I’ve been getting tons of questions regarding California’s SB-9 bill. I wanted to hold off until the final version is signed into place because bills could change quite a bit between when it’s first proposed, debated, revised, and finally voted on.

It’s a big game changer for California honestly. I don’t like broad stroke policies, regardless if you are liberal or conservative. This one they did put some thought behind it and taken into account people’s concern. If the goal is to create new housing units, I think this one will be much more effective than some of the other BS housing bills that’s been passed.

What is it?

The bill will permit property owners to subdivide each lot as long as each is > 1,200sf. On each subsequent divided lot, you are permitted to build a duplex (so really you can build a fourplex) with ministerial review, meaning it doesn’t need to go to a Planning Commission or have public hearings, which can delay development timeline because anybody can object to your design for any reason, and even if it’s approved anyone can appeal for any reason within 30 days, and then to address the appeal will take another 30 days.

You are allowed to sell off each lot individually. However each lot needs to have proper access, which means likely you will have to record an easement.

Suburban Neighborhood

Criteria

While the bill was still in draft and debate stage, I mentioned to a lot of my friends and colleagues that there are still a number of methods local municipalities or at the state level can impose to make a fourplex design infeasible. I’m quite glad to see they implemented a balanced approach that’s not going to lead to wild speculation and rampant displacement.

  • No demolition of more than 25% of existing exterior structural walls
  • No demolition of affordable housing
  • Not allowed in historical districts
  • Not allowed if tenant occupied the last 3 years
  • Not allowed if the property has been Ellis Acted, as in removed from the rental market, within the last 15 years
  • Not allowed for rent controlled properties
  • Owner needs to sign an affidavit to declare they INTEND to occupy one of the units for minimum 3 years
  • Newly created units cannot be used for short term rentals (STR), as in < 30 days Airbnb kind of rental
  • ADU approval on top of the 4 units is not required
  • Local agency cannot impose design standards to prevent creation of at least (2) 800sf floor area units or reject projects that does not create specific adverse public health and saftey impact.
  • Must be in Census urban area
Lot Split
  • Each parcel must be at least 40% of the original
  • Each resulting parcel must be > 1,200sf
  • Lots can only be subdivided once
  • Easement for public services and facilities and access to the public right of way may be required
My take

Homeowners I would say don’t have to worry about the entire neighborhood turning into fourplexes overnight. In fact, I think only a small percentage of property will qualify or even bother to move forward with it. Aside from the restrictions imposed here, just the financing aspect of it is going to prevent many homeowners to do this even if they wanted to. I’ve heard somewhere between 2-5% of all property might be able to actually to utilize this bill.

The added language about keeping 75% of the exterior structural walls I think will go a long way to keeping the single family look and feel of the neighborhood. Not allowing this for rent controlled properties, or if it’s been occupied by a tenant within the last 3 years will help prevent displacement.

The other couple of things such as consideration for ADU’s and STRs that wasn’t in the initial bill but worked its way in is what I meant when I said that the legislators put some thought behind it.

The Census thing is worth noting as well. Any area that’s in dire need of more housing units doesn’t have to worry about it but it also means you’re able to do this in say Grass Valley or Joshua Tree because they’re not designated in the urban area by Census. Farmland or wetland is also still protected under this bill.

Until at the local level more guidance or ordinances come out I would still say it’s too vague to form any kind of investment thesis around this. If you’re a regular homeowner though and this is something you want to explore or you need help with architect designs, permitting, GC construction definitely reach out to me.