New ADU Laws In 2023 – Everything You Need To Know

1. Why Are ADU Laws Being Updated?

Real estate market in California’s is facing steep housing shortage as we have moved in to 2023. This shortage was compounded as the home prices sky rocketed post COVID19 and affordability reduced. To deal with crisis, government ha has been encouraging ADU construction by making it more affordable and easier to undergo the process. ADUs are small, compact units that can provide affordable housing to low-income families, thus helping California housing production keep pace with demand.

New ADU laws passed in 2017 and 2019 left room for improvement. Although Governor Newsom signed into law the CalHFA Grant, Freddie Mac made changes to their ADU rules, and many local jurisdictions within the state launched ADU programs, there are still barriers holding people back from constructing units.

Improving upon these laws helps remove unforeseen barriers created when the original laws were written. As a result, more units will be constructed to combat the growing housing crisis plaguing the state of California.

2. New AB 221 ADU Law

AB 221 now requires that all cities change their ADU size limits to at least 16 feet. Cities are allowed to have higher height limitations, but they cannot restrict you from constructing your ADU any lower, thus paving the way for more 2-story ADUs. There are added regulations to this new law that require cities to allow you to build even higher than 16 feet.

Circumstance and ADU Height Limitation

ADU is attached to the primary dwelling – 25 ft*

Structure is within ½ a mile from public transit – 18 ft

Property already has a multi-family dwelling that is two stories high – 18 ft

All other ADUs that don’t meet above requirements – 16 ft

* This will also depend on the underlying zoning code of that property. If it is lower than 25ft, then it will be the ADU height limitation.

Of course, this still leaves some questions. For example, you may be wondering if changing height restrictions impacts the maximum size an ADU can be. From our understanding, it will not affect the maximum size of an ADU unless it is a percentage-based ordinance (i.e. an open space requirement). Whether or not this holds true will be better defined when the law goes into effect.

In 2020, legislation required that your ADU permit must be approved or denied within 60 days. This encouraged rapid ADU development, but it had a major drawback. Since most cities were being slammed with ADU permits, a lot of planning departments started simply denying permit applications once the 60 days were up.

To try to prevent this from happening, AB 221 now requires that cities write all the reasons an application is rejected, not just a few. That way, they must spend time looking at the application more carefully and not just rejecting it for a minor mistake if time is running out.

The language of the law was also changed from “local agencies” to “permitting agencies.” Therefore, any entity involved in the review of an ADU permit (i.e. water districts, utilities, etc.) is held to the 60-day requirement, not just your planning board. How well this can be enforced is another story. We will have to wait and see how well this goes into effect.

If an ADU is under 800 sq ft, front setback requirements now cannot prevent an ADU from being built. ADU zoning laws such as floor area ratio and open space ratio are two regulations that previously could not be enforced if they prevent an 800 sq ft or less unit from being built. With the new changes in laws, front setback requirements have been added to the list.

Currently, you can add an ADU to a pre-existing multi-family building. However, you cannot add one to a proposed multi-family building. As a result, developers have to complete their multi-family building project and then start ADU development once their original project is complete. This is time-consuming and unnecessary.

AB 221 makes it so that builders can propose and build new ADUs in new multi-family housing concurrently. Thus, saving everyone time, money, and headaches.

3. New SB-897 ADU Laws

SB-897 was signed into law on the same day as AB 221 and will go into effect on January 1, 2023. It is another “clean-up” bill that features a lot of overlapping changes, like increasing height restrictions to allow for more 2-story ADUs. However, there are a few unique provisions to this bill as well.

Many cities currently prohibit homeowners from developing ADUs if there is unpermitted work on their property. This can include non-conforming zoning conditions, building code violations, or unpermitted structures. Fixing these issues can take lots of time and money, resulting in ADU development being severely delayed.

SB-897 now eliminates these restrictions unless the unpermitted work is deemed a safety or health concern. If it is not, you do not need to fix it before building the ADU.

The construction of an ADU currently triggers a Group R occupancy change to your property. As a result, you needed to install fire sprinklers in the primary dwelling.

This new bill will eliminate the occupancy change, resulting in no more mandatory fire sprinklers in the primary dwelling.

When building an attached JADU, you do not need to include a bathroom in the unit. This new bill makes it more explicit that if you don’t include a bathroom, the bathroom in the primary dwelling needs to be accessible to the JADU. Apparently, this wasn’t explicit enough for some people before.

Despite how helpful ADUs are at improving the California housing crisis, some cities are still doing their best to block ADU development. Therefore, to stop garage conversions from being built, many cities issue ADU permits but then withhold the demolition permit needed to tear down the existing garage. As a result, ADU development is halted.

Starting in 2023, cities can no longer withhold demolition permits if the ADU permit is issued. You will also not need to post a public notice about the demolition anymore. As a result, it will be harder for cities to block ADU development.

SB-897 also adds Government Code 50678 to require that the department establishes a grant program to fund the construction and maintenance of both ADUs and JADUs. Once the legislation determines the amount of funds that will be put towards this program, the department will distribute funds to eligible recipients. We will know more about this fund in the future when all the rules and regulations are hashed out.

4. Other ADU Law Updates

Although AB 221 and SB-897 are two very big bills that make a lot of changes, other changes are coming in 2023 as well. Here is a quick overview of a few worth mentioning.

AB 916 is not directly about ADUs but still applies to them. It makes it so that a city cannot require a public hearing to add a bedroom or two to an existing dwelling unit. As a result, there is the possibility that local jurisdictions may allow you to use this bill to convert garages, attics, basements, and other unconditional spaces into bedrooms. We cannot know for sure, but there is a good chance this will be beneficial to ADU development.

The $40k CalHFA Grant has been an incredible asset in encouraging ADU development. AB 157 will make it even better by requiring CalHFA to convene a working group to develop recommendations to make it easier for homeowners to qualify for ADU construction loans. It will also increase access to the capital available for homeowners who are looking to develop ADUs and JADUs. We will see what they come up with by July 1st, 2023.

AB 561 is another government-backed ADU finance program known as the Help Homeowners Add New Housing Program. This program was created because many homeowners, even with strong credit scores and favorable loan-to-value ratios, cannot easily access federal government-backed mortgages to finance their ADU. This is because mortgages currently require tenants in place and a year or more of documented rental income.

This program addresses the gap to enable homeowners to take advantage of low mortgage interest rates that are predicted to come in the next several years. It “encourages banks, credit unions, and other mortgage originators to make construction loans to homeowners to bridge existing federally backed loans.”

The purpose of the program is “to protect participating financial institutions that elect to enroll qualified loans in the program from losses through default by establishing loss reserve accounts for each participating institution.” A lot of the rules still need to be hashed out, but this is looking like it will be a great financing opportunity for individuals looking to build ADUs.

Thanks to the new California ADU law updates, it will soon be even easier to build an ADU in the state. There will most likely be discrepancies in how jurisdictions interpret and therefore enforce the law. However, it is safe to say these changes will more than likely do more good than harm.

(By RoomWiser – your #1 source for real estate knowledge and tools!)