Accessory Dwelling Units: Could New California Laws Ease the Housing Crisis?

It’s no secret that California has a housing crisis.

There are countless statistics and figures we could cite to highlight this problem.

There has been a large increase in home prices, and the amount of available inventory is not growing to meet demand. According to Zillow, the value for a “typical home” in the United States is $259,906, as of data from September 2020. This represents a 5.8% increase over a year’s time. In California, Zillow’s home value index says the typical home is worth $586,659; housing has grown in value by 6.8%.

According to Bloomberg, 41% of California households are “cost-burdened.”

In California, it’s becoming increasingly difficult to purchase a high-quality affordable home.

This is not just a problems for middle and high-end housing buyers. Homelessness is also on the rise in our state. According to a document from the Homelessness Policy Research Institute, homelessness in California increased by 22% between 2009 and 2019. Between 2018 and 2019 alone, homelessness spiked by 16%. In fact, 27% of homeless people in the United States are found in California.

We could go on with statistics that highlight the problem, but clearly California needs to address the issue. The causes could be numerous, and the potential solutions are just as wide, but it seem reasonable to assume that if California could simply provide access to more units of affordable housing, at least some of the problem could be softened.

To this end, accessory dwelling units, or “ADUs” have been floated as a potential source for easing the housing crisis. By providing access to affordable housing, demand could cool, housing prices may stabilize, and homelessness (possibly) could be lowered.

The California government seems to agree with this idea. In 2020, they passed Assembly Bill 68, known by many as “AB 68,” which will make building ADUs easier and less complex.

Before we explore this California law, let’s shift our focus to learn more about ADUs…

What is an Accessory Dwelling Unit?

Accessory dwelling units, also called granny flats, in-law units, and backyard cottages, are a secondary house or apartment that shares a lot with a primary house. They can take many forms, including separate small buildings, perhaps with only a few rooms, that is located in another section or corner of a property.

They can also function as separate units inside the main house. If a property owner is able to section off a portion of the house so it is essentially an entirely-independent unit, it can be considered an ADU.

A detached garage with a rented apartment, a finished basement with its own living quarters, or a rented apartment on the side of a house could all fall under the legal definition of an ADU.

California Legislation and Accessory Dwelling Units: AB 68

A new California law makes accessory dwelling units easier to build, potentially easing the housing crisis.

ADUs had received various attention from the state government of California in the past. Previous laws paved the way for homeowners to create ADUs on their properties, and the units saw moderate success as a way for homeowners to add income-generating units to their properties.

But there were issues. In particular, towns and homeowner associations resisted them, and placed regulations and building codes that made it hard to build these units. There may have been high registration fees, cumbersome regulations, and zoning issues, all of which made it harder to build an ADU.

Easier Permit Applications, Less Chances for Rejection

AB 68 is meant to make it easier for homeowners to construct an ADU on their property. Taking a wide-ranging approach, this state legislation hopes to create greater access to accessory dwelling units while easing, at least on some level, the California housing crisis.

One of main issues with ADUs in California was the extensive permit process. This law seeks to expedite the process, hopefully taking it from 120 days to as little as 60. Essentially, the law says that if you apply for an ADU, the local government cannot take longer than two months deciding on the application. It also restricts local governments from making strict requirements that exceed the state requirements. There is a size and space element to the law as well. Essentially, if a proposed ADU is below a certain size limit, it can’t be rejected (in most cases) by local governments.

Expanding What Counts as an ADU

Before AB 68, there was a very narrow definition for what counts as an accessory dwelling unit. The new law seeks to expand the definition to make these housing units more available. Thanks to the law, homeowners can build an ADU (800 square feet) or a “junior ADU,” which is attached to a single-family home or to the new ADU. Essentially, the law allows a spare room that has been converted into a separate unit to be legally classified as an accessory dwelling unit.

Impact on California Communities

Like any government regulation, the overall impact has yet to be seen. However, this law has the potential to help many California communities, homeowners, and people seeking affordable housing.

Affordable housing issues are driving many long-time California renters from their homes, but this new law could provide safe, comfortable housing for a variety of people. Essentially, the more ADUs that are built, the more opportunities there will be for people to live comfortably in the areas where they live and work.

By creating more units for rent, it’s possible that rental costs could decline, reducing the often-burdensome cost of living in the state. It will also mean homeowners have more opportunities to earn an income from their properties.

There is also the possibility that more ADUs could ease traffic congestion in the state. It makes sense; if more people are able to afford housing closer to work, commutes will be reduced, thereby easing the total traffic in the state.

Let Us Help You Find Financing for an ADU

If you are thinking of building an ADU on your property, contact our team today and learn about financing options for these housing additions. We would be proud to help you find affordable financing so you can earn an income off your property while helping to ease California’s housing crisis!



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I hope you enjoyed reading this article. It's my goal to keep you updated with the latest real estate mortgage news. I'm proud to provide you with 100% original and unique content. Subscribe now to get high quality real estate mortgage content and articles delivered directly to your inbox. Chad Baker is Regional Manager for Cross Country Mortgage. Chad is consistently recognized in the top 1% of mortgage originators in the United States 2011-2019. Got a question for Chad? Call (858) 353-8331 or submit your question online