Trending in California Real Estate: Garage Conversions and the ADU Building Boom

GOMEZ SIMONE Oct. 3, 2018

Trending in California Real Estate: The ADU Building Boom

Why does California need Accessory Dwelling Units (“ADUs”)?

California’s housing production is not keeping pace with demand. In the last decade less than half of the needed housing was built. This lack of housing is impacting affordability with average housing costs in California exceeding the rest of the nation. The legislature has responded to this burgeoning crisis by passing new state laws that encourage the building and use of Accessory Dwelling Units (ADUs) (also referred to as Second Units, Mother-In-Law Units, or Granny Flats). New relaxed regulations and the low cost to build an ADU make it a very feasible affordable housing option, and ADUs can both help tenants by easing the housing shortage and can help homeowners by providing significant additional income. A UC Berkeley study noted that one unit of affordable housing in the Bay Area costs about $500,000 to develop whereas an ADU can range from a small cost to anywhere up to $200,000 on the expensive end in high housing cost areas. Garage Conversions are often the most cost-effective.

What is an ADU?

An ADU is a secondary dwelling unit with complete independent living facilities for one or more persons and generally takes three forms:

  • Detached: The unit is separated from the primary structure,

  • Attached: The unit is attached to the primary structure,

  • Repurposed Existing Space: Space (e.g., master bedroom) within the primary residence is converted into an independent living unit.

Why build an ADU?

There are many reasons for building an ADU on your lot. Because ADUs are zoned to be rental units, they produce additional household income. But ADUs can provide additional living quarters for caregivers, grown children, relatives or elderly parents as well as renters. Or, “Empty nesters” can stay in their neighborhoods by moving into a smaller ADU and renting their larger existing home to pay the mortgage.

Checklist: Can I Add an ADU to my Home?

  • I own a single family home;

  • My home (1) has a room or garage that can be converted into a unit with its own entrance, or (2) a garage in my back yard or (3) there is extra space in my back yard (see setback details below);

  • My home (1) has room and access for an additional parking space, or (2) is located within ½ mile from public transit.

Why are ADUs suddenly Trending?

In January of 2017, a new California state law took effect that encourages homeowners to build “granny flats.” But many homeowners and residential real estate investors still do not know that the California has made it easier than ever to add a legal rental unit to a single-family home.

What is the law for ADUs in the State of California?

The new state laws – AB 2299 (Bloom) and SB 1069 (Wieckowski), effective January 2017 – makes it easier to build an ADU on a single family lot by cutting out a lot of the red tape. You can read the entire law at the California Legislative Information website by searching California AB 2299 and California SB 1069. Please be aware that Cities may pass new laws that will affect ADU construction, so always check your city’s websites and talk to their planning departments.

ADUs are now permitted in all single-family zones. Any lot in these zones, regardless of its size, can add an ADU if it will fit. Your lot must have an existing house, only one ADU per lot is permitted, and the ADU cannot be sold separately from the house. The owner is not required to live in either unit; i.e. both the main house and the AUD can be rented out even in single family zones, which can be a big deal to “buy-and-hold” Real Estate Investors. An ADU must meet additional site requirements as well as building construction requirements as described in more detail below. The new laws may also help homeowners who currently have an unpermitted ADU on their lot to upgrade it to permitted status; contact your city Dept. of Building and Safety for more information.

ADUs within Existing Space

Local governments must ministerially approve an application to create within a single family residential zone one ADU per single family lot if the unit is:

  • contained within an existing residence or accessory structure.

  • has independent exterior access from the existing residence.

  • has side and rear setbacks that are sufficient for fire safety.

These provisions apply within all single family residential zones and ADUs within existing space must be allowed in all of these zones. No additional parking or other development standards can be applied except for building code requirements.

Governmental Fees

SB 1069 provides that ADUs shall not be considered new residential uses for the purpose of calculating utility connection fees or capacity charges, including water and sewer service. The bill prohibits a local agency from requiring an ADU applicant to install a new or separate utility connection or impose a related connection fee or capacity charge for ADUs that are contained within an existing residence or accessory structure. For attached and detached ADUs, this fee or charge must be proportionate to the burden of the unit on the water or sewer system and may not exceed the reasonable cost of providing the service.

Fire Requirements

SB 1069 provides that fire sprinklers shall not be required in an accessory unit if they are not required in the primary residence.

No Total Prohibition

SB 1069 prohibits a local government from adopting an ordinance that precludes ADUs.

Size Limitations

Generally, AB 2299 (Chapter 735, Statutes of 2016) requires a local government to ministerially approve ADUs if the unit complies with certain parking requirements, the maximum allowable size of an attached ADU, and setback requirements, as follows:

  • The unit is not intended for sale separate from the primary residence and may be rented.

  • The lot is zoned for single-family or multifamily use and contains an existing, single-family dwelling.

  • The unit is either attached to an existing dwelling or located within the living area of the existing dwelling or detached and on the same lot.

  • The increased floor area of the unit does not exceed 50% of the existing living area, with a maximum increase in floor area of 1,200 square feet.

  • The total area of floorspace for a detached accessory dwelling unit does not exceed 1,200 square feet.

  • No passageway can be required.

  • No setback can be required from an existing garage that is converted to an ADU.

  • Compliance with local building code requirements.

  • Approval by the local health officer where private sewage disposal system is being used.

ADU law requires local government approval if meeting various requirements (GovCode Section 65852.2(a)(1)(D)), including unit size requirements. Specifically, attached ADUs shall not exceed 50 percent of the existing living area or 1,200 square feet and detached ADUs shall not exceed 1,200 square feet.

A local government may establish minimum and maximum unit sizes (GC Section 65852.2(c). However, like all development standards (e.g., height, lot coverage, lot size), unit sizes should not burden the development of ADUs. For example, setting a minimum unit size that substantially increases costs or a maximum unit size that unreasonably restricts opportunities would be inconsistent with the intent of the statute. Typical maximum unit sizes range from 800 square feet to 1,200 square feet. Minimum unit size must at least allow for an efficiency unit as defined in Health and Safety Code Section 17958.1.

Impact on Existing Accessory Dwelling Unit Ordinances

AB 2299 provides that any existing ADU ordinance that does not meet the bill’s requirements is null and void upon the date the bill becomes effective. In such cases, a jurisdiction must approve accessory dwelling units based on Government Code Section 65852.2 until the jurisdiction adopts a compliant ordinance.

Exemptions from Local Parking Requirements

SB 1069 reduces parking requirements to one space per bedroom or unit. The legislation authorizes off street parking to be tandem or in setback areas unless specific findings such as fire and life safety conditions are made. SB 1069 also prohibits parking requirements if the ADU meets any of the following:

  • Is part of an existing primary residence or an existing accessory structure,

  • Is within an architecturally and historically significant historic district,

  • Is in an area where on-street parking permits are required, but not offered to the occupant of the ADU,

  • Is located within one block of a car share area,

  • Is within a half mile from public transit.

To find out if your lot is within a half-mile of transit: First, see if your lot appears to be within a half-mile radius of a bus stop, rail station, or a dedicated space where a shared-vehicle is parked by checking the City’s transit map at ridingmetro/maps/images/systemmap.pdf. Second, call the Dept. of Building and Safety and give your property address; they can confirm whether you need to provide parking for your ADU.

More Info for Los Angeles City Homeowners

Rent Control

If your home was built before 1979, one or both of the units may become subject to Los Angeles’ Rent Stabilization Ordinance (RSO). To determine if your ADU falls or will fall under the RSO, call the LA HCID.

ADU Size and Location Limitations

As stated in the state law, an attached ADU cannot be bigger than 50% of the existing house. For example, if your existing house in 2,000 sq. ft., the attached ADU cannot exceed 1,000 sq. ft. in size. In addition, most ADUs cannot exceed 1200 sq. ft.

Second, there is a “mansionization ordinance” in Los Angeles that usually restricts the total square footage of all structures on a lot to 45% of total lot size. For example, if your lot is 10,000 sq. ft., the total built area (existing house, ADU, garage, etc.) cannot exceed 4,500 sq. ft.

Third, if your existing garage is at the front of your house, you may not be able to convert it to an ADU. The Los Angeles Dept. of City Planning will need to verify the specifics related to your project.

If you are a landlord or potential landlord, it’s always a good idea to get good legal advice, and Gomez & Simone is here to help at (855) 219-3333. Remember, there is a complex interplay between state and local laws, and since these are new laws, they are in constant flux. This article is no substitute for legal advice.