New ADU laws in California 2024 feature major relaxations and offer incentives that encourage homeowners and landlords to invest in an ADU right away. The latest amendments to the housing laws have relaxed stringent restrictions and helped encourage more homeowners to construct ADUs on their properties.
In this article, we outline the importance and new changes in California’s ADU laws in 2024. We will also weigh in on the impact of these new regulations and see how they have transformed the ADU landscape for property owners in the Golden State.
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What RenoFi Can Do
RenoFi is a new way to finance your ADU project. ADUs not only increase your home’s value once the build is completed but can also generate rental income. However, ADUs are costly. If you don’t have enough equity in your current home, funding ADU construction with a home equity loan is impossible.
For example, let’s say your current home value is $500,000, and your outstanding mortgage balance is $400,000. You are planning on adding an ADU and expect the value of your home to increase to $640,000. Your current loan-to-value ratio (LTV) is already at 80%, which means that most home equity loans are out of reach because that’s the maximum LTV they allow. So, your borrowing power using your current equity is $0.
RenoFi, on the other hand, would allow you to go as high as 150% LTV of your current value or 90% of your after renovation value, whichever is lower. So, in this example, while using a standard home equity loan results in your borrowing power being $0, a RenoFi loan allows you to borrow up to $176,000 by using the after renovation value of your home!
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What Is the Importance of ADU Laws in California?
Accessory dwelling units are innovative living solutions that effectively tackle the house shortage problem. These independent spaces are located on the same lot as the existing property and bring numerous benefits to the homeowner.
ADUs are used to shelter family members, elderly parents, and adult children. Additionally, the granny flats offer sufficient space and privacy to serve as short and long-term rental units such as Airbnb. Their versatility and affordability, in contrast to traditional houses, have made them increasingly popular in the state of California.
California’s ADU laws are a collection of regulations and requirements that govern the construction and usage of accessory dwelling units. For several years, this legislation has been considered overly harsh and unclear for real estate owners and potential buyers.
However, the recently included changes have helped loosen most restrictions and provide attractive incentives to property owners in 2024. The new ADU laws are all set to welcome builders and buyers willing to enter California’s housing market in the upcoming years.
What Are California’s New ADU Laws in 2024?
California is one of the few US states that recognizes the benefits of ADUs and passes several statewide notions and modifications to increase their growth.
The latest laws introduced by the Golden State’s policymakers aim to reduce the costs and hassle involved in the installation of an ADU. These bills eliminate the previously imposed restrictions related to the lot size, unit size, and permit approval to simplify the planning and building process of a dwelling unit.
Let’s take an in-depth view of what’s new for ADU laws in California:
Owner Occupancy Requirements
As per California’s previous ADU laws, a property owner could only build an ADU as long as they lived in either the main house or the dwelling unit. However, AB 976 has permanently eliminated the need for owner occupancy from 2024 onwards.
This change is welcomed by landlords and investors who can now build ADUs on properties on rent or investment. Additionally, they can now rent out the main residence and granny flat at the same time to generate additional rental income.
The elimination of the owner occupancy constraints has opened up numerous opportunities for the construction of newly built or converted ADU projects. However, remember that junior accessory dwelling units (JADUs) are still conditioned to follow the owner occupancy requirement.
Condo-ized ADUs
For the longest time, local agencies in California have restricted the use of dwelling units and prohibited them from being sold as separate entities. The recently implemented AD 1033 has put an end to this limitation by permitting the sale of ADUs independent of the primary property.
Now, one or more dwelling units can be marketed separately from the primary residence as a recognized condominium. A homeowners association (HOA) is then established between the main house and the ADU to jointly manage the common property.
This adjustment is a remarkable shift in boosting the accessibility of the ADUs. It also helps provide a flexible, small-sized structure for individuals and families at a fraction of the price of traditional homes and apartments.
Pre-Approved ADU Plan Scheme
The ADU planning process has historically been quite complicated and costly across the state of California. The latest AB 434 has been released in an attempt to make the ADU project cost-effective and speed up its completion time.
According to this bill, every municipality in California needs to develop the pre-approved ADU plan scheme by 2025. Under this scheme, applicants can submit their ADU blueprints to be reviewed and approved by the local agency. The accepted plans are then posted on the official city website to be viewed by the homeowners and builders.
This scheme aims to expedite the planning procedure in California. However, cities can still choose to charge a certain amount for these pre-approved plans. Also, remember that these designs are not always compatible with every property’s unique characteristics and may need extra charges to be modified accordingly.
At RenoFi, our team is always prepared to understand your aesthetic vision and bring it to life. Whether you prefer a contemporary ADU design or a more sustainable structure, our pre-approved ADU plans ensure that the ADU is up to your expectations and complies with the zoning requirements.
Streamlined Permitting
Homeowners across all states require an ADU permit before they can go ahead with the ADU’s formation. Before 2024, California’s local agencies would take as long as 120 days to approve or reject an ADU permit, causing unnecessary delays in its construction.
Fortunately enough, the AB 2221 has made this a thing of the past. With the 60-day rule in place, the planning departments must deny or approve an ADU permit within a timeframe of sixty days.
In case of denial, the agency must provide details for this decision and include possible remedies for the problem. These new changes have helped streamline the permitting process and added transparency and accountability during its review. The timely feedback provided also helps homeowners understand the issue and tackle it concerning the local zoning requirements.
Reduced Impact Fees
According to the new AB 68, accessory dwelling units under 750 square feet are exempted from impact fees charged by local agencies. Meanwhile, granny flats with sizes greater than 750 square feet will be charged proportionally to the size of the unit and the primary residence. These changes have significantly reduced the impact fee from what was paid before and scaled down the total project expenses.
Relaxed Height and Size Requirements
The recent amendments to California ADU laws have elevated the flexibility in the placement of dwelling units by relaxing the rigid height and size requirements. Now, detached ADUs can be built up to 1200 square feet to offer additional living space to the occupants. Whereas, attached ADUs may be at most 50% of the size of the existing property.
AB 2221 has also revised the height restrictions for ADUs in California. According to this, the granny flat can max be 16 ft tall and exceed this limit in certain circumstances. It can be up to 18 feet tall if the in-law suite is within half a mile of public transit and 25 feet tall or the same size as the main house(whichever is lower) if it is attached.
Installation of Additional Units
With AB 68 coming into effect from 2024 onwards, landlords are now able to add two more units to their existing lot. Single-family lots are allowed to build an attached or detached ADU up to 1200 square feet, along with a Junior ADU up to 500 square feet.
Meanwhile, multi-family properties can convert existing, non-habitable structures such as the basement, garages, or attics into multiple dwelling units. Alternatively, they can build two detached units on the residential property.
This regulation is an effective strategy to expand the ADU development and provide housing facilities without needing additional land in the densely populated Golden State.
What Are Some Other Changes to the ADU Laws in California?
California’s new ADU laws strive to encourage property owners and investors to consider adding these dwelling units to their properties. They have made some major alterations to the previous rigorous policies in an attempt to ease out the ADU development journey.
Our team at RenoFi is also committed to doing the same for you. We are here to guide you at every stage of the ADU planning and building journey by providing valuable insights about the financing options you have available.
We understand that ADUs can be expensive, which is why we offer tailored financing solutions you can use to increase your borrowing power and lock in low rates.
That said, here are some other impressive amendments to the ADU laws in California coming into effect in 2024:
Revised Housing Accountability Act
Many municipalities are known to withhold the demolition permits required to convert an ADU from existing spaces, leading to unnecessary time delays. This has been put to a halt with the current changes to the Housing Accountability Act.
Now, the planning department can no longer deny the demolition permit if an ADU permit has been approved. Other HOA-imposed limitations have also been overridden to ensure that the local agencies cannot block ADU projects that comply with the objective standards.
Improved Front Setback
Setbacks measure the distance between the independent unit and the main house and could previously lead to the denial of an ADU permit. To allow greater flexibility in the design and position of the ADU, California has now redefined these setbacks to four-foot rear and side yards.
Additionally, a granny flat under 800 square feet no longer needs to comply with the front setback requirement to be built. This supports the building of accessory dwelling units on properties with limited backyard spaces.
Unpermitted Conditions
Before the newly launched ADU laws, the presence of unpermitted work, such as building code violations or illegal zoning conditions, could prevent the construction of ADU on property. This requirement has now been eliminated. The homeowner can build an ADU while having unpermitted structures on their property as long as they are not a health or safety concern.
CalHFA ADU Grant
The latest updates require local agencies across California to offer financial assistance and grants to foster the creation of ADUs. The most notable contribution to this has been the $40,000 grant provided by the California Housing Finance Agency (CalHFA). Besides this, CalHFA also plans on establishing a work group to recommend recipients of the grant and expand the capital provided to qualified homeowners.
Fire Sprinklers
Earlier on, fire sprinklers needed to be installed in the primary dwelling to build an attached ADU. This requirement has been eliminated as of 2024.
JADU Bathrooms
Junior ADUs no longer require a separate bathroom provided that they are attached to the main property and have access to the one located inside. This considerably takes down the cost involved in building, plumbing, and furnishing the bathroom inside the in-law suite.
Conclusion
The implementation of California’s new ADU laws in 2024 is expected to positively impact the housing market and significantly increase the housing supply. With the relaxed height restrictions, transparent permitting process, and elimination of owner-occupancy and other policies, homeowners and renters are both inclined to invest in ADUs in California.
At the same time, it is crucial to consider the possible challenges associated with these latest regulations. The process of acquiring a permit for building accessory dwelling units has surely been eased, but there are still certain regulatory obstacles that one must be aware of beforehand.
Furthermore, our RenoFI loans are the most efficient approach to finance a home renovation project. Contrary to traditional loans focused on your existing property value or asking you to refinance the main mortgage, RenoFi loans are related to your property’s after renovation value. This strategy offers up to 11x more borrowed amounts, receives monthly low payments, and sticks with your first mortgage’s low cost.
Read our detailed guide about California’s local building codes and get started with the planning of your ADU project right away!
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