News & Insights

California’s maze of housing and development laws gets even more complex this year. A spate of new regulations aimed at streamlining the approval process for housing developments and bolstering accessory dwelling unit (ADU) production recently went into effect — boosting incentives for housing construction in a state plagued by a dearth of affordable housing. Following is an overview.

Housing construction

As part of a multi-faceted strategy to tackle the California housing predicament, Gov. Newsom recently announced that the state has fast tracked the development of 5,500 affordable homes — partially through the use of excess state-owned land. According to a recent press release issued by the governor’s office, by using state-owned property, projects can be streamlined and avoid potential delays caused by communities antagonistic to development of new housing.

In addition, multiple new laws related to housing development go into effect this year, among them:

• SB 4: In an effort to fight the state’s growing homeless problem, SB 4 allows affordable housing developments to be built on land owned by religious institutions and nonprofit colleges or universities. Starting this year, these institutions can circumvent local permitting as well as environmental review rules including the California Environmental Quality Act (CEQA).
• SB 35: In 2017, lawmakers passed SB 35 — a law which was to sunset in 2026 — requiring cities to approve certain housing projects that meet minimum affordable housing requirements if the city had not yet met its state-mandated housing targets. SB 423 now extends the provisions of SB 35 ten years through 2036.
• SB 684: Simplifies the approval process for small, infill apartment buildings (up to 10 units) on vacant lots in neighborhoods where multifamily is already permitted and includes protections against the demolition of existing rent-controlled or affordable housing.
• AB 1287: Provides for a 50% base density bonus to projects containing deed-restricted very low-income, low-income, or moderate-income units (i.e., 15% very low-income, or 24% low-income, or 44% moderate-income), enabling developers to construct taller buildings with more density.
• AB 2011: Introduces a streamlined approval process for multifamily housing projects on commercially zoned land, expediting the development of affordable housing units.
• AB 968: Concentrating on eliminating low quality renovations by “flippers,” AB 968expands sales disclosure laws. Owners that flip a home within 18-months of purchase must now disclose in writing all repairs and renovations made to the property during that time.
• AB 1490: Champions adaptive reuse of existing buildings by allowing builders to retrofit hotels, motels and single-occupancy residences in developed areas into low-income apartments — regardless of zoning.

Environmental restrictions eliminated

A slew of new laws makes it tougher for opponents of proposed housing projects to use CEQA — which requires public agencies and local governments to evaluate, disclose and limit the environmental impacts of development projects or other major land use decisions — to delay certain types of housing projects.

Highlights include:

• SB 10: Aimed at spurring housing development, SB 10 exempts specific projects from environmental review under certain conditions. This law allows the construction of up to 10 dwelling units on any parcel within specific transit-oriented areas or urban infill sites.
• SB 439: With a focus on curbing “CEQA abuse,”SB 439limits the ability of housing opponents to file frivolous suits under CEQA.
• SB 1449: Exempts low-income housing projects near mass transit in urban areas from CEQA requirements.
• SB 91: Makes permanent a CEQA exemption for projects that convert hotels or motels into supportive transitional housing.
• AB 1633: Limited to specific decisions under CEQA and to projects meeting detailed criteria, AB 1633provides developers of qualified infill projects the ability to challenge a local government’s decision to deny the use of an exemption under CEQA or to require further environmental analysis rather than adopt or certify the CEQA document.

Ever-evolving ADU rules

Also known as granny flats, casitas or guest houses, an accessory dwelling unit (ADU) is an additional structure designed for permanent housing built on a property that already has a primary home. ADUs can be an innovative, affordable and effective alternative for adding much-needed housing in California. The benefits of this housing option include: affordable construction (since they do not require paying for land or major new infrastructure), a source of income for homeowners and allowing extended families to be near one another while maintaining privacy.

In recent years, California has encouraged ADU production and evidence is mounting that more homeowners are implementing ADU solutions.
According to the California Department of Housing and Community Development, the number of ADU-related building permits issued throughout the state grows each year. Starting with 2016, 1,366 ADU permits were reported followed by steady increases in subsequent years. By 2022, the annual total reached 24,857 ADU permits statewide.

A flurry of new ADU rules have gone into effect in California, most recently:

• AB 1033: Will let homeowners spin off their ADUs as separate for-sale condos, potentially reshaping the existing ADU market.
• AB 976: Permanently restricts cities and counties from mandating that ADUs be owner occupied.
• SB 897: Allows for new height limits, including a minimum height restriction of 16-feet for all detached units, paving the way for potential two story ADUs.

Conclusion

According to a survey by the Public Policy Institute of California, nine out of ten Californians consider housing affordability to be a problem. Their worries are not unfounded. Recent data shows that the median California home price is 2.5 times the national average — with housing affordability in the state hitting a 16-year low in the second quarter of 2023.

California’s housing shortage is also a significant drag on the state’s economy. According to the Mckinsey Global Institute, $53 billion in consumption spending is lost each year in California because of exorbitant housing costs.

Unfortunately, the headwinds — among them density restrictions, community resistance, environmental laws, scarcity of developable land and soaring construction costs — are numerous and far reaching. Only time will tell if these ambitious new laws will have the desired impact of expanding California’s housing stock and bringing prices closer to the national average.

Joseph von Meier is a partner at Crosbie Gliner Schiffman Southard & Swanson (CGS3).  The article was published in The Daily Journal and The Daily Transcript (subscriptions required).