can run as high as $80,000 depending on location. In addition, some areas, particularly historical areas, may require land to be remapped, which could result in additional costs on top of a splitting fee.
• Time Commitment: Splitting a property isn’t a quick process. Due to the legal intricacies in delineating property lines, splitting can be a lengthy process that may take as long as two years. This means property owners eager to split and start earning extra rental income may not see a return right away. This is especially true for those counting on using rental income to immediately offset costs associated with splitting.
• Potential Lender Pushback: If a property is owned in full, splitting shouldn’t be problematic, but attempting to split a property with a mortgage could lead to lender resistance. As this is a new piece of legislation, many lenders likely have not yet established guidelines on working with borrowers. For those with the available cash, paying off a mortgage prior to initiating a split might be a wise choice.
• Lot Location: Not all lots, even large ones, will be easy to split. Corner lots are ideal, as are lots located along an alley. However, property in the middle of a block may run into issues with local zoning, right-of-way, and easement rules. Be sure to do due diligence on local property laws and reach out about the feasibility of splitting.

 

For those with plans to increase rental income, especially when planning for a not-too-distant retirement, Senate Bill SB9 offers a lot of potential. From creating existing rental opportunities by dividing a lot in two to adding on to an existing rental home, expanding real estate holdings and serving more renters in California is now much easier. However, be sure you know the advantages as well as potential roadblocks before moving forward with a new take on property rentals.

 

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