California’s Big Plans for Accessory Dwelling Units: What Lawyers Need to Know

California’s Big Plans for Accessory Dwelling Units: What Lawyers Need to Know

Estimated reading time: 8 minutes

Housing. Housing. Housing. That’s one of the dominant themes of legislation passed by the California Legislature in the past 12 months. It’s a focus of Gov. Gavin Newsom’s administration — for good reason. According to some estimates, California must build at least 3.5 million new homes by 2025 to end the housing crisis. 

That is less than six months away.  

So, it’s no wonder Newsom signed no fewer than 54 housing bills into law in late 2023. Among them was legislation to improve the regulatory approval process for building more accessory dwelling units (ADUs). 

Formerly known as second units, ADUs are attached or detached residential dwellings that provide self-contained housing on a lot with a primary residence. Think garden suites, basement units and tiny homes located on properties with an existing main housing structure such as a house. ADUs must have separate and permanent living, sleeping, eating, cooking and sanitation facilities.  

The regulatory shifts for ADUs are a positive development for both the housing crisis and the California construction and municipal lawyers who are crucial to addressing it. Many of the changes streamline existing law. However, as with any new legislation, it’s essential to ensure you are fully briefed on updates and use the correct forms to guide your construction, developer and project sponsor clients.  

Lucky for you, we’re about to dive into two of the critical developments below. For an even more granular look at the topic, CEB’s California Municipal Law Handbook is a great place to start, and the database has additional resources to peruse. More on that later.   

California ADU Laws Get Their Government Code Chapter 

Newsom enacted urgency measure Senate Bill 477 in March, immediately relocating California’s laws governing ADUs (and junior accessory dwelling units) to their shiny new chapter of the Government Code Title 7, Division 1, Chapter 13).  

Pardon us if we take a moment to get a bit excited. It’s a huge step, and that whooshing sound you hear is California construction and municipal lawyers exhaling en masse. While this might seem like the legislative equivalent of moving your living room furniture around because you got bored, the change is significant.  

For one thing, all the California statutes governing ADUs will now be in one place. Gone are the days when lawyers had to check disparate bits of government code to ensure they were following all the rules for ADUs. To give you a sense of how mammoth that task was, the applicable laws were scattered across sections 65852.2, 65852.22, 65852.23 and 65852.26. Even worse, they were slotted in with regulations meant for primary dwellings across several disparate chapters. That resulted in significant confusion and headaches for California municipalities drafting their own ADU ordinances and the lawyers trying to guide clients.  

Another plus? The new chapter lays out everything in a more organized way, making it easier to navigate and understand. Four articles in Chapter 13 bring all California accessory dwelling regulations together. Three apply to ADUs. 

General Provisions (Article 1; Gov. Code, §§ 66310-66313).

This article encompasses the California Legislature’s findings, declarations regarding ADUs and definitions that get their own section. That one step has made the statutes significantly more straightforward to navigate.  

Accessory Dwelling Unit Approvals (Article 2; Gov. Code, §§ 66314-66332).

Here, you’ll find all the regulations governing the creation of ADUs. This should help lawyers because the different aspects of the approval process, which are situational and nuanced, have their sections and are not a collection of endless subdivisions. For example, the article divides former Gov. Code § 65852.2(a) into five sections from 66314-66319.  

Accessory Dwelling Unit Sales (Article 4; Gov. Code, §§ 66340-66342).

Here, you’ll find everything there is to know about how property owners can convey — or transfer ownership of — an ADU separately from the property’s primary residence.  

Simple, right? Given how vital ADUs are to solving the California housing crisis, this was an essential step forward. It also created a sort of “roominess” in the statutes that allows for future laws to be slotted in logically. For example, isolating conveyancing in Article 4 provides a specific home for additional creative future legislation in that area. Given what we discuss in the next section, that’s important.   

California’s New Rules for Conveying ADUs as Condominiums 

When the California Legislature created Article 4 in Chapter 13, there were already two statutes to slot in: Assembly Bills 976 and 1033. They were both sponsored by San Francisco Assemblymember Phil Ting and signed into law by Newsom on October 11, 2023. Thanks to SB 477, they now have a permanent home in Article 4 (which is fitting given this legislation’s goal).  

AB 976 and AB 1033 go a long way to simplifying the process for property owners to turn ADUs into condominiums and transfer ownership. Previously, there was a patchwork of legislation across the state, with ordinances varying by municipality. And it was largely left up to local governments, which is problematic for expanding ADUs. For example, before AB 976 and AB 1033, municipalities with ADU ordinances had to include specific standards, such as a bar on conveying an ADU unless it was built by a particular type of nonprofit and conveyed tenancy in common with specific provisions in the governing agreement. Existing state law would have also allowed local agencies to impose owner-occupancy requirements on land parcels containing ADUs beginning in 2024, which would hamper conveyance.  

AB 976 and AB 1033 now codify into state law the process for conveying ADUs separately as condominiums — and expressly prohibit owner-occupancy requirements. We detail other elements of the new laws in this CEB DailyNews post, but here are two main highlights:  

• AB1033 establishes two ways for a property owner to convey an ADU. It can be done under existing section 65852.26, which allows a qualified nonprofit corporation to convey an ADU as a tenancy in common. Or the property owner can leverage AB 1033’s new requirements, specifically Gov. Code, § 65852.2, subd. (a)(10).   

• For its part, AD 976 protects the ADU conveyance procedure by prohibiting municipalities from requiring owner-occupancy on a parcel containing an ADU. In theory, municipalities were previously given this power to guard against speculative development. However, the city of Los Angeles looked into the issue and found that investors had developed only a tiny percentage (8%) of ADUs. As a side benefit, the ban on owner-occupancy requirements in AD 976 will make it far easier to finance ADU construction.  

These new laws are already having an impact. Earlier this summer, the San José City Council passed and enacted an ordinance implementing AB 1033 to create a way for property owners to turn ADUs into condos. This first-of-its-kind law for California amends San José’s zoning laws to lay out the requirements that property owners must meet to convey an ADU and ensures they don’t conflict with existing state and local laws. San José has always been at the forefront of innovative housing policy, so it’s no surprise that the municipality has already taken action. The hope is that more local governments will follow suit.  

Minding the ABCs of ADUs 

If you’re excited by all the recent updates to California ADU laws, you’re not alone. Housing circles have a lot of optimism about the positive impact these changes will have. As with all things regulatory, however, it will be left to California lawyers to help their clients and organizations navigate these statutes and ordinances properly.  

Let Continuing Education of the Bar (CEB) Be Your Guide

CEB can’t do the work for you, but we can arm you with all the information you need to confidently advise your clients — and fill out all that permitting paperwork. As noted above, consulting CEB’s California Municipal Law Handbook is a good first step. It’s the best place to find everything. There’s also our resource on the California Subdivision Map Act and the Development Process, as well as not one but two volumes of California Land Use Practice, found here and here. If you’re scratching your head over local ordinances for building ADUs, look no further than Practice Under the California Environmental Quality Act.  

And, of course, you can find out the latest ADU developments with CEB’s DailyNews. Here’s a handy shortcut that searches all of our posts for ADU content.  

This is an exciting time for California housing law, with progress on many important fronts. While no one piece of legislation will solve the housing crisis, hopefully, it will all contribute to more Californians finding safe and affordable housing.  

Has all this talk of ADU changes got you mystified? Contact us today to arrange for a free trial of CEB and see how we can make everything clearer.