AB 976 is a new law that extends the incentives for building accessory dwelling units (ADUs) in California. ADUs are small, independent housing units that can be attached or detached from the main house, such as granny flats, garage conversions, or backyard cottages. ADUs can provide affordable and flexible housing options for renters and homeowners, especially in a state that faces a severe housing shortage and high housing costs. AB 976 aims to encourage more property owners to build ADUs by removing some of the barriers and restrictions that limit their development.
AB 976 was introduced by Assembly Member Phil Ting on Feb. 14, 2023, as part of a package of bills to address the housing crisis in California. The bill was co-authored by Senators Scott Wiener and Nancy Skinner, and Assembly Members Buffy Wicks and David Chiu. The bill was supported by various organizations, such as California YIMBY, AARP California, Habitat for Humanity California, and the California Association of Realtors. The bill passed both houses of the Legislature with bipartisan support and was signed by Governor Gavin Newsom on Oct. 8, 2023. The bill will took effect on Jan. 1, 2024.
Incentives for building ADUs
Removal of owner-occupancy requirements
One of the main incentives that AB 976 offers for building ADUs is the removal of the owner-occupancy requirement. This means that property owners can build ADUs on their rental properties, as well as on their primary residences, without having to live on the same lot. This can increase the supply of rental housing and create more opportunities for income generation for property owners.
According to California YIMBY, the sponsor of AB 976, “prior to AB 881’s enactment, many local governments required the property owner to live in either the ADU or primary home – which killed construction of many affordable rental ADUs.” This requirement also prevented many low-income and BIPOC homeowners from building ADUs, as they were more likely to rent out their primary homes and live elsewhere.
As a report by the Terner Center for Housing Innovation and the Center for Community Innovation states, “the owner occupancy requirement has historically been used as a tool of exclusionary zoning and has disproportionately impacted low-income homeowners and homeowners of color who may not be able to afford to live in their primary residence.”
Exemption from Impact Fees
Another incentive that AB 976 offers is the exemption from impact fees for ADUs that are less than 750 square feet. Impact fees are charges that local governments impose on new development to cover the costs of providing public services and infrastructure, such as water, sewer, roads, parks, and schools. By exempting ADUs from these fees, AB 976 can reduce the cost and complexity of building ADUs and make them more affordable and accessible. As Holland & Knight explains, “impact fees can be a significant barrier to development of affordable housing because they are often charged on a per-unit basis rather than based on square footage or other factors that reflect actual impacts.”
Impact fees can also vary widely across jurisdictions and add thousands of dollars to the cost of an ADU project. According to the Terner Center and CCI report, “impact fees are one of the most significant costs associated with building an ADU in California; in some jurisdictions they can exceed $50,000 per unit.”
Streamlining of the approval process for ADUs
A third incentive that AB 976 offers is the streamlining of the approval process for ADUs. Under AB 976, local governments have to approve or deny an application for an ADU within 60 days, instead of 120 days as before.
Moreover, local governments cannot impose any design standards or requirements that are not objective and based on health and safety. This can speed up the permitting process and prevent arbitrary or unreasonable delays or denials.
As LegiScan notes, “the bill would prohibit a local agency from imposing a minimum square footage requirement for either an attached or detached accessory dwelling unit that prohibits an efficiency unit.” The streamlined approval process can also reduce the need for homeowners to hire consultants or contractors to navigate the complex and confusing regulations and procedures.
The Terner Center and CCI report found that “many homeowners struggle with finding reliable information about how to build an ADU in their jurisdiction” and that “the lack of clear information leads many homeowners to rely on costly professionals who may not always have their best interests in mind.”
Protection from local ordinances that restrict ADUs
A fourth incentive that AB 976 offers is the protection from local ordinances that restrict ADUs.
CCI reports found that “local regulations often reflect neighborhood preferences rather than objective standards” and that “some localities use restrictive zoning to exclude certain types of residents or preserve neighborhood character.”
Under AB 976, local governments cannot adopt or enforce any ordinance that limits the number, size, location, or occupancy of ADUs, unless they can demonstrate a specific adverse impact on public health or safety. This can prevent local governments from imposing unnecessary or excessive restrictions on ADUs that discourage their development.
For example, some local governments have tried to limit ADUs by requiring large lot sizes, imposing strict setback or height limits, mandating excessive parking spaces, or banning short-term rentals.
Advantages of AB 976 for homeowners
AB 976 provides several advantages for homeowners interested in building ADUs:
- Income Generation: A UC Berkeley study reports a median rent of $1,400 per month for ADUs in California, offering homeowners an annual income of $16,800. This income helps cover mortgages, property taxes, and maintenance costs, particularly beneficial for low-income and BIPOC homeowners.
- Increased Property Value: Adding an ADU can increase property value by up to 30%, according to a Freddie Mac study. This enhances homeowners’ equity, enabling refinancing, home equity loans, or selling at a higher price.
- Housing Flexibility: Homeowners gain flexibility and diverse housing options, using ADUs for various purposes such as housing family members, providing rental accommodation, creating home offices, or expanding living spaces.
- Social and Environmental Benefits: ADUs contribute to social interaction, support, and the creation of intergenerational households. They also help reduce greenhouse gas emissions and urban sprawl, contributing to more diverse and inclusive neighborhoods.
Challenges and Limitations of the AB 976
Despite the incentives, homeowners should be aware of challenges with ADUs:
- Cost and Feasibility: Construction costs for ADUs can range from $50,000 to $300,000. Upgrading existing infrastructure and securing financing can pose challenges for homeowners.
- Community Opposition: Homeowners may face opposition from neighbors concerned about the impact of ADUs on parking, traffic, noise, privacy, aesthetics, property values, or neighborhood character.
- Infrastructure and Service Impact: Homeowners may experience increased utility bills, shared public facilities, and higher demand on services due to additional ADUs.
Bottomline
In summary, AB 976 marks a significant step in expanding the opportunities for building Accessory Dwelling Units (ADUs) in California, offering a range of benefits for homeowners seeking affordable and versatile housing solutions. While the law strives to spur ADU development by removing certain restrictions, it’s crucial for prospective builders to navigate potential challenges.
For those considering ADU projects, the advantages are noteworthy—potential income, increased property value, housing flexibility, and positive environmental impacts. However, understanding the hurdles is equally important. High construction costs, potential community opposition, and the impact on infrastructure and services are realities that demand careful consideration.
To navigate this landscape effectively, homeowners need to do research and planning. Consult at no cost with experts at Yifu Design Studio. Foster open communication with neighbors, and adhere to local regulations, we believe are some of the key steps to ensuring a successful ADU project. Building an ADU can be a fulfilling and valuable investment, contributing to the expansion of housing solutions in California.
Ready to embark on the ADU movement? Stay informed and engage in a well-prepared journey toward unlocking the full potential of your property.
Resources:
- California YIMBY Sponsored Legislation
- Title: AB 976 – Extend Incentives for Accessory Dwelling Units
- Link: California YIMBY – AB 976
- Insights from Holland & Knight
- Title: California’s 2024 Housing Laws: What You Need to Know
- Link: Holland & Knight – California’s 2024 Housing Laws
- LegiScan – Bill Text: CA AB976
- Title: Bill Text: CA AB976 | 2023-2024 | Regular Session
- Link: LegiScan – AB 976
- UC Berkeley Study on ADU Median Rent
- Title: Exploring ADU Rental Income: A UC Berkeley Study
- Freddie Mac Study on Property Value Increase
- Title: The Impact of ADUs on Property Value: A Freddie Mac Study
- Terner Center for Housing Innovation and Center for Community Innovation Report
- Title: Removing Barriers to ADU Construction: Insights from Terner Center and CCI
