Much Ado About Adus: New Legislation and Emerging Legal Issues from California's Attempt to Create Affordable Housing
| Publication year | 2021 |
| Author | Andrew Hall |
Andrew Hall
Andrew E. Hall is senior counsel at the Blake Law Firm in Encinitas. Mr. Hall's practice focuses on commercial and residential real estate, including landlord-tenant disputes, purchase and sale disputes, title insurance claims, Homeowners Associations disputes, and zoning and land use. Mr. Hall is also licensed to practice in Washington. Mr. Hall may be contacted by email at andrew@blakelawca.com or by phone at (858) 232-1290.
It is no secret that California is in the midst of a housing crisis.1 "The state is falling far short of meeting current and future housing demand with serious consequences for the state's economy, ability to build green infill consistent with state greenhouse gas reduction goals, and the well-being of our citizens, particularly lower and middle-income earners."2 In the last decade, less than half of the homes needed to keep up with the population growth were built.3 This, in turn, has created a trickle-down effect in that less housing has resulted in more demand and less affordability, particularly for renters and especially for low- to moderate-income households. In 2019 alone, eighteen bills were signed into law designed to jumpstart production, and as of January 1, 2020, six of those were implemented to encourage production of accessory dwelling units (ADUs) and junior accessory dwelling units (JADUs) by loosening restrictions.
There are several benefits to constructing ADUs. ADUs provide a low-cost means of creating housing supply as they can be created by taking space from the primary residence, adding to the primary residence, or constructed as a standalone building on the homeowner's property. Because ADUs must be built on lots with existing or proposed housing, they do not require paying for new land, dedicated parking, or other costly infrastructure that would otherwise be required to build a new single-family home.4 The construction of ADUs infill areas closer to jobs and amenities while creating opportunities for homeowners to receive extra monthly income through rent. ADUs may also be used as a home office or homeschooling classroom. The COVID-19 pandemic has dramatically impacted where and how we work and where our children are educated. According to a Gallup poll from the summer of 2020, the average U.S. worker now telecommutes an average of 11.9 days per month, which is double the 5.8 days per month from the fall of 2019, and over one-quarter of U.S. workers work entirely from home.5 Moreover, according to the U.S. Census Bureau, nearly 93% of households with school-age children report some form of distance learning during COVID-19.6 Homeowners continue to be interested in ADUs for a variety of reasons and the Legislature continues to pass laws to facilitate their construction.
There are, however, barriers to the construction of ADUs. To address California's housing crisis, the intent of the Legislature is to encourage the construction of affordable ADUs and JADUs.7 While restrictions on ADU construction have been stripped to their studs, options to financing the construction of ADUs remain limited despite recent laws and incentives taking place over the past year. Though ADU permitting and completion numbers continue to grow, there may be even more room for growth by making available financing, education, and assistance to homeowners interested in adding an ADU to their property. This article examines several recent ADU-related laws that took effect, options for financing ADUs, potential legal challenges related to these new ADU laws, and barriers that still exist to continued ADU growth.
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Since 2019, a number of laws have taken effect that aim to remove hurdles associated with the construction of affordable housing and enable local jurisdictions to meet housing goals and increase housing supply in the face of the State's housing crisis. In 2020 alone, there were six bills enacted that directly impact ADU governance.
A. Senate Bill 13Senate Bill 13 (SB 13) was signed into law on October 9, 2019, and went into effect on January 1, 2020. SB 13 amends Government Code sections 65852.2 and 65852.22 with its primary thrust being to reduce barriers to constructing ADUs in an effort to increase the supply of affordable housing. SB 13 made changes, some significant, to existing law, including the following changes.
1. Streamlining of Application Approval
Prior to SB 13, local agencies were permitted to approve or disapprove an ADU application within 120 days after receiving the application. SB 13, however, requires a local agency to consider and approve an ADU application in half the time, within sixty days after receiving a completed application. Further, if the agency fails to act on the application within sixty days, the application is deemed approved.8 This substantially cuts down on approval timelines to expedite construction.
2. Prohibiting Requirement that Applicant for an ADU Be Owner-Occupied
Pre-SB 13, a local agency was permitted to condition approval of an application on a requirement that the applicant be an owner-occupant of either the primary or accessory dwelling unit as a condition of issuing a permit. This is no longer the case. Instead, local agencies are prohibited from imposing an owner-occupant requirement. Notably, there is a January 1, 2025 sunset on this owner-occupant proviso.9 Now, not only may a homeowner apply for an ADU, but landlords and owners of non-owner-occupied properties may also apply, which opens up the potential for additional housing while creating a potential new revenue stream for landlords.
3. Creation of Tiered Fee System Based on the Size of the ADU
The crown-jewel of SB 13 is the creation of a tiered fee system based on the size of the ADU. Specifically, it prohibits local agencies from imposing any impact fee on an ADU of less than 750 square feet and requires any impact fees for an ADU of 750 square feet or more to be proportional to the square footage of the primary dwelling unit.10 Some may argue that the limiting of impact fees through this tier system could result in a reduction of revenue streams that may otherwise be used to provide public improvements and infrastructure that may service the infill created by an influx of ADUs and residents of these newly constructed ADUs. The stated purpose of this tiered fee system is to eliminate prohibitive cost barriers that may otherwise prevent a prospective ADU applicant to move forward with the project. This harkens back to the Legislature's stated intent in addressing the housing crisis: to construct affordable housing. SB 13 attempts to do so by reducing cost barriers for the construction of ADUs.
B. Assembly Bill 68Like SB 13, Assembly Bill 68 (AB 68) was signed into law on October 9, 2019, and took effect on January 1, 2020. AB 68 amends Government Code sections 65852.2 and 65852.22, and its focus is to make it faster and easier to obtain an ADU permit and build an ADU. To wit, the purpose of AB 68 is to allow ADUs to go from "policy to permit in 12 months." AB 68 also requires permits to be approved or denied within sixty days.
1. Expansion of Ministerial Approval Requirements
Prior to AB 68's enactment, existing law required a local agency to ministerially approve an application for one ADU per single-family lot, subject to certain conditions and requirements. AB 68, however, allows owners of single-family homes to build both a regular sized ADU and a JADU. Thus, homeowners can now build a JADU attached to the primary dwelling unit while creating a separate ADU on the property.11 This potentially appeals to a much broader array of property owners while creating multiple livable units on a single property.
2. Adjustment to ADU Size Requirements
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AB 68 also expands the potential size of an ADU. Prior to AB 68, ordinances were required to provide a maximum and minimum ADU size. AB 68, on the other hand, prohibits the imposition of size limitations if the ordinance does not permit at least a minimum ADU size of 800 square feet and 16 feet high. Likewise, if an ordinance fails to allow these minimum requirements, it cannot impose limits on lot coverage, floor area ratio, open space, and minimum lot size.12 In other words, local agencies cannot enact an ordinance that does not allow an ADU of at least 800 square feet and 16 feet in height.
C. Assembly Bill 881Assembly Bill 881 (AB 881) walks in lockstep with SB 13 and AB 68. In fact, AB 881 is considered a shared bill with AB 68. Like AB 68, it amends Government Code sections 65852.2 and 65852.22 with the intent of updating and clarifying ADU statutes in an effort to reduce barriers to construction and facilitate the construction of more housing. Further, like AB 68, AB 881's key provisions seek to streamline the process for ADU approvals, including through ministerial approval of ADUs on lots with multifamily residences and within existing garages, a loosening of zoning requirements, elimination of owner-occupancy requirements, and elimination of restrictions on parking requirements. It is possible, however, that the elimination of owner-occupancy requirements could have unintended consequences. By eliminating the owner-occupancy requirements, AB 881 potentially incentivizes investors to purchase single-family homes and add ADUs thereto, thereby commercializing ADUs.
D. Assembly Bill 670Assembly Bill 670 (AB 670) takes on Homeowners Associations (HOA) by augmenting the Davis-Stirling Common Interest Development Act through the addition of section 4751 to the Civil Code. AB 670 was introduced to address concerns that HOAs may attempt to bar ADUs in their Covenants, Conditions, and Restrictions (CC&Rs). For example, CC&Rs may limit each lot to a single unit of housing, effectively prohibiting ADU development within the common-interest...
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