ADUs Likely Coming En Masse to South Bay Real Estate

In 2017, I wrote a blog post called “A Can’t Miss South Bay Investment,” which addressed the new California ADU (Accessory Dwelling Units) bills signed into law by Governor Jerry Brown.

This was the first step in allowing for “granny flats” or “in-law units” to be built on owner-occupied single-family property, which was otherwise expensive or nearly impossible to get done in the past.

For me, this was a “can’t miss” opportunity for homeowners in the South Bay to cash in on rental income by converting a garage or constructing a rental unit in their backyard.

My optimism was soon quashed, however, as cities throughout the state could take the state law and amend certain aspects to fit their locality. Unfortunately, many cities took this as a way to restrict ADU codes making it nearly impossible for homeowners to make an ADU happen.

Now, two years later, the state legislature along with Gavin Newsome has passed several additional bills that make it harder for cities to enforce restrictive ADU codes, while also making the ADU laws even more aggressive.

Triplexes throughout California

The combination of newly passed bills effectively allows for most of the state to convert single-family properties to triplexes, with some exceptions of course.

In summary, here is what the totality of the bills mean:

• Every property is now allowed two ADUs – a standard ADU and a junior ADU
• Removes the owner-occupancy requirement to allow for an ADU
• More than two ADUs can be built on investment properties with multi-family zoning
• Eliminates restrictions on things like lot coverage and lot size
• Reduces fees even further
• Reduces setback requirements
• Exempts garage conversion ADUs from replacement parking
• Cities cannot reduce the size of an ADU to less than 850 square feet
• CC&Rs from homeowner associations can no longer prevent construction of ADUs

Wow. When you think about the above…it is pretty incredible.

And, it all goes into effect January 1, 2020.

Each Bill and a Little More Detail

If you are intrigued, below are the bills in a little more detail…

AB 68 & 881:

• Removes minimum lot size requirements
• Maximum setbacks for ADUs can only be four feet
• Prohibit lot coverage, floor to area ratio and other regulations
• Exempts garage conversions form finding replacement parking
• Guarantees larger ADUs (some cases, 800, 850, or 1,000 square feet)
• ADU permit application should not exceed 60 days
• Allows for ADU and junior ADU

SB 13:

• Eliminates owner-occupancy requirements for five years (open to investors)
• Amnesty program to permit unpermitted ADUs
• Reduces expensive impact fees
• Shortens time for permit review and replacement parking as well
• ADUs can be required to rent in periods of longer than 30 days

AB 670:

• Prevents homeowner associations from barring ADUs
• CC&Rs would not be enforceable if they are unreasonable

There are other detailed aspects to the combined laws. For instance, if you demolish a garage, carport, or covered parking in conjunction with building a new ADU, you still do not have to replace the parking.

Or, if you build a new detached ADU, the local law can only require one parking spot per ADU or per bedroom, whichever is less. And, the parking may be provided as tandem parking on an existing driveway.

Furthermore, ADU approval will be subject to skipping things like Architectural reviews in cities.

I would highly advise you consult with a qualified architect, experienced real estate attorney, and of course work with your city on how they plan to apply these new laws to their building codes.

How Will This Affect the South Bay?

This legislation will be transformative.

Larger single-family lots will be able to convert existing square footage into a junior ADU and build a detached ADU if they can find the room with four foot setbacks and an additional driveway parking space.

Smaller lots will be able to convert garages to junior ADUs.

Multi-family zoned properties owned by investors will be allowed to convert at least one ADU from a laundry room, storage unit, attic, basement, etc. if they comply with state building standards, along with potentially constructing up to two detached ADUs (don’t quote me, the language gets tricky).

As mentioned above, here are some of the things that can be expected to happen around the four areas I write about each week…

• Sand Section properties in Hermosa and Manhattan Beach will be able to convert their garages.
• Behind the gates in Rolling Hills, there will now be large detached bungalows available for rent in what is a single-family only neighborhood.
• A triplex in Redondo Beach could convert its garage space into a fourth, or potentially even fifth unit. A large 3-car detached garage can be torn down and have a 2-bedroom ADU built.
• Palos Verdes Estates which used its tools such as the P.V. Homes Association, CC&Rs, and Art Jury to bar ADUs will now render those powers unenforceable.

If the state legislatures covered every angle in the laws, it could get wild on what is built in the South Bay and the entire state. You should expect lawsuits. And, a lot of them.

It may take some time to work out the logistics and new laws, but it looks like ADUs will happen in a big way.

Get Ready

But, moral of the story, ADUs are coming and you need to be ready for them.

Whether you currently own a single-family home, an investment property, or are on the hunt to purchase a property in the South Bay, Greater L.A., or California…there is going to be big money to be made if you understand the law, local codes, and how to apply them.

You can maximize the value of your existing asset or score an amazing deal with instant “higher and better” use prospects that will create additional income streams and increase the value to a property.

Hire a great architect. Hire an amazing real estate attorney. Find a General Contractor who will specialize in ADUs. And maybe, find a sharp Realtor that can advise on what to build or score you a deal on the right property.

Have fun, do your homework, and I hope there are some profitable ADUs in your future.

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