Can Adus Help Solve California's Housing Shortage? Recent Amendments to Government Code Section 65852.2 May Provide the Answer

• Publication year: 2020
• Author: Jason Nelson

Can ADUs Help Solve California's Housing Shortage? Recent Amendments to Government Code Section 65852.2 May Provide the Answer

Jason Nelson

Jason Nelson has more than 20 years of combined experience as a real estate attorney and broker. He practices law as a solo, and real estate as one half of the Nelson + Fallone Team with Compass Real Estate in Marin County.*

I. INTRODUCTION

California is suffering from a severe and chronic housing shortage. From government studies, to countless media reports, to Governor Newsom's statements, the message is clear: California needs more homes. California is estimated to need 3.5 million new housing units by 2025 just to meet its current level of housing demand.¹ The area of greatest need is affordable housing units, as more than 50% of households cannot afford the cost of housing.² This scarcity leads to less social cohesiveness, a decreased sense of belonging, and a greater sense of separation and more pronounced divide between the various socio-economic groups.³

This lack of housing is due to a multitude of factors, including significant regulatory restrictions, high costs of development, environmental concerns, local anti-growth movements, and labor and material shortages.⁴ The result is an increase in the price of housing in the areas where many people work, and when large portions of a populace cannot afford to buy or rent near their workplaces, they are drawn away from their workplaces to more distant areas, lured by the appeal of lower cost housing.⁵ This can have negative consequences such as increased commute times and traffic congestion, more accidents, decreased use of public transit, and heightened emissions due to the increase in the number of cars on the road.

Accessory dwelling units ("ADUs") and junior accessory dwelling units ("JADUs") could help ease the housing shortage problem. Support has been growing in recent years for the streamlining of ADU development as a practical and relatively easy way to help alleviate the state's housing shortage. This article explains how ADUs might be one good way to provide relief and explores how recent changes to the ADU and JADU-related provisions contained in California Government Code Sections ("Section") 65852.2 and 65852.22 might lead to the creation of more housing in areas affected by the housing crisis.⁶

II. WHY ADUS?

Previously referred to by various names, including second units, granny flats, in-law units, guest houses, backyard cottages, and many others, the Legislature decided to clear up any potential confusion in 2016 and passed Senate Bill 1069,⁷ which promulgated that the official term for all such structures would now be ADUs. As a result, all local jurisdictions in the state now use the term ADU.

A major reason why ADUs are such an attractive option is because they provide the owners of the properties on which they are located a large degree of flexibility. They can use their ADUs as a primary dwelling for themselves, for adult children or aging parents, for a caregiver, or (as legislators hope) for rent to unrelated third parties in the rental market, thereby providing an additional income stream for the homeowner.

The Legislature has good reason to hope. A 2017 study of ADUs in Portland, Seattle, and Vancouver conducted by the Terner Center for Housing Innovation at University of California, Berkeley found that not only did a significant amount of ADUs in those cities go into the rental market, but also that the majority of those ADUs that did (58%) were rented at below-market rates.⁸ Interestingly, the study also found that a majority of homeowners (51%) who built ADUs used their ADUs as their primary residence, freeing up their original primary dwelling for any of the accessory uses mentioned above.⁹

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ADUs are considered a form of infill housing. Infill housing is the insertion of additional housing units into an already approved subdivision or neighborhood. This includes additional units built on the same lot, the division of existing homes into multiple units, or the creation of new residential lots by further subdivisions or lot line adjustments.¹⁰ Like ADUs, infill housing is appealing because it is a relatively easy way to add housing units with minimal impact on existing neighborhoods and the environment. For example, while an undeveloped lot outside of an existing development would require the expensive and time-consuming initial steps of installing utilities and adding infrastructure such as roads, sidewalks, and storm sewers to the lot, infill sites already have these improvements and are shovel-ready for new ADUs.

In the case of creating ADUs through the conversion of existing spaces in homes such as attics, basements, and garages, the process and effort involved is far easier, creating an even gentler ecological impact. Even the U.S. Environmental Protection Agency is a strong supporter of infill housing, noting:

Infill development can reduce development pressure on outlying areas, helping to protect lands that serve important ecological functions. When it occurs near existing transit infrastructure, employment centers, and other destinations, it can also help reduce the amount that people drive, improving air quality and reducing greenhouse gas emissions.¹¹

By some estimates, infill housing is expected to provide up to 50% of all new housing units in coming decades.¹² Many local governments are also in favor of ADUs because they can be credited towards a locality's requirements for meeting the state-mandated regional housing needs allocation ("RHNA").¹³

III. POTENTIAL IMPACT OF SECTION 65852.2/POSSIBLE NUMBER OF UNITS CREATED

Given that Section 65852.2 seemingly permits ADUs to be constructed on all single-family, multifamily, and mixed-use lots in California, resulting in a number of ADUs that could be huge. State Senator Bob Wieckowski, who authored Senate Bill 13,¹⁴ which amended significant portions of Section 65852.2, commented on the housing shortage and ADUs, saying,

There is no single solution. But I do believe ADUs can make a dent in our housing shortage. If 10 percent of homeowners built an ADU, that would be roughly 900,000 new units. In the San Francisco Bay Area, that would amount to 150,000 new homes, mixed in throughout existing neighborhoods, at no cost to taxpayers.¹⁵

This is a major reason why so many ADU-related bills have been passed into law, starting with Senate Bill 1069¹⁶ and Assembly Bill 2299¹⁷ in 2016, which amended Section 65852.2, and the follow-up legislation in 2017, Senate Bill 229¹⁸ and Assembly Bill 494,¹⁹ which further amended Section 65852.2 and clarified the provisions of Senate Bill 1069 and Assembly Bill 494. Despite this previous flurry of ADU laws, there was no robust growth in the number of ADUs built. Although these state laws eased regulatory barriers somewhat, local governments still retained the power of discretionary review and public hearings, and subjected proposed ADUs to strict requirements for floor area ratios, minimum lot sizes, setbacks, and parking restrictions. This situation resulted in the most recent laws being passed, which are the current amendments to Sections 65852.2 and 65852.22 discussed below.

IV. AMENDMENTS TO SECTIONS 65852.2 AND 65852.22

Even with the slow ADU growth, the legislature continues to have faith that ADUs may be a good answer to California's housing shortage, leading to the most recent bundle of housing bills that went into effect on January 1, 2020.²⁰ These bills contained substantial amendments to Sections 65852.2 and 65852.22. Perhaps the most significant amendments to Section 65852.2 are the provisions that effectively strip much of local governments' power to hold hearings or exercise discretionary review during the approval process for certain ADUs.

Traditionally, local governments have wielded tremendous control and oversight over local building decisions as an appropriate exercise of the police power granted to them by the U.S. and California Constitutions.²¹ But through the passage of the recent legislation, the state has exercised its right of preemption in the context of the approval process for ADUs.

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The portion of Section 65852.2 that most directly challenges local authority, and in fact directly supersedes it, is subsection (a)(3), which provides that permit applications for ADUs or JADUs "shall be considered and approved ministerially without discretionary review or a hearing, notwithstanding Section 65901 or 65906 or any local ordinance regulating the issuance of variances or special use permits."²² Moreover, local authorities must grant or deny this approval within sixty days; otherwise, the application shall be deemed approved.²³

A. By Right ADUs

The amendments to Section 65852.2 have also created a class of "by right" ADUs that local governments are required to approve, subject to very limited exceptions based on water and sewer service availability, or traffic and public safety considerations.²⁴

The first category of "by right" ADUs is detached ADUs that are 800 square feet or less in area, sixteen feet or less in height, with rear and side setbacks of at least four feet. For ADUs that meet these requirements, they must be considered and approved without any hearing or discretionary review, within sixty days.²⁵ Furthermore, local governments cannot enforce any local ordinances related to limits on lot size, open space, lot coverage, or floor area ratio...