WRITTEN BY: MAX FITZGERALD
OCTOBER 2021

Shortly after the recall election, Governor Newsom signed into law a handful of bills intended to help alleviate California's housing crisis. One of those bills being Senate Bill 9.

What is SB 9, and why should you care?

If you own a single-family residence in the State of California, SB 9 now directly affects you. It's been a widely debated bill by both political parties over the last few months, and it may be one of the most substantial real estate legislation that I've seen passed over the course of my real estate career.

Let’s discuss the pros and cons, and dig into the details of what this bill actually means for homeowners after January 1, 2022.

What is California’s SB 9?

In a very condensed nutshell, SB 9 now allows homeowners throughout California to legally split their single-family lot into two separate lots. After the lot split, a homeowner can either sell each lot individually. Or, they can build up to two units on each lot.

Can Local Jurisdictions Prohibit SB 9 Developments?

No. Under SB 9, local agencies must ministerially approve subdivisions of one lot into two without discretionary review or a hearing. Local agencies may only impose objective zoning and design standards. Even then, only to the extent that the standards do not physically preclude the construction of two units of at least 800 square feet.

How is this different than building an ADU?

The key fundamental difference is the ability to lot split. If a homeowner decides to build an ADU in their backyard, that ADU is merely a detached structure on the single-family lot. While it does increase the overall value of the "home" (the house + ADU), the ADU has no inherent value on its own and must be sold in conjunction with the house.

After an SB 9 lot split, the new structure (whether it's a singular dwelling unit or duplex) can be sold to a completely new homeowner.

What are the Qualifications and Limitations?

A homeowner has the ability to build a maximum of 2 new units on an SB 9 lot split. Here is the qualifying criteria that must be adhered to:

• Each new lot is at least 1,200 square feet (though the local agency may set a lower minimum.)

• The split results in two new lots of approximately equal size (60/40 split at most).

• The split does not involve the demolition or alteration of affordable housing, rent-controlled housing, housing that was withdrawn from rent within the last 15 years, or housing occupied by a tenant in the past 3 years.

• The lot to be split is zoned single-family residential.

• The lot is not a historic landmark or within a designated historic district.

• The lot is within an urbanized area or urban cluster.

• The original lot was not established through a prior SB 9 lot split.

• Neither the owner, nor anyone acting in concert with the owner previously subdivided an adjacent parcel through an SB 9 lot split.
  
  

And the most important qualification:

Three-year owner occupancy...by affidavit: The applicant-owner must sign an affidavit stating that the owner intends to occupy one of the housing units as the owner's principal residence for at least 3 years following the lot split.

This will prohibit non-owner-occupied investors from purchasing homes and performing lot splits for profit.

The Bottom Line: Homeowners, your lots just got a whole lot more valuable.

SB 9 is a very important housing bill that homeowners need to be aware of. Even if a homeowner chooses not to sell a portion of their lot or build a couple of units, having the additional density and "building potential" fundamentally increases the overall value of someone's home.

More information will unfold as we get closer to January 2022, but the passing of SB 9 is big.

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